SHMP 8-K
NaturalShrimp Inc (SHMP)
8-K
2021-04-15
For: 2021-04-14
View Original
Added on
July 28, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934
Date of Report (Date of earliest event reported): April 14,
2021
NATURALSHRIMP INCORPORATED
(Exact
name of Registrant as specified in its charter)
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Nevada
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000-54030
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74-3262176
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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15150 Preston Road, Suite #300
Dallas, Texas 75248
(Address of principal executive offices, including zip
code)
(866) 351-5907
(Registrant’s telephone number, including area
code)
Check
the appropriate box below if the 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant
under any of the following provisions:
[
] Written communication
pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
] Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
[
] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)).
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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N/A
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N/A
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N/A
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (17 CFR
§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging
growth company [ ]
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Item 1.01. Entry into a Material Definitive
Agreement.
Securities Purchase Agreement
On
April 14, 2021, NaturalShrimp Incorporated (the
“Company”) entered into a securities purchase agreement
(the “Purchase Agreement”) with an accredited investor
(the “Purchaser”), for the offering (the
“Offering”) of (i) $5,000,000 worth of common stock
(“Shares”), par value $0.0001 per share, of the Company
(“Common Stock”); at a per share purchase price of
$0.55 per Share (ii) common stock purchase warrants
(“Warrants”) to purchase up to an aggregate of
10,000,000 shares of Common Stock, which are exercisable for a
period of five years after issuance at an initial exercise price of
$0.75 per share, subject to certain adjustments, as provided in the
Warrants; and (iii) 1,000,000 shares of Common Stock (the
“Commitment Shares”). Pursuant to the Purchase
Agreement, the Purchaser is purchasing the Shares, accompanying
Warrants and Commitment Shares for an aggregate purchase price of
$5,000,000. The number of shares of common stock outstanding
immediately after the Offering was 573,280,090 shares (excluding
the exercise of the warrants offered in the Offering). The Company
expects to receive approximately $4,925,000 in net proceeds from
the Offering before exercise of the Warrants and after deducting
the discounts, commissions, and other estimated offering expenses
payable by the Company. The Company expects to use the net proceeds
from the Offering to redeem 2,450 shares of Series D Preferred
Stock in the aggregate amount of $3,658,800, for working capital
and for general corporate purposes.
The
Shares, the accompanying Warrants and Commitment Shares will be
issued to the Purchaser in a registered direct offering (the
“Registered Offering”), pursuant to which the Shares,
the Warrants, the Commitment Shares and the shares of Common Stock
issuable upon exercise of the Warrants, will all be registered
under the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to a prospectus supplement to the
Company’s currently effective registration statement on Form
S-3 (File No. 333-253953), which was initially filed with the U.S.
Securities and Exchange Commission (the “SEC”) on March
5, 2021, and was declared effective on March 22, 2021 (the
“Shelf Registration Statement”). A prospectus
supplement for the Offering will be filed on April 15, 2021 and
will be available on the SEC’s web site at http://www.sec.gov.
The
Purchase Agreement contains customary representations, warranties
and agreements by the Company and the other parties thereto,
customary conditions to closing, indemnification obligations of the
parties, including for liabilities under the Securities Act and
other obligations of the parties.
Further,
pursuant to the terms of the Purchase Agreement, from the date
thereof until the date that is the twelve-month anniversary of the
closing of the Offering, upon any issuance by the Company or any of
its subsidiaries of Common Stock or Common Stock Equivalents for
cash consideration, indebtedness or a combination of units thereof
(a “Subsequent Financing”), each Purchaser shall have
the right to participate in up to an amount of the Subsequent
Financing equal to 100% of the Subsequent Financing on the same
terms, conditions and price provided for in the Subsequent
Financing.
Share Exchange Agreement
On
April 14, 2021, the Company, entered into a share exchange
agreement (the “Exchange Agreement”) with a holder of
the Series D Preferred Stock, whereby, at the closing of the
Offering, the Holder has agreed to exchange an aggregate of 3,600
shares of the Company’s Series D Preferred Stock, par value
$0.0001 per share (the “Series D Preferred Stock”) into
approximately 3,739.63 shares of the Company’s Series E
Convertible Preferred stock, par value $0.0001 (the “Series E
Preferred Stock”). In connection with the Exchange Agreement,
the Company has filed a Certificate of Designation of Preferences
of the Series E Convertible Preferred Stock with the State of
Nevada.
The
foregoing description of the Purchase Agreements, the Exchange
Agreement and the Warrants are qualified in their entirety by
reference to the full text of such Purchase Agreement, Exchange
Agreement, and Warrants, the forms of which are attached as
Exhibits 10.1, 10.2, and 4.1, respectively, to this Current Report
on Form 8-K (this “Form 8-K”), and which are
incorporated herein in their entirety by reference. The Company is
filing the opinion of its counsel, Lucosky Brookman LLP, relating
to the legality of the issuance and sale of the Shares, the
Commitment Shares and the Warrants as Exhibit 5.1 hereto. Exhibit
5.1 is incorporated herein by reference and into the Shelf
Registration Statement.
This
Form 8-K contains forward-looking statements. Forward-looking
statements include, but are not limited to, statements that express
the Company’s intentions, beliefs, expectations, strategies,
predictions, or any other statements related to the Company’s
future activities, or future events or conditions. These statements
are based on current expectations, estimates and projections about
the Company’s business based, in part, on assumptions made by
its management. These statements are not guarantees of future
performances and involve risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in the
forward-looking statements due to numerous factors, including those
risks discussed in documents that the Company files from time to
time with the SEC. Any forward-looking statements speak only as of
the date on which they are made, and the Company undertakes no
obligation to update any forward-looking statement to reflect
events or circumstances after the date of this Form 8-K, except as
required not by law.
Item 3.02 Unregistered Sales of Equity
Securities.
The
information set forth in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 3.02.
The
Series E Preferred Stock are not registered under the Securities
Act, but qualified for exemption under Section 4(a)(2) and/or
Regulation D of the Securities Act. The securities were exempt from
registration under Section 4(a)(2) of the Securities Act because
the issuance of such securities by the Company did not involve a
“public offering,” as defined in Section 4(a)(2) of the
Securities Act, due to the insubstantial number of persons involved
in the transaction, size of the offering, manner of the offering
and number of securities offered. The Company did not undertake an
offering in which it sold a high number of securities to a high
number of investors. In addition, the Holder had the necessary
investment intent as required by Section 4(a)(2) of the Securities
Act since the Holder agreed to, and received, the securities
bearing a legend stating that such securities are restricted
pursuant to Rule 144 of the Securities Act. This restriction
ensures that these securities would not be immediately
redistributed into the market and therefore not be part of a
“public offering.” Based on an analysis of the above
factors, the Company has met the requirements to qualify for
exemption under Section 4(a)(2) of the Securities Act.
Item 3.03 Material Modification to Rights of Security
Holders.
The
information set forth in Item 1.01 and Item 3.02 of this Current
Report on Form 8-K is incorporated by reference into this Item
3.03.
On
April 14, 2021, the Secretary of State of the State of Nevada
delivered confirmation of the effective filing of the
Company’s Certificate of Designations of the Series E
Preferred Stock, which established 10,000 shares of the
Company’s Series E Preferred Stock, having such designations,
rights and preferences as set forth therein (the “Series E
Designation”).
The
shares of Series E Preferred Stock have a stated value of $1,200
per share (the “Series E Stated Value”) and are
convertible into Common Stock at the election of the holder of the
Series E Preferred Stock at any time at a price of $0.35 per share,
subject to adjustment (the “Conversion Price”). The
Series E Preferred Stock is convertible into that number of shares of Common Stock
determined by dividing the Series E Stated Value (plus any and all
other amounts which may be owing in connection therewith) by the
Conversion Price, subject to certain beneficial ownership
limitations.
Each
holder of Series E Preferred Stock shall be entitled to receive,
with respect to each share of Series E Preferred Stock then
outstanding and held by such holder, dividends at the rate of
twelve percent (12%) per annum, payable quarterly (the
“Preferred Dividends”).
The
holders of Series E Preferred Stock rank senior to the Common Stock
and Common Stock Equivalents (as defined in the Series E
Designation) with respect to payment of dividends and rights upon
liquidation and will vote together with the holders of the Common
Stock on an as-converted basis, subject to beneficial ownership
limitations, on each matter submitted to a vote of holders of
Common Stock (whether at a meeting of shareholders or by written
consent).
The Series E Designation are subject to certain Registration
Rights, whereby if the Corporation does not complete a market
listing to 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) within
one hundred twenty (120) calendar days from the issuance of the
Series E Preferred Stock, the Company will, within ten (10)
calendar days, file a registration statement covering the shares of
Common Stock underlying the Series E Preferred Shares.
Additionally, the Company will include the shares of Common Stock
underlying the Series E Preferred Shares in any registration
statement which shall be hereafter filed by the Company, subject to
certain requirements, as noted in the Series E
Designation.
The
foregoing description of the Series E Designation does not purport
to be complete and is subject to, and qualified in its entirety by
the Series E Designation, a copy of which is attached as Exhibit
3.1 to this Current Report on Form 8-K and incorporated herein by
reference.
Item 5.03 Amendments to Articles of Incorporation or
Bylaws; Change in Fiscal Year.
The
information set forth in Item 1.01, Item 3.02, and Item 3.03 of
this Current Report on Form 8-K is incorporated by reference into
this Item 5.03.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
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Exhibit No.
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Description
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Certificate
of Designations of the Series E Convertible Preferred
Stock
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Form
of Warrant
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Opinion
of Lucosky Brookman LLP
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Form
of Securities Purchase Agreement, dated as of April 14, 2021, by
and between the Company and the Purchaser
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Form of
Exchange Agreement, dated as of April 14, 2021 by and between the
Company and a holder of the Series D Preferred Stock
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Consent
of Lucosky Brookman LLP (contained in Exhibit 5.1
hereto)
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
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NATURALSHRIMP INCORPORATED
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Date:
April 15, 2021
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By:
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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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Exhibit 3.1
NATURALSHRIMP INCORPORATED
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES E 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 E Preferred
Stock, a series of the preferred stock, which shall consist of, up
to ten thousand (10,000) 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 E 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 the Exchange Agreement.
“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 E Convertible Preferred Stock and the number
of shares so designated shall be up to ten thousand (10,000) (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.
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“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.
“Event of Default” means
any of the following events: (i) the suspension, cessation from
trading or delisting of the Corporation's Common Stock on the
Trading Market for a period of two (2) consecutive trading days or
more; (ii) the failure by the Corporation to timely comply with the
reporting requirements of the Exchange Act (including applicable
extension periods); (iii) the failure for any reason by the
Corporation to issue Common Stock to a Holder within the required
time periods; (iv) the Corporation breaches any representation,
warranty, covenant or other term of condition contained in the
definitive agreements between the parties; (v) the Corporation
files or threatens to file for Bankruptcy or receivership or any
money judgment writ, liquidation or a similar process is entered by
or filed against the Corporation 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 Corporation
or failure by the Corporation to maintain any assets, intellectual,
personal or real property or other assets which are necessary to
conduct its business (vii) the Corporation shall lose the "bid"
price for its Common stock on the Trading Market; or (viii) if at
any time the Common Stock is no longer eligible for electronic
delivery.
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exchange
Agreement” means that
certain Exchange 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.
“New York
Courts” shall have the
meaning set forth in Section 11(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.
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“Preferred
Stock” shall mean
Series E Convertible Preferred Stock.
“Premium
Rate” shall have the
meaning set forth in Section 8(a).
“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.
“Subsidiary”
means any subsidiary of the Corporation as set forth in the
Company’s SEC filings.
“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 Exchange Agreement, all exhibits
and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions
contemplated hereby, excluding any document or agreement executed
in connection with the capital raise by the Corporation entered
into on or about the date hereof.
“Transfer
Agent” means
Transhare Corporation, the current
transfer agent of the Company, with a mailing address of
15500 Roosevelt
Blvd., Suite 302, Clearwater FL 33760 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) 150% 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.
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(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.
5
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, 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 $0.35 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 two (2) 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.
6
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 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
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.
7
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.
8
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 E Preferred Stock,
upon any issuance by the Company of
Series E 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 E
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 E
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 E 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 E 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).
9
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.
10
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.
11
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.
(a) Section 8.
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 upon
three (3) business days prior notice to the Holder or the Holder
may convert the Preferred Stock within such three (3) business days
period prior to redemption. The Holder shall have the right to
either redeem for cash or convert the Preferred Stock into Common
Stock within three (3) business days following the consummation of
a Qualified Offering. 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.
12
(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 the full Corporation Redemption
Price.
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;
13
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 eligible for electronic delivery
of shares; or
xi.
any Event of Default occurs.
b) Upon the occurrence of a Triggering Event and
following a five (5) day 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 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) 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, 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, if applicable. 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.
14
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.
15
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 11. 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. 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.
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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. 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 E Convertible Preferred
Stock.
17
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 14 day of April, 2021.
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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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18
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 E 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. No fee will be charged to
the Holders for any conversion, except for any such transfer
taxes.
Conversion calculations:
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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
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Name of Entity Holder______________ (Please Print)
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By:
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Name:
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Name of Individual Holder______________ (Please Print)
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______________________ (Signature of Individual
Holder)
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19
Exhibit 4.1
COMMON STOCK PURCHASE WARRANT
NATURALSHRIMP INCORPORATED
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Warrant
Shares: 10,000,000
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Issue
Date: April 14, 2021
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, GHS Investments LLC or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the Issue
Date to subscribe for and purchase from NaturalShrimp Incorporated,
a Nevada corporation (the “Company”), up to
10,000,000 shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock. This Warrant shall expire on
the five (5) year anniversary of the Issue Date. The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement (the
“Purchase
Agreement”), dated April 14, 2021, among the Company
and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Issue Date by delivery to the Company (or such
other office or agency of the Company as it may designate by notice
in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile
copy (or e-mail attachment) of the Notice of Exercise in the form
annexed hereto. Within two (2) Trading Days following the date of
exercise as aforesaid, the Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a
United States bank. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.75, subject to adjustment hereunder (the “Exercise
Price”).
c)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. Warrant Shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s or its designee’s balance
account with The Depository Trust Company through its Deposit or
Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner-of-sale limitations pursuant to Rule 144,
and otherwise by physical delivery of a certificate, registered in
the Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is one (1)
Trading Day after the delivery to the Company of the Notice of
Exercise (such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares; provided payment of the aggregate
Exercise Price is received within three Trading Days of delivery of
the Notice of Exercise. If the Company fails for any reason to
deliver to the Holder the Warrant Shares subject to a Notice of
Exercise by the Warrant Share Delivery Date, the Company shall pay
to the Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Warrant Shares subject to such exercise (based
on the VWAP of the Common Stock on the date of the applicable
Notice of Exercise), $10 per Trading Day (increasing to $20 per
Trading Day on the fifth Trading Day after such liquidated damages
begin to accrue) for each Trading Day after such Warrant Share
Delivery Date until such Warrant Shares are delivered or Holder
rescinds such exercise. The Company agrees to maintain a transfer
agent that is a participant in the FAST program so long as this
Warrant remains outstanding and exercisable. For purposes hereof,
“VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
2
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to
Timely Deliver Warrant Shares Upon Exercise. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 2(d)(i) above
pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
3
v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
4
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
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 the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company 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 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within three Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties 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
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
written notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
5
(f) Automatic
Exercise. In the event the
closing price of a share of Common Stock equals or exceeds $1.85
(subject to adjustment as set forth in Section 3 herein) for at
least ten (10) consecutive Trading Days, this Warrant, on the third
(3rd)
Trading Day following the end of such ten (10) consecutive Trading
Day period, be automatically exercised for the remaining number of
Warrant Shares, subject to the Beneficial Ownership
Limitation.
Section 3. Certain
Adjustments.
a) Stock Dividends, Splits and
Reclassifications. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock
or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged. Any adjustment made pursuant to this
Section 3(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) Subsequent Equity Sales. If the
Company or any subsidiary thereof, as applicable, at any time while
this Warrant is outstanding, shall sell, enter into an agreement to
sell, or grant any option to purchase, or sell or grant any right
to reprice, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents, at an effective price
per share less than the Exercise Price then in effect (such lower
price, the “Base
Share Price” and such issuances collectively, a
“Dilutive
Issuance”) (it being understood and agreed that if the
holder of the Common Stock or Common Stock Equivalents so issued
shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is less than the Exercise Price, such issuance shall
be deemed to have occurred for less than the Exercise Price on such
date of the Dilutive Issuance at such effective price), then
simultaneously with the consummation (or, if earlier, the
announcement) of each Dilutive Issuance the Exercise Price shall be
reduced and only reduced to equal the Base Share Price.
Notwithstanding the foregoing, no adjustments shall be made, paid
or issued under this Section 3(b) in respect of an Exempt Issuance.
The Company shall notify the Holder, in writing, no later than the
Trading Day following the issuance or deemed issuance of any Common
Stock or Common Stock Equivalents subject to this Section 3(b),
indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing
terms (such notice, the “Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to
this Section 3(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Warrant Shares based
upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of
Exercise. If the Company enters into a variable rate transaction,
the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the actual price of any conversion of the
variable rate instrument.
6
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to all
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro
Rata Distributions. During such time as this Warrant is
outstanding, if the Company 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 Warrant, 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 Warrant
(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).
7
e) Fundamental
Transaction.
(1) If,
at any time while this Warrant 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
(other than as a result of a stock split, combination or
reclassification of shares of Common Stock covered by Section 3(a)
above), 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 exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), 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 for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise 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 Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any
Successor Entity (as defined below) shall, at the Holder’s
option, exercisable at any time concurrently with, or within 30
days after, the consummation of the Fundamental Transaction (or, if
later, the date of the public announcement of the
applicable
8
Fundamental
Transaction), purchase this Warrant
from the Holder by paying to the Holder an amount of cash
equal to the Black Scholes Value (as defined below) of the
remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction; provided, however, that, if the
Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, Holder
shall only be entitled to receive from the Company or any Successor
Entity the same type or form of consideration (and in the same
proportion), at the Black Scholes Value of the unexercised portion
of this Warrant, that is being offered and paid to the holders of
Common Stock of the Company in connection with the Fundamental
Transaction, whether that consideration be in the form of cash,
stock or any combination thereof, or whether the holders of Common
Stock are given the choice to receive from among alternative forms
of consideration in connection with the Fundamental Transaction;
provided,
further, that if
holders of Common Stock of the Company are not offered or paid any
consideration in such Fundamental Transaction, such holders of
Common Stock will be deemed to have received common stock of the
Successor Entity (which Entity may be the Company following such
Fundamental Transaction) in such Fundamental Transaction.
“Black Scholes
Value” means the value of this Warrant based on the
Black and Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg, L.P. (“Bloomberg”) determined as
of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of
the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of
the Trading Day immediately following the public announcement of
the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such
Fundamental Transaction and (ii) the highest VWAP 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 this
Section 3(e) and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable
Fundamental Transaction and the Termination Date and (E) a zero cost of borrow.
The payment of the Black Scholes Value
will be made by wire transfer of immediately available funds within
five Business Days of the Holder’s election (or, if later, on
the consummation date of the Fundamental
Transaction). The Company shall cause
any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(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 this Warrant a security of
the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which
is exercisable for 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 exercise
of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise 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 exercise price being for
the purpose of protecting the economic value of this Warrant
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 Warrant and the
other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other
Transaction Documents with the same effect as if such Successor
Entity had been named as the Company herein.
9
f) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, 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 treasury shares, if
any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least ten (10) calendar days prior to
the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to 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 in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
10
Section 4. Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. The Holder shall be
required to physically surrender this Warrant to the Company within
three (3) Trading Days of the date the Holder delivers an
assignment form to the Company assigning this Warrant
full. The Warrant,
if properly assigned in accordance herewith, may be exercised by a
new holder for the purchase of Warrant Shares without having a new
Warrant issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the original Issue Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
11
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
12
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Legends. The Company and Holder
acknowledge that the Warrant Shares shall be issued without
legend.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. If the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
13
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
14
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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NATURALSHRIMP INCORPORATED
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By:/s/
Gerald Easterling
Name:
Gerald Easterling
Title:
Chief Executive Officer
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15
NOTICE OF EXERCISE
TO:
NATURALSHRIMP
INCORPORATED
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
Payment
shall take the form of lawful money of the United
States.
(2) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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(Please Print)
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Address:
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Phone Number:
Email Address:
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(Please
Print)
______________________________________
______________________________________
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Dated: _______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Exhibit
5.1
April
15, 2021
NaturalShrimp
Incorporated
15150
Preston Road, Suite 300
Dallas,
Texas 75248
Re:
NaturalShrimp
Incorporated Offering of Shares
Registration
Statement on Form S-3 (No. 333-253953)
Ladies
and Gentlemen:
We have acted as counsel for NaturalShrimp
Incorporated, a Nevada corporation (the “Company”),
in connection with the registration under the Securities Act of
1933, as amended (the “Securities
Act”), of the offer and
sale (the “Offering”)
by the Company of up to an aggregate of 10,090,909 shares of the
Company’s common stock, $0.0001 par value per share
(collectively, the “Shares”),
and warrants to purchase up to 10,000,000 shares of common stock
(the “Warrant”),
pursuant to an Securities Purchase Agreement dated April 14, 2021
(the “Purchase
Agreement”) entered into
by and between the Company and GHS Investments LLC. The Shares and
the Warrant have been offered for sale pursuant to a final
prospectus supplement dated April 14, 2021 and filed with the
U.S. Securities and Exchange
Commission (the “SEC” or the “Commission”)
pursuant to Rule 424(b) under the Securities Act on April 15, 2021
(the “Prospectus
Supplement”), and to the
base prospectus (such base prospectus, as amended and supplemented
by the Prospectus Supplement, the “Prospectus”)
that form a part of the Company’s registration statement on
Form S-3 (No. 333-253953), initially filed by the Company with the
Commission on March 5, 2021, and declared effective by the
Commission on March 22, 2021 (the “Registration
Statement”).
This
opinion is being furnished to you at your request to enable you to
fulfill the requirements of Item 601(b)(5) of Regulation S-K
promulgated under the Securities Act, in connection with the
Registration Statement, and no opinion is expressed or may be
implied herein as to any matter pertaining to the contents of the
Registration Statement, or the Prospectus.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of (a) the Articles of
Incorporation of the Company, as amended (the
“Articles of
Incorporation”), (b) the
Bylaws of the Company, as amended (the “Bylaws”),
(c) the Registration Statement and all exhibits thereto, (d) the
unanimous written consent of the Board of Directors (the
“Board”)
approving the filing of the Registration Statement and other
related matters; (e) the Purchase Agreement; and (f) the originals
or copies certified to our satisfaction of such other documents,
records, certificates, memoranda and other instruments as in our
judgment are necessary or appropriate to enable us to render the
opinion expressed below.
NaturalShrimp
Incorporated
April
15, 2021
Page
2 of
2
In
rendering this opinion, we have assumed: (i) information contained
in documents reviewed by us is true, complete and correct; (ii) the
genuineness and authenticity of all signatures; (iii) the
authenticity of all documents submitted as originals; (iv) the
conformity to authentic originals of all documents submitted to as
copies; (v) the accuracy, completeness and authenticity of
certificates of public officials; (vi) the obligations of parties
other than the Company to the Purchase Agreement being valid,
binding and enforceable; (vii) the legal capacity of all natural
persons; and (viii) that all Shares and the Warrant will be issued
and sold in in the manner specified in the Registration Statement
and Prospectus. In making our examination of executed documents or
documents to be executed, we have assumed that they constitute or
will constitute valid, binding and enforceable obligations of all
parties thereto other than the Company.
As
to various questions of fact material to the opinions expressed
below, we have, without independent third party verification of
their accuracy, relied in part, and to the extent we deemed
reasonably necessary or appropriate, upon the representations and
warranties of the Company and the purchasers contained in such
documents, records, certificates, instruments or representations
furnished or made available to us by the Company or the purchasers,
including the Registration Statement and Purchase
Agreement.
The
foregoing opinions are limited to the laws of the State of Nevada.
We express no opinion herein as to any other laws, statutes,
ordinances, rules, or regulations (and in particular, we express no
opinion as to any effect that such other laws, statutes,
ordinances, rules, or regulations may have on the opinions
expressed herein). No opinion is expressed herein with respect to
the qualification of the Shares or the Warrant under the securities
or ‘blue sky’ laws of any state or any foreign
jurisdiction. This opinion is limited to the matters set forth
herein, and no other opinion should be inferred beyond the matters
expressly stated. We have made such examination of Nevada law as we
have deemed relevant for purposes of this opinion. We express no
opinion as to any county, municipal, city, town or village
ordinance, rule, regulation or administrative decision. We express
no opinion as to the enforceability of the Purchase
Agreement.
Our
opinion is based on the laws as in effect on the date hereof, and
we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinion
expressed herein. We are not rendering any opinion as to compliance
with any federal or state antifraud law, rule or regulation
relating to securities, or to the sale or issuance
thereof.
On
the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares and the Warrant have been authorized by all
necessary corporate action of the Company and, when issued and sold
in accordance with the Purchase Agreement and in the manner
contemplated by the Registration Statement and the Prospectus
Supplement, against payment of the consideration therefor as
provided therein, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the
caption “Legal
Matters” in the
Prospectus included in the Registration Statement and to the filing
of this opinion as an exhibit to a Current Report of the Company on
Form 8-K being filed on the date hereof and incorporated by
reference into the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules
and regulations of the Commission promulgated
thereunder.
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Very
truly yours,
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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of April 14, 2021, 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 an effective registration statement under the Securities Act of
1933, as amended (the “Securities Act”) as to
the Shares and Warrants, the Company desires to issue and sell to
each Purchaser, and 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, 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.
“Closing
Date” means, initially the Trading Day on which all of
the Transaction Documents have been executed and delivered by the
applicable parties thereto in connection with the initial Closing,
and, to the extent applicable, all conditions precedent to (i) the
Purchaser’s obligations to pay the Subscription Amount as to
each Closing and (ii) the Company’s obligations to deliver
the Securities as to such 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(a), which shall occur on each Closing
Date.
“Commission” means the
United States Securities and Exchange Commission.
1
“Commitment Shares” means
1,000,000 registered shares of Common Stock. The Commitment Shares
shall be deemed earned upon the date they are due to be
issued.
“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.
“Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.
“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, Shares or Warrant 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 or threatens to file 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 eligible to be delivered
electronically to Purchaser.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
2
“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, directors, or consultants of the Company pursuant to any
stock or option plan duly adopted for such purpose, by a majority
of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose
for services rendered to the Company, (b) securities upon the
exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the
number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities (other than
in connection with stock splits or combinations) or to extend the
term of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equityholders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
“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).
“Per Share Purchase Price”
means $0.55.
“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.
“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.
3
“Prospectus” means the
final prospectus filed for the Registration Statement.
“Prospectus Supplement”
means the supplement to the Prospectus complying with Rule 424(b)
of the Securities Act that is filed with the Commission and
delivered by the Company to each Purchaser at the
Closing.
“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.7.
“Registration Statement”
means the effective registration statement with Commission File No.
333-253953 which registers the sale of the Shares and Warrant
Shares to the Purchasers.
“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
Common Stock, the Warrant and the Warrant Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shares” means the shares
of Common Stock issued or issuable to Purchaser pursuant to this
Agreement.
“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).
“Subscription Amount”
shall mean the aggregate amount to be paid for the Common Stock and
Warrant 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.
4
“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 Warrants, all exhibits and schedules
thereto and hereto and any other documents or agreements executed
in connection with the transactions contemplated
hereunder.
“Transfer Agent” means
Transhare Corporation the current transfer agent of the Company,
with a mailing address of 15500 Roosevelt Blvd., Suite 302,
Clearwater, FL 33760 and any successor transfer agent of the
Company.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Purchaser at the Closing in accordance with Section 2.1(b) hereof,
which Warrants shall be exercisable immediately and have a term of
exercise equal to five (5) years from such initial exercise
date.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 (a) (i)
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 the Purchaser
agrees to purchase, $5,000,000 worth of Common Stock at the Per
Share Purchase Price (the “Purchased Shares”) and
Warrants to purchase up to ten million (10,000,000) shares of
Common Stock. The 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 Common Stock purchased and
the Warrant, as determined pursuant to Section 2.1(a) and the
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, the Closing shall occur at
the offices of Pryor Cashman LLP, 7 Times Square, New York, NY
10036, or such other location as the parties shall mutually
agree.
(ii) Additional
Closings. The Company, upon satisfaction of the applicable
deliveries and closing conditions set forth in Section 2.2, during
the one (1) year period following the date hereof (or if sooner,
until such time as an aggregate of $15,000,000 worth of Common
Stock is issued by the Company to Purchaser pursuant to this
Agreement), may require the Purchaser to purchase, and the
Purchaser irrevocably agrees to purchase, as long as no Event of
Default currently exists, up to an additional $10,000,000 of Common
Stock (each such closing, an “Additional Closing”). A
minimum of five (5) Trading Days must elapse between Additional
Closings.
5
(b) Deliveries.
(a)
On or prior to the
Closing Date (or as otherwise indicated below), the Company shall
deliver or cause to be delivered to the Purchaser the
following:
(i)
this Agreement duly
executed by the Company;
(ii)
a legal opinion of
Company Counsel;
(iii)
the Purchased
Shares, which shall be delivered electronically to Purchaser per
instructions provided to the Company by the Purchaser within 24
hours of receipt of the purchase price therefore;
(iv)
a Warrant
registered in the name of such Purchaser to purchase up to
10,000,000 shares of Common Stock, with an exercise price equal to
$0.75, subject to adjustment therein;
(v)
the Commitment
Shares, which shall be delivered electronically to Purchaser per
instructions provided to the Company by the Purchaser within 24
hours of receipt of the purchase price therefore;
(vi)
within 48 hours of
receipt of the purchase price therefore, an irrevocable letter of
instruction to the Company's Transfer Agent, instructing the
Transfer Agent to maintain for the benefit of the Purchaser,
75,545,455 shares of its common stock and at all times thereafter
two times 2x) the number of shares of Common Stock and Warrants
held by the Purchaser; and
(vii)
the Prospectus and
Prospectus Supplement (which may be delivered in accordance with
Rule 172 under the Securities Act).
(b)
On or prior to the
Closing Date, the 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.
2.2
Closing
Conditions.
(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);
6
(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; and
(iii)
the delivery by the
Purchaser of the items set forth in Section 2.1(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 2.1(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:
7
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth in on
Schedule 3.1(a).
Other than as noted 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.
8
(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. Notwithstanding
anything contained herein, the parties acknowledge that there may
exist a conflict and/or default with respect to certain agreements
with H.C. Wainwright.
(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 December 31, 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(e) via the SEC’s Electronic Data
Gathering, Analysis, and Retrieval system (“EDGAR”)
shall satisfy all delivery requirements of this Section
3(e).
9
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. The Warrant
Shares, when issued in accordance with the terms of the Warrant,
will be validly issued, fully paid and nonassessable, free and
clear of all Liens imposed by the Company. The Company shall
reserve from its duly authorized capital stock a number of shares
of Common Stock issuable pursuant to the Warrant equal to the
amount set forth in Section 2.1(b)(iv).
(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.
10
(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. 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.
11
(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), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority, 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. 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.
12
(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”). 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. 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. All employee salaries
and contractor fees have been paid to date and no such amounts are
outstanding or past due.
13
(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. Except as set
forth on Schedule
3.1(s), 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) 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.
14
(u) Registration Rights. Except as
set forth on Schedule
3.1(u), 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.
(v) 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.
(w) [RESERVED]
(x) 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.
(y) 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.
15
(z) 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.
(aa) 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.
(bb) Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(bb) 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 December
31, 2020.
(cc) 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.
16
(dd) 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, including, without
limitation, during the periods that the value of the Warrant Shares
deliverable with respect to the Warrants are being determined, 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.
(ee) 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.
(ff) Reserved.
(gg) 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.
17
(hh) 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”).
(ii) 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.
(jj) 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.
(kk) 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.
18
(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 exercised any Warrants, 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.
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 Legends.
The Commitment Shares, Common Stock and Warrant Shares shall be
issued free of legends.
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.
19
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.
20
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.
21
4.8 Exercise
Procedures. The form of Notice of Exercise included in the
Warrant set forth the totality of the procedures required of the
Purchaser in order to exercise the Warrant. No additional legal
opinion, other information or instructions shall be required of the
Purchaser to exercise their Warrant. Without limiting the preceding
sentences, no ink-original Notice of Exercise shall be required,
nor shall any medallion guarantee (or other type of guarantee or
notarization) of any Notice of Exercise form be required in order
to exercise the Warrant. The Company shall honor exercises of the
Warrant and shall deliver Warrant Shares in accordance with the
terms, conditions and time periods set forth in the Transaction
Documents.
4.9 DTC
Program. For so long as any Warrant is outstanding, the
Company will employ as the Transfer Agent for the Common Stock and
Warrant Shares a participant in the DTC Automated Securities
Transfer Program and cause the Common Stock to be transferable
pursuant to such program.
4.10
Subsequent
Equity Sales. From the date
hereof until sixty (60) days after the Closing Date, neither the
Company nor any Subsidiary shall issue, enter into any agreement to
issue or announce the issuance or proposed issuance of any shares
of Common Stock or Common Stock Equivalents, except for an Exempt
Issuance.
4.11
Subsequent
Financing; Most Favored Nations. From the date hereof until the one year
anniversary of the date hereof, upon any issuance by the Company of
its securities for cash consideration, (a
“Subsequent
Financing”), Purchaser
may elect, in its sole discretion, to exchange (in lieu of
conversion), if applicable, all or some of the Securities 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
Purchaser 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 Purchaser of such additional or more favorable terms and such
terms, at Purchaser’s option, shall become a part of the
transaction documents with the Purchaser. 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, 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 Purchaser 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 Securities the Holder holds on
the date of the sale and issuance of the convertible
note.
4.12.
Participation in
Future Financing.
(a)
From
the date hereof until the date that is the 12 month anniversary of
the Closing Date, upon any issuance by the Company or any of its
subsidiaries of Common Stock, Common Stock Equivalents for cash
consideration, indebtedness or a combination of units hereof (a
“Subsequent
Financing”), Purchaser shall have the right to
participate up to an amount of the Subsequent Financing equal to
100% of the Subsequent Financing (the “Participation Maximum”)
on the same terms, conditions and price provided for in the
Subsequent Financing.
22
(b) At least four (4)
Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the
details of such financing (such additional notice, a
“Subsequent
Financing Notice”). Upon the request of Purchaser, and
only upon a request by Purchaser, for a Subsequent Financing
Notice, the Company shall promptly, but no later than one (1)
Trading Day after such request, deliver a Subsequent Financing
Notice to Purchaser. The Subsequent Financing Notice shall describe
in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder
and the Person or Persons through or with whom such Subsequent
Financing is proposed to be effected and shall include a term sheet
or similar document relating thereto as an attachment.
(c) Should Purchaser
desire to participate in such Subsequent Financing, it must provide
written notice to the Company by not later than 5:30 p.m. (New York
City time) on the fourth (4th) Trading Day after
receipt of the Pre-Notice that such Purchaser is willing to
participate in the Subsequent Financing, the amount of
Purchaser’s participation, and representing and warranting
that Purchaser has such funds ready, willing, and available for
investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no such notice from Purchaser as of
such fourth (4th) Trading Day,
Purchaser shall be deemed to have notified the Company that it does
not elect to participate.
(d) If by 5:30 p.m.
(New York City time) on the fourth (4th) Trading Day after
the Purchaser has received the Pre-Notice, notifications by the
Purchaser of its willingness to participate in the Subsequent
Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Participation Maximum,
then the Company may effect the remaining portion of such
Subsequent Financing on the terms and with the Persons set forth in
the Subsequent Financing Notice.
(e) The Company must
provide Purchaser with a second Subsequent Financing Notice, and
the Purchaser will again have the right of participation set forth
above in this Section 4.12, if the Subsequent Financing subject to
the initial Subsequent Financing Notice is not consummated for any
reason on the terms set forth in such Subsequent Financing Notice
within thirty (30) Trading Days after the date of the initial
Subsequent Financing Notice.
(f) The
Company and Purchaser agree that if Purchaser elects to participate
in the Subsequent Financing, the transaction documents related to
the Subsequent Financing shall not include any term or provision
whereby Purchaser shall be required to agree to any restrictions on
trading as to any of the Securities purchased hereunder or be
required to consent to any amendment to or termination of, or grant
any waiver, release or the like under or in connection with, this
Agreement, without the prior written consent of
Purchaser.
(g) Notwithstanding
anything to the contrary in this Section 4.12 and unless otherwise
agreed to by Purchaser, the Company shall either confirm in writing
to Purchaser that the transaction with respect to the Subsequent
Financing has been abandoned or shall publicly disclose its
intention to issue the securities in the Subsequent Financing, in
either case in such a manner such that such Purchaser will not be
in possession of any material, non-public information, by the tenth
(10th) Business Day following delivery of the Subsequent Financing
Notice. If by such tenth (10th) Business Day, no public disclosure
regarding a transaction with respect to the Subsequent Financing
has been made, and no notice regarding the abandonment of such
transaction has been received by Purchaser, such transaction shall
be deemed to have been abandoned and Purchaser shall not be deemed
to be in possession of any material, non-public information with
respect to the Company or any of its subsidiaries.
23
(h) Notwithstanding the foregoing, this Section
4.12 shall not apply in respect of an Exempt Issuance.
4.13 Blue
Sky Filings. 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.
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. At the Closing, the Company has agreed to
reimburse the Purchaser $16,500 for its legal fees in connection
with the transaction contemplated by the Transaction Documents,
which such amount may be withheld from the Purchaser’s
Subscription Amount deliverable at Closing. 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.
24
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.
25
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.
26
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)
27
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 Dallas, Texas 75248
|
|
By:/s/
Gerald Easterling
Name:
Gerald Easterling
Title:
Chief Executive Officer
With a
copy to (which shall not constitute notice):
|
|
|
Lucosky
Brookman LLP
101
Wood Avenue South, 5th Floor
Woodbridge,
NJ 08830
Attn:
Joseph M. Lucosky, Esq.
Email:
[email protected]
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
28
[PURCHASER
SIGNATURE PAGE TO SHMP 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: $5,000,000
Subscription
Date:
29
FORM
OF CLOSING NOTICE
TO:
DATE:
We
refer to the Securities Purchase Agreement, dated April ___,2021
(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 Common Stock;
and
2)
Certify that, as of
the date hereof, the conditions set forth in Section 2.2 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
By:
________________________________________
Name:
Title:
|
30
Exhibit 10.2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the
“Agreement”), is entered into on April 14, 2021 by and
between NaturalShrimp Incorporated, a Nevada corporation (the
“Company”) and GHS Investments LLC (the
“Holder”).
WHEREAS, Holder is the legal and
beneficial owner of 3,600 shares of the Company’s Series D
Preferred Stock purchased from the Company in two transactions on
December 16, 2020 and January 8, 2021, respectively (the “GHS
Series D Shares”), and the aggregate stated value of the GHS
Series D Shares, including accrued but unpaid dividends, is
$4,487,556; and
WHEREAS, the Company desires to
extinguish the GHS Series D Shares, and
WHEREAS, the Holder is willing to accept
in exchange for the GHS Series D Shares, 3,739.63 shares of the
Company’s Series E Convertible Preferred Stock (the
“GHS Series E Shares”) having an aggregate stated value
of $4,487,556, and
WHEREAS, in connection with the exchange
of the GHS Series D Shares and the Series E Shares, the Company
filed with the State of Nevada a Certificate of Designation of
Preferences, Rights and Limitation of Serie E Convertible Preferred
Stock in the form attached hereto as Exhibit A (the
“Certificate of Designation”).
NOW THEREFORE, in consideration of the
foregoing and for other good and valuable consideration, the
adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
1.
Exchanges. On the date hereof (the
“Closing Date”), the Company shall issue to the Holder
the GHS Series E Shares in full and immediate exchange for the GHS
Series D Shares (the “Exchange”).
2.
Additional Documents. The Company agrees
to take such further action (including, without limitation, action
on the part of its counsel and its transfer agent) and to execute
and deliver, or cause to be executed and delivered, any and all
other documents which are, in the opinion of the Holder or its
counsel, necessary to carry out the terms and conditions of this
Agreement.
3.
Effective Date and Counterpart
Signature. This Agreement shall be effective as of the date
first written above. This Agreement, and acceptance of same, may be
executed in one or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the
same instrument. Confirmation of execution by telex or by telecopy
or telefax of a facsimile signature page shall be binding upon that
party so confirming.
4.
Representations and Warranties of the
Holder.
(a)
Organization:
Authority. The Holder is an
entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full right,
corporate, partnership or other applicable power and authority to
enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations thereunder,
and the execution, delivery and performance by the Holder of the
transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part
of the Holder. This Agreement, when executed and delivered by the
Holder, will constitute a valid and legally binding obligation of
the Holder, enforceable against the Holder in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of
creditors’ rights generally, (b) as limited by laws relating
to the availability of specific performance, injunctive relief, or
other equitable remedies, or (c) to the extent the indemnification
provisions contained herein may be limited by federal or state
securities laws.
(b)
Investment Experience. The
Holder either alone or together with its representatives has such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of the Exchange and make
an informed decision to so invest, and has so evaluated the risks
and merits of the Exchange.
(c)
Absence of General
Solicitation. The Holder is not accepting the Exchange as a
result of any advertisement, article, notice or other communication
regarding the Shares 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.
(d)
No Conflicts: Advice. Neither
the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, does or will violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any
government, governmental agency, or court to which the Holder is
subject or any provision of its organizational documents or other
similar governing instruments, or conflict with, violate or
constitute a default under any agreement, credit facility, debt or
other instrument or understanding to which the Holder is a
party.
(e)
Consents. No authorization,
consent, approval or other order of, or declaration to or filing
with, any governmental agency or body or other Person is required
on the part of the Holder for the valid authorization, execution,
delivery and performance by the Holder of this Agreement and the
consummation of the transactions contemplated hereby.
2
5.
Representations and Warranties of the
Company.
(a)
Valid Issuance. The GHS Series
E Shares being issued in the Exchange have been duly authorized
and, upon issuance, will be validly issued, fully paid and
non-assessable and, upon consummation of the Exchange, the Holder
will receive valid and good title to the GHS Series E Shares so
issued free and clear of all liens, claims, charges and other
encumbrances.
(b)
Organization:
Authority. The Company is an
entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full right,
corporate, and other applicable power and authority to enter into
and to consummate the transactions contemplated by this Agreement
and otherwise to carry out its obligations thereunder, and the
execution, delivery and performance by the Company of the
transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part
of the Company. This Agreement, when executed and delivered by the
Company, will constitute a valid and legally binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of
creditors’ rights generally, (b) as limited by laws relating
to the availability of specific performance, injunctive relief, or
other equitable remedies, or (c) to the extent the indemnification
provisions contained herein may be limited by federal or state
securities laws.
(c)
No conflicts: Advice. Neither
the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, does or will violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any
government, governmental agency, or court to which the Company is
subject or any provision of its organizational documents or other
similar governing instruments, or conflict with, violate or
constitute a default under any agreement, credit facility, debt or
other instrument or understanding to which the Assignee is a
party.
(d)
Consents. No authorization,
consent, approval or other order of, or declaration to or filing
with, any governmental agency or body or other Person is required
on the part of the Company for the valid authorization, execution,
delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby.
(e)
No Litigation. There is no
action, suit, proceeding, judgment, claim or investigation pending,
or to the knowledge of the Company, threatened against the Company
which could reasonably be expected in any manner to challenge or
seek to prevent, alter or delay the transaction contemplated
hereby.
3
6.
Governing Law: Submission to
Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA,
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. EACH PARTY AGREES
THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING IN ANY WAY
TO THIS AGREEMENT SHALL BE BROUGHT IN A U.S. FEDERAL OR STATE COURT
OF COMPETENT JURISDICTION SITTING IN THE BOROUGH OF MANHATTAN, IN
THE STATE AND CITY OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY DEFENSE OF AN INCONVENIENT FORUM OR LACK
OF PERSONAL JURISDICTION TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING AND ANY RIGHT OR JURISDICTION OR VENUE ON ACCOUNT OF THE
PLACE OF RESIDENCE OR DOMICILE OF ANY PARTY HERETO. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
7.
Amendments. No provision hereof may be
waived or modified other than by an instrument in writing signed by
both parties.
8.
Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction.
[remainder of page
intentionally left blank; Signature Page to follow]
4
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first above
written.
COMPANY
NATURALSHRIMP
INCORPORATED
By:
/s/ Gerald
Easterling
Name:
Gerald Easterling
Title:
Chief Executive Officer
HOLDER:
GHS
INVESTMENTS LLC
By:
Name:
Title:
5