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EX-10 - EXHIBIT 10.41 - Viewbix Inc. | exh10_41.htm |
EX-10 - EXHIBIT 10.40 - Viewbix Inc. | exh10_40.htm |
EX-10 - EXHIBIT 10.39 - Viewbix Inc. | exh10_39.htm |
EX-10 - EXHIBIT 10.38 - Viewbix Inc. | exh10_38.htm |
EX-10 - EXHIBIT 10.37 - Viewbix Inc. | exh10_37.htm |
8-K - CURRENT REPORT - Viewbix Inc. | mrla8k09012017.htm |
EXHIBIT 10.42
Certificate Of Designation Of The Relative Rights And Preferences
Of The
Series A Convertible Preferred Stock
Of
Emerald Medical Applications Corp.
The undersigned, representing all of the members of the Board of Directors of
Emerald Medical Applications Corp., a Delaware corporation (the "Company"), in
accordance with the provisions of Title 8, Section 151, of the Delaware General
Corporation Law ("DGCL"), do hereby certify that, pursuant to the authority
conferred upon the Board of Directors by the Certificate of Incorporation of the
Company, the following resolution creating a series of preferred stock,
designated as Series A Convertible Preferred Stock, was duly adopted on June 20,
2017 and was duly filed with the State of Delaware, effective August 7, 2017, as
follows:
RESOLVED, that pursuant to the authority expressly granted to and vested in the
Board of Directors of the Company by provisions of the Certificate of Amendment
of the Certificate of Incorporation of the Company dated February 17, 2015 (the
"Certificate of Amendment"), there hereby is created out of the shares of the
Company's preferred stock, par value $0.0001 per share, of the Company
authorized in Article IV of the Certificate of Amendment (the "Preferred
Stock"), a series of Preferred Stock of the Company, to be named "Series A
Convertible Preferred Stock," consisting of Five Hundred Twenty-Eight point
Eight-Two (528.82) shares, which series shall have the following designations,
powers, preferences and relative and other special rights and the following
qualifications, limitations and restrictions:
1. Designation and Rank.The designation of such series of the Preferred Stock
shall be the Series A Convertible Preferred Stock, par value $0.0001 per share
(the "Series A Preferred Stock").The maximum number of shares of Series A
Preferred Stock shall be Five Hundred Twenty-Eight point Eight-Two (528.82)
shares, having a stated value of One Thousand ($1,000) Dollars per share.The
Series A Preferred Stock shall rank senior to the Company's common stock, par
value $0.0001 per share (the "Common Stock"), and to all other classes and
series of equity securities of the Company including any other series of
Preferred Stock hereinafter authorized and issued by the Company (the "Junior
Stock").
2.Dividends.
(a) Payment of Dividends.Commencing on the date of the initial issuance (the
"Issuance Date") of the Series A Preferred Stock, the holders of record of
shares of Series A Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and as declared by the Board of
Directors, cash dividends if and when cash dividends are declared by the Board
on any other equity securities of the Company; provided, however, if the Company
has not declared any cash dividends on any Junior Securities, the Company shall
not be obligated to declare, issue or grant any cash dividends on the Series A
Preferred Stock.
(b) So long as any shares of Series A Preferred Stock are outstanding, the
Company shall not declare, pay or set apart for payment any dividend or make any
distribution on any Junior Stock (other than dividends or distributions payable
in additional shares of Junior Stock), unless at the time of such dividend or
distribution the Company shall have paid all accrued and unpaid dividends on the
outstanding shares of Series A Preferred Stock.
(c) In the event of a dissolution, liquidation or winding up of the Company
pursuant to Section 4 hereof, all accrued and unpaid dividends, if any, on the
Series A Preferred Stock shall be payable on the date of payment of the
preferential amount to the holders of Series A Preferred Stock.In the event of
a conversion pursuant to Section 5(a) hereof, all accrued and unpaid dividends,
if any, on the Series A Preferred Stock being converted shall be payable on the
Conversion Date (as defined in Section 5(b)(i) hereof).
(d) For purposes hereof, unless the context otherwise requires, "distribution"
shall mean the transfer of cash or property without consideration, whether by
way of dividend or otherwise, payable other than in shares of Common Stock or
other equity securities of the Company, or the purchase or redemption of shares
of the Company (other than redemptions set forth in Section 8 below or
repurchases of Common Stock held by employees or consultants of the Company upon
termination of their employment or services pursuant to agreements providing for
such repurchase or upon the cashless exercise of options held by employees or
consultants) for cash or property.
3.Voting Rights.
(a) Class Voting Rights.The Series A Preferred Stock shall have the following
class voting rights (in addition to the voting rights set forth in Section 3(b)
hereof).So long as any shares of the Series A Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least seventy-five percent (75%) of the shares of the Series A
Preferred Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting, in which the holders of the Series A Preferred Stock
vote separately as a class: (i) authorize, create, issue or increase the
authorized or issued amount of any class or series of stock, including but not
limited to the issuance of any more shares of Preferred Stock, ranking pari
passu or senior to the Series A Preferred Stock, with respect to the
distribution of assets on liquidation, dissolution or winding up; (ii) amend,
alter or repeal the provisions of the Series A Preferred Stock, whether by
merger, consolidation or otherwise, so as to adversely affect any right,
preference, privilege or voting power of the Series A Preferred Stock; provided,
however, that any creation and issuance of another series of Junior Stock shall
not be deemed to adversely affect such rights, preferences, privileges or voting
powers; (iii) repurchase, redeem or pay dividends on, shares of Common Stock or
any other shares of the Company's Junior Stock (other than de minimus
repurchases from employees of the Company in certain circumstances, and any
contractual redemption obligations existing as of the date hereof as disclosed
in the Company's public filings with the Securities and Exchange Commission);
(iv) amend the Articles of Incorporation or By-Laws of the Company so as to
affect materially and adversely any right, preference, privilege or voting power
of the Series A Preferred Stock; provided, however, that any creation and
issuance of another series of Junior Stock shall not be deemed to adversely
affect such rights, preferences, privileges or voting powers; (v) effect any
distribution with respect to Junior Stock other than as permitted hereby; (vi)
reclassify the Company's outstanding securities; (vii) voluntarily file for
bankruptcy, liquidate the Company's assets or make an assignment for the benefit
of the Company's creditors; or (viii) materially change the nature of the
Company's business.
(b) General Voting Rights.Except with respect to transactions upon which the
Series A Preferred Stock shall be entitled to vote separately as a class
pursuant to Section 3(a) above and except as otherwise required by the DGCL, the
Series A Preferred Stock shall have no voting rights.The Common Stock into
which the Series A Preferred Stock is convertible shall, upon issuance, have all
of the same voting rights as other issued and outstanding Common Stock of the
Company, and none of the rights of the Preferred Stock.
4.Liquidation Preference.
(a) In the event of the liquidation, dissolution or winding up of the affairs of
the Company, whether voluntary or involuntary, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to receive, out of the assets
of the Company available for distribution to its stockholders, an amount equal
to $1,000 per share (the "Liquidation Preference Amount") of the Series A
Preferred Stock plus any accrued and unpaid dividends before any payment shall
be made or any assets distributed to the holders of the Common Stock or any
other Junior Stock.If the assets of the Company are not sufficient to pay in
full the Liquidation Preference Amount plus any accrued and unpaid dividends
payable to the holders of outstanding shares of the Series A Preferred Stock and
any series of Preferred Stock or any other class of stock ranking pari passu, as
to rights on liquidation, dissolution or winding up, with the Series A Preferred
Stock, then all of said assets will be distributed among the holders of the
Series A Preferred Stock and the other classes of stock ranking pari passu with
the Series A Preferred Stock, if any, ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full.The liquidation payment with respect to each outstanding
fractional share of Series A Preferred Stock shall be equal to a ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of Series A Preferred Stock.All payments for which this Section 4(a)
provides shall be in cash, property (valued at its fair market value as
determined by an independent appraiser reasonably acceptable to the holders of a
majority of the Series A Preferred Stock) or a combination thereof; provided,
however, that no cash shall be paid to holders of Junior Stock unless each
holder of the outstanding shares of Series A Preferred Stock has been paid in
cash the full Liquidation Preference Amount plus any accrued and unpaid
dividends to which such holder is entitled as provided herein.After payment of
the full Liquidation Preference Amount plus any accrued and unpaid dividends to
which each holder is entitled, such holders of shares of Series A Preferred
Stock will not be entitled to any further participation as such in any
distribution of the assets of the Company.
(b) A consolidation or merger of the Company with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of the
Company, or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting shares of the Company
is disposed of or conveyed, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this Section 4.In the event of
the merger or consolidation of the Company with or into another corporation, the
Series A Preferred Stock shall maintain its relative powers, designations and
preferences provided for herein and no merger shall result which is inconsistent
therewith.
(c) Written notice of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, stating a payment date and the place
where the distributable amounts shall be payable, shall be given by mail,
postage prepaid, no less than forty-five (45) days prior to the payment date
stated therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the Company.
5.Conversion.The holder of Series A Preferred Stock shall have the following
conversion rights (the "Conversion Rights"):
(a) Right to Convert.At any time on or after the Issuance Date, the holder of
any such shares of Series A Preferred Stock may, at such holder's option,
subject to the limitations set forth in Section 7 herein, elect to convert (a
"Conversion") all or any portion of the shares of Series A Preferred Stock held
by such person into a number of fully-paid and nonassessable shares of Common
Stock equal to the total of (i) the Stated Value equal to the Liquidation
Preference Amount of $1,000 for each of the shares of Series A Preferred Stock
being converted multiplied by the number of Series A Preferred Stock being
converted, divided by (ii) the Conversion Price (as defined in Section 5(d)
below) then in effect as of the date of the delivery by such holder of its
notice of election to convert.For example, if all of the Five Hundred
Twenty-Eight point Eight-Two (528.82) shares of Series A Preferred Stock having
a Stated Value equal to the Liquidation Preference Amount of $1,000, the holder
shall be entitled to be issued a number of shares of Common Stock equal to
$528,822 divided by $0.14 representing a total of 3,777,300 shares of Common
Stock.
(b) Mechanics of Conversion.The Conversion of Series A Preferred Stock shall
be conducted in the following manner:
(i) Holder's Delivery Requirements.To convert Series A Preferred Stock into
full shares of Common Stock on any date (the "Conversion Date"), the holder
thereof shall (A) transmit by facsimile (or otherwise deliver), for receipt on
or prior to 5:00 p.m., New York time on such date, a copy of a fully executed
notice of conversion in the form attached hereto as Exhibit I (the "Conversion
Notice"), to the Company at (___) ___-____, Attention: Chief Executive Officer
or Chief Financial Officer, and (B) surrender to a common carrier or overnight
courier for delivery to the Company as soon as practicable following such
Conversion Date the original certificates representing the shares of Series A
Preferred Stock being converted (or an indemnification undertaking with respect
to such shares in the case of their loss, theft or destruction) (the "Preferred
Stock Certificates") and the originally executed Conversion Notice.
(ii) Company's Response.Upon receipt by the Company of a facsimile copy of a
Conversion Notice, the Company shall immediately send, via facsimile, a
confirmation of receipt of such Conversion Notice to such holder.Upon receipt
by the Company of a copy of the fully executed Conversion Notice, the Company or
its designated transfer agent (the "Transfer Agent"), as applicable, shall,
within three (3) business days following the date of receipt by the Company of
the fully executed Conversion Notice, issue and deliver to the Depository Trust
Company ("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") as specified in the Conversion Notice, registered in
the name of the holder or its designee, for the number of shares of Common Stock
to which the holder shall be entitled.Notwithstanding the foregoing to the
contrary, the Company or its Transfer Agent shall only be obligated to issue and
deliver the shares to the DTC on a holder's behalf via DWAC if a registration
statement providing for the resale of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock is effective.If the number of shares
of Preferred Stock represented by the Preferred Stock Certificate(s) submitted
for conversion is greater than the number of shares of Series A Preferred Stock
being converted, then the Company shall, as soon as practicable and in no event
later than three (3) business days after receipt of the Preferred Stock
Certificate(s) and at the Company's expense, issue and deliver to the holder a
new Preferred Stock Certificate representing the number of shares of Series A
Preferred Stock not converted.
(iii) Dispute Resolution.In the case of a dispute as to the arithmetic
calculation of the number of shares of Common Stock to be issued upon
conversion, the Company shall cause its Transfer Agent to promptly issue to the
holder the number of shares of Common Stock that is not disputed and shall
submit the arithmetic calculations to the holder via facsimile as soon as
possible, but in no event later than two (2) business days after receipt of such
holder's Conversion Notice.If such holder and the Company are unable to agree
upon the arithmetic calculation of the number of shares of Common Stock to be
issued upon such conversion within one (1) business day of such disputed
arithmetic calculation being submitted to the holder, then the Company shall
within one (1) business day submit via facsimile the disputed arithmetic
calculation of the number of shares of Common Stock to be issued upon such
conversion to the Company's independent, outside accountant.The Company shall
cause the accountant to perform the calculations and notify the Company and the
holder of the results no later than seventy-two (72) hours from the time it
receives the disputed calculations.Such accountant's calculation shall be
binding upon all Parties absent manifest error.The reasonable expenses of such
accountant in making such determination shall be paid by the Company, in the
event the holder's calculation was correct, or by the holder, in the event the
Company's calculation was correct, or equally by the Company and the holder in
the event that neither the Company's or the holder's calculation was correct.
The period of time in which the Company is required to effect conversions or
redemptions under this Certificate of Designation shall be tolled with respect
to the subject conversion or redemption pending resolution of any dispute by the
Company made in good faith and in accordance with this Section 5(b)(iii).
(iv) Record Holder.The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion of the Series A Preferred Stock shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert.If within three (3) business days of
the Company's receipt of an executed copy of the Conversion Notice (so long as
the applicable Preferred Stock Certificates and original Conversion Notice are
received by the Company on or before such third business day) (the "Delivery
Date") the Transfer Agent shall fail to issue and deliver to a holder the number
of shares of Common Stock to which such holder is entitled upon such holder's
conversion of the Series A Preferred Stock or to issue a new Preferred Stock
Certificate representing the number of shares of Series A Preferred Stock to
which such holder is entitled pursuant to Section 5(b)(ii) (a "Conversion
Failure"), in addition to all other available remedies which such holder may
pursue hereunder and under the Series A Convertible Preferred Stock Purchase
Agreement (the "Purchase Agreement") among the Company and the initial holders
of the Series A Preferred Stock (including indemnification pursuant to Section 6
thereof), the Company shall pay additional damages to such holder on each
business day after such third (3rd) business day that such conversion is not
timely effected in an amount equal 0.5% of the product of (A) the sum of the
number of shares of Common Stock not issued to the holder on a timely basis
pursuant to Section 5(b)(ii) and to which such holder is entitled and, in the
event the Company has failed to deliver a Preferred Stock Certificate to the
holder on a timely basis pursuant to Section 5(b)(ii), the number of shares of
Common Stock issuable upon conversion of the shares of Series A Preferred Stock
represented by such Preferred Stock Certificate, as of the last possible date
which the Company could have issued such Preferred Stock Certificate to such
holder without violating Section 5(b)(ii) and (B) the Closing Bid Price (as
defined below) of the Common Stock on the last possible date which the Company
could have issued such Common Stock and such Preferred Stock Certificate, as the
case may be, to such holder without violating Section 5(b)(ii).If the Company
fails to pay the additional damages set forth in this Section 5(b)(v) within
five (5) business days of the date incurred, then such payment shall bear
interest at the rate of 2.0% per month (pro rated for partial months) until such
payments are made.The term "Closing Bid Price" shall mean, for any security as
of any date, the last closing bid price of such security on the OTC Bulletin
Board or other principal exchange on which such security is traded as reported
by Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc.If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
of a majority of the outstanding shares of Series A Preferred Stock.
(vi) Buy-In Rights.In addition to any other rights available to the holders of
Series A Preferred Stock, if the Company fails to cause its Transfer Agent to
transmit to the holder a certificate or certificates representing the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock on or
before the Delivery Date, and if after such date the holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the holder of the shares of Common
Stock issuable upon conversion of Series A Preferred Stock which the holder
anticipated receiving upon such conversion (a "Buy-In"), then the Company shall
(1) pay in cash to the holder the amount 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 (A) the
number of shares of Common Stock issuable upon conversion of Series A Preferred
Stock that the Company was required to deliver to the holder in connection with
the conversion at issue times (B) the price at which the sell order giving rise
to such purchase obligation was executed, and (2) at the option of the holder,
either reinstate the shares of Series A Preferred Stock and equivalent number of
shares of Common Stock for which such conversion was not honored or deliver to
the holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its conversion 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
conversion of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay to 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, together with applicable
confirmations and other evidence reasonably requested by the Company.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 certificates representing shares of Common Stock upon
conversion of the Series A Preferred Stock as required pursuant to the terms
hereof.
(c) Intentionally omitted.
(d) Conversion Price.
(i) The term "Conversion Price" shall mean $0.14, subject to adjustment under
Section 5(e) hereof.Notwithstanding any adjustment hereunder, at no time shall
the Conversion Price be greater than $0.14 per share except if it is adjusted
pursuant to Section 5(e)(i).
(ii) Notwithstanding the foregoing to the contrary, if during any period (a
"Black-out Period"), a holder of Series A Preferred Stock is unable to trade any
Common Stock issued or issuable upon conversion of the Series A Preferred Stock
immediately due to the postponement of filing or delay or suspension of
effectiveness of the Registration Statement or because the Company has otherwise
informed such holder of Series A Preferred Stock that an existing prospectus
cannot be used at that time in the sale or transfer of such Common Stock
(provided that such postponement, delay, suspension or fact that the prospectus
cannot be used is not due to factors solely within the control of the holder of
Series A Preferred Stock or due to the Company exercising its rights under
Section 3(n) of the Registration Rights Agreement (as defined in the Purchase
Agreement)), such holder of Series A Preferred Stock shall have the option but
not the obligation on any Conversion Date within ten (10) trading days following
the expiration of the Black-out Period of using the Conversion Price applicable
on such Conversion Date or any Conversion Price selected by such holder of
Series A Preferred Stock that would have been applicable had such Conversion
Date been at any earlier time during the Black-out Period or within the ten (10)
trading days thereafter.
(e) Adjustments of Conversion Price.
(i) Adjustments for Stock Splits and Combinations.If the Company shall at any
time or from time to time after the Issuance Date, effect a stock split of the
outstanding Common Stock, the Conversion Price shall be proportionately
decreased.If the Company shall at any time or from time to time after the
Issuance Date, combine the outstanding shares of Common Stock, the Conversion
Price shall be proportionately increased.Any adjustments under this Section
5(e)(i) shall be effective at the close of business on the date the stock split
or combination becomes effective.
(ii) Adjustments for Certain Dividends and Distributions.If the Company shall
at any time or from time to time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in shares of Common Stock, then, and in
each event, the Conversion Price shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying the Conversion Price then
in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date; and
(2) the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution.
(iii) Adjustment for Other Dividends and Distributions.If the Company shall at
any time or from time to time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in securities of the Company other than
shares of Common Stock, then, and in each event, an appropriate revision to the
applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of Series
A Preferred Stock shall receive upon conversions thereof, in addition to the
number of shares of Common Stock receivable thereon, the number of securities of
the Company which they would have received had their Series A Preferred Stock
been converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the Conversion
Date, retained such securities (together with any distributions payable thereon
during such period), giving application to all adjustments called for during
such period under this Section 5(e)(iii) with respect to the rights of the
holders of the Series A Preferred Stock; provided, however, that if such record
date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends or distributions; and providedfurther, however, that no such
adjustment shall be made if the holders of Series A Preferred Stock
simultaneously receive (i) a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event or (ii) a dividend or
other distribution of shares of Series A Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as is
equal to the number of additional shares of Common Stock being issued with
respect to each share of Common Stock in such dividend or distribution.
(iv) Adjustments for Reclassification, Exchange or Substitution.If the Common
Stock issuable upon conversion of the Series A Preferred Stock at any time or
from time to time after the Issuance Date shall be changed to the same or
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series A Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales ofAssets.If
at any time or from time to time after the Issuance Date there shall be a
capital reorganization of the Company (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 5(e)(i), (ii) and (iii), or a reclassification, exchange or substitution
of shares provided for in Section 5(e)(iv)), or a merger or consolidation of the
Company with or into another corporation where the holders of outstanding voting
securities prior to such merger or consolidation do not own over 50% of the
outstanding voting securities of the merged or consolidated entity, immediately
after such merger or consolidation, or the sale of all or substantially all of
the Company's properties or assets to any other person (an "Organic Change"),
then as a part of such Organic Change an appropriate revision to the Conversion
Price shall be made if necessary and provision shall be made if necessary (by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series A Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock into the kind and amount of shares of
stock and other securities or property of the Company or any successor
corporation resulting from Organic Change.In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section
5(e)(v) with respect to the rights of the holders of the Series A Preferred
Stock after the Organic Change to the end that the provisions of this Section
5(e)(v) (including any adjustment in the Conversion Price then in effect and the
number of shares of stock or other securities deliverable upon conversion of the
Series A Preferred Stock) shall be applied after that event in as nearly an
equivalent manner as may be practicable.
(vi) Adjustments for Issuance of Additional Shares of Common Stock.
(A) In the event the Company, shall, at any time, from time to time, issue or
sell any additional shares of Common Stock (otherwise than as provided in the
foregoing subsections (i) through (v) of this Section 5(e) or pursuant to Common
Stock Equivalents (hereafter defined) granted or issued prior to the Issuance
Date) (the "Additional Shares of Common Stock"), at a price per share less than
the Conversion Price, or without consideration, the Conversion Price then in
effect upon each such issuance shall be adjusted to that price (rounded to the
nearest cent) determined by multiplying the Conversion Price by a fraction:
(1) the numerator of which shall be equal to the sum of (A) the number of shares
of Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus (B) the number of shares of Common Stock (rounded to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the then Conversion Price, and
(2) the denominator of which shall be equal to the number of shares of Common
Stock outstanding immediately after the issuance of such Additional Shares of
Common Stock;
No adjustment of the number of shares of Common Stock shall be made under
paragraph (A) of Section 5(e)(vi) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Common Stock Equivalents (as defined below), if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Common Stock Equivalents (or upon the
issuance of any warrant or other rights therefore) pursuant to Section
5(e)(vii).
(vii) Issuance of Common Stock Equivalents.If the Company, at any time after
the Issuance Date, shall issue any securities convertible into or exchangeable
for, directly or indirectly, Common Stock ("Convertible Securities"), other than
the Series A Preferred Stock, or any rights or warrants or options to purchase
any such Common Stock or Convertible Securities, shall be issued or sold
(collectively, the "Common Stock Equivalents") and the aggregate of the price
per share for which Additional Shares of Common Stock may be issuable thereafter
pursuant to such Common Stock Equivalent, plus the consideration received by the
Company for issuance of such Common Stock Equivalent divided by the number of
shares of Common Stock issuable pursuant to such Common Stock Equivalent (the
"Aggregate Per Common Share Price") shall be less than the Conversion Price, or
if, after any such issuance of Common Stock Equivalents, the price per share for
which Additional Shares of Common Stock may be issuable thereafter is amended or
adjusted, and such price as so amended or adjusted shall cause the Aggregate Per
Common Share Price to be less than Conversion Price in effect at the time of
such amendment or adjustment, then the Conversion Price then in effect shall be
adjusted pursuant to Section (5)(e)(vi) above assuming that all Additional
Shares of Common Stock have been issued pursuant to the Convertible Securities
or Common Stock Equivalents for a purchase price equal to the Aggregate Per
Common Share Price.No adjustment of the Conversion Price shall be made under
this subsection (vii) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefore, if any adjustment shall previously have been made to
the exercise price of such warrants then in effect upon the issuance of such
warrants or other rights pursuant to this subsection (vii).No adjustment shall
be made to the Conversion Price upon the issuance of Common Stock pursuant to
the exercise, conversion or exchange of any Convertible Security or Common Stock
Equivalent where an adjustment to the Conversion Price was made as a result of
the issuance or purchase of any Convertible Security or Common Stock Equivalent.
(viii) Consideration for Stock.In case any shares of Common Stock or
Convertible Securities other than the Series A Preferred Stock, or any rights or
warrants or options to purchase any such Common Stock or Convertible Securities,
shall be issued or sold:
(1) in connection with any merger or consolidation in which the Company is the
surviving corporation (other than any consolidation or merger in which the
previously outstanding shares of Common Stock of the Company shall be changed to
or exchanged for the stock or other securities of another corporation), the
amount of consideration therefore shall be, deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or
(2) in the event of any consolidation or merger of the Company in which the
Company is not the surviving corporation or in which the previously outstanding
shares of Common Stock of the Company shall be changed into or exchanged for the
stock or other securities of another corporation, or in the event of any sale of
all or substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of shares of its Common Stock for stock or securities or other property
of the other corporation computed on the basis of the actual exchange ratio on
which the transaction was predicated, and for a consideration equal to the fair
market value on the date of such transaction of all such stock or securities or
other property of the other corporation.If any such calculation results in
adjustment of the applicable Conversion Price, or the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock, the
determination of the applicable Conversion Price or the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock
immediately prior to such merger, consolidation or sale, shall be made after
giving effect to such adjustment of the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock.In the event any
consideration received by the Company for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board of
Directors of the Company.In the event Common Stock is issued with other shares
or securities or other assets of the Company for consideration which covers
both, the consideration computed as provided in this Section (5)(e)(viii) shall
be allocated among such securities and assets as determined in good faith by the
Board of Directors of the Company.
(iii) Record Date.In case the Company shall take record of the holders of its
Common Stock or any other Preferred Stock for the purpose of entitling them to
subscribe for or purchase Common Stock or Convertible Securities, then the date
of the issue or sale of the shares of Common Stock shall be deemed to be such
record date.
(iv) Certain Issues Excepted.Anything herein to the contrary notwithstanding,
the Company shall not be required to make any adjustment to the Conversion Price
upon (i) securities issued (other than for cash) in connection with a merger,
acquisition, or consolidation, (ii) securities issued pursuant to the conversion
or exercise of convertible or exercisable securities issued or outstanding on or
prior to the date of the Purchase Agreement or issued pursuant to the Purchase
Agreement (so long as the conversion or exercise price in such securities are
not amended to lower such price and/or adversely affect the holders), (iii)
securities issued in connection with bona fide strategic license agreements or
other partnering arrangements so long as such issuances are not for the purpose
of raising capital, (iv) Common Stock issued or the issuance or grants of
options to purchase Common Stock pursuant to the Issuer's stock option plans and
employee stock purchase plans outstanding as they exist on the date of the
Purchase Agreement, and (v) any warrants issued to the placement agent and its
designees for the transactions contemplated by the Purchase Agreement.
(d) No Impairment.The Company shall not, by amendment of its Articles 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 to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.In the event a holder shall elect to convert any shares of
Series A Preferred Stock as provided herein, the Company cannot 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, unless (i)
an order from the Securities and Exchange Commission prohibiting such conversion
or (ii) an injunction from a court, on notice, restraining and/or adjoining
conversion of all or of said shares of Series A Preferred Stock shall have been
issued and the Company posts a surety bond for the benefit of such holder in an
amount equal to 120% of the Liquidation Preference Amount of the Series A
Preferred Stock such holder has elected to convert, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such holder in the event it obtains
judgment.
(e) Certificates as to Adjustments.Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock pursuant to this
Section 5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
such Series A Preferred Stock a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.The Company shall, upon written request of the holder of
such affected Series A Preferred Stock, at any time, furnish or cause to be
furnished to such holder a like certificate setting forth such adjustments and
readjustments, the Conversion Price in effect at the time, and the number of
shares of Common Stock and the amount, if any, of other securities or property
which at the time would be received upon the conversion of a share of such
Series A Preferred Stock.Notwithstanding the foregoing, the Company shall not
be obligated to deliver a certificate unless such certificate would reflect an
increase or decrease of at least one percent of such adjusted amount.
(f) Issue Taxes.The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of shares of
Series A Preferred Stock pursuant hereto; provided, however, that the Company
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(g) Notices.All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by facsimile or three (3)
business days following being mailed by certified or registered mail, postage
prepaid, return-receipt requested, addressed to the holder of record at its
address appearing on the books of the Company.The Company will give written
notice to each holder of Series A Preferred Stock at least twenty (20) days
prior to the date on which the Company closes its books or takes a record (I)
with respect to any dividend or distribution upon the Common Stock, (II) with
respect to any pro rata subscription offer to holders of Common Stock or (III)
for determining rights to vote with respect to any Organic Change, dissolution,
liquidation or winding-up and in no event shall such notice be provided to such
holder prior to such information being made known to the public.The Company
will also give written notice to each holder of Series A Preferred Stock at
least twenty (20) days prior to the date on which any Organic Change,
dissolution, liquidation or winding-up will take place and in no event shall
such notice be provided to such holder prior to such information being made
known to the public.
(h) Fractional Shares.No fractional shares of Common Stock shall be issued
upon conversion of the Series A Preferred Stock.In lieu of any fractional
shares to which the holder would otherwise be entitled, the Company shall round
the number of shares to be issued upon conversion up to the nearest whole number
of shares.
(i) Reservation of Common Stock.The Company shall, so long as any shares of
Series A Preferred Stock are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of Common
Stock equal to at least one hundred twenty percent (120%) of the aggregate
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series A Preferred Stock then outstanding.
The initial number of shares of Common Stock reserved for conversions of the
Series A Preferred Stock and any increase in the number of shares so reserved
shall be allocated pro rata among the holders of the Series A Preferred Stock
based on the number of shares of Series A Preferred Stock held by each holder of
record at the time of issuance of the Series A Preferred Stock or increase in
the number of reserved shares, as the case may be.In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series A Preferred
Stock, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor.Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any shares of Series A Preferred Stock shall be allocated to the
remaining holders of Series A Preferred Stock, pro rata based on the number of
shares of Series A Preferred Stock then held by such holder.
(j) Retirement of Series A Preferred Stock.Conversion of Series A Preferred
Stock shall be deemed to have been effected on the Conversion Date.Upon
conversion of only a portion of the number of shares of Series A Preferred Stock
represented by a certificate surrendered for conversion, the Company shall issue
and deliver to such holder at the expense of the Company, a new certificate
covering the number of shares of Series A Preferred Stock representing the
unconverted portion of the certificate so surrendered as required by Section
5(b)(ii).
(k) Regulatory Compliance.If any shares of Common Stock to be reserved for the
purpose of conversion of Series A Preferred Stock require registration or
listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
6.No Preemptive Rights.Except as provided in Section 5 hereof and in the
Purchase Agreement, no holder of the Series A Preferred Stock shall be entitled
to rights to subscribe for, purchase or receive any part of any new or
additional shares of any class, whether now or hereinafter authorized, or of
bonds or debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares of
any class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and disposed of by
the Board of Directors on such terms and for such consideration (to the extent
permitted by law), and to such person or persons as the Board of Directors in
their absolute discretion may deem advisable.
7.Conversion Restriction.Notwithstanding anything to the contrary set forth
in Section 5 of this Certificate of Designation, at no time may a holder of
shares of Series A Preferred Stock convert shares of the Series A Preferred
Stock if the number of shares of Common Stock to be issued pursuant to such
conversion would cause the number of shares of Common Stock owned by such holder
at such time to exceed, when aggregated with all other shares of Common Stock
owned by such holder at such time, the number of shares of Common Stock which
would result in such holder beneficially owning (as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder) in excess of 9.9% of the then issued and outstanding shares of
Common Stock outstanding at such time; provided, however, that upon a holder of
Series A Preferred Stock providing the Company with sixty-one (61) days notice
(pursuant to Section 5(i) hereof) (the "Waiver Notice") that such holder would
like to waive Section 7 of this Certificate of Designation with regard to any or
all shares of Common Stock issuable upon conversion of Series A Preferred Stock,
this Section 7(a) shall be of no force or effect with regard to those shares of
Series A Preferred Stock referenced in the Waiver Notice.
8.Redemption.
(a) Redemption Option Upon Major Transaction.In addition to all other rights
of the holders of Series A Preferred Stock contained herein, simultaneous with
the occurrence of a Major Transaction (as defined below), each holder of Series
A Preferred Stock shall have the right, at such holder's option, to require the
Company to redeem all or a portion of such holder's shares of Series A Preferred
Stock at a price per share of Series A Preferred Stock equal to one hundred
percent (100%) of the Liquidation Preference Amount, plus any accrued but unpaid
dividends and liquidated damages (the "Major Transaction Redemption Price");
provided that the Company shall have the sole option to pay the Major
Transaction Redemption Price in cash or shares of Common Stock.If the Company
elects to pay the Major Transaction Redemption Price in shares of Common Stock,
the price per share shall be based upon the Conversion Pricethen in effect on
the day preceding the date of delivery of the Notice of Redemption at Option of
Buyer Upon Major Transaction (as hereafter defined) and the holder of such
shares of Common Stock shall have demand registration rights with respect to
such shares.
(b) Redemption Option Upon Triggering Event.In addition to all other rights of
the holders of Series A Preferred Stock contained herein, after a Triggering
Event (as defined below), each holder of Series A Preferred Stock shall have the
right, at such holder's option, to require the Company to redeem all or a
portion of such holder's shares of Series A Preferred Stock at a price per share
of Series A Preferred Stock equal to one hundred twenty percent (120%) of the
Liquidation Preference Amount, plus any accrued but unpaid dividends and
liquidated damages the "Triggering Event Redemption Price" and, collectively
with the "Major Transaction Redemption Price," the "Redemption Price"); provided
that with respect to the Triggering Events described in clauses (i), (ii), (iii)
and (vii) of Section 8(d), the Company shall have the sole option to pay the
Triggering Event Redemption Price in cash or shares of Common Stock; and
provided, further, that with respect to the Triggering Event described in
clauses (iv), (v) and (vi) of Section 8(d), the Company shall pay the Triggering
Event Redemption Price in cash.If the Company elects to pay the Triggering
Event Redemption Price in shares of Common Stock in accordance with this Section
8(b), the price per share shall be based upon the Conversion Pricethen in effect
on the day preceding the date of delivery of the Notice of Redemption at Option
of Buyer Upon Triggering Event and the holder of such shares of Common Stock
shall have demand registration rights with respect to such shares.
(c) "Major Transaction".A "Major Transaction" shall be deemed to have occurred
at such time as any of the following events:
(i) the consolidation, merger or other business combination of the Company with
or into another Person (other than (A) pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Company or (B) a consolidation, merger or other business combination in which
holders of the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the members
of the board of directors (or their equivalent if other than a corporation) of
such entity or entities).
(ii) the sale or transfer of more than 50% of the Company's assets other than
inventory in the ordinary course of business in one or a related series of
transactions; or
(iii) closing of a purchase, tender or exchange offer made to the holders of
more than fifty percent (50%) of the outstanding shares of Common Stock in which
more than fifty percent (50%) of the outstanding shares of Common Stock were
tendered and accepted.
(d) "Triggering Event".A "Triggering Event" shall be deemed to have occurred
at such time as any of the following events:
(i) so long as any shares of Series A Preferred Stock are outstanding, the
effectiveness of the Registration Statement, after it becomes effective, (i)
lapses for any reason (including, without limitation, the issuance of a stop
order) and such lapse continues for a period of twenty (20) consecutive trading
days, or (ii) is unavailable to the holder of the Series A Preferred Stock for
sale of the shares of Common Stock, and such lapse or unavailability continues
for a period of twenty (20) consecutive trading days, and the shares of Common
Stock into which such holder's Series A Preferred Stock can be converted cannot
be sold in the public securities market pursuant to Rule 144(k) ("Rule 144(k)")
under the Securities Act of 1933, as amended, provided that the cause of such
lapse or unavailability is not due to factors solely within the control of such
holder of Series A Preferred Stock.
(ii) the suspension from listing, without subsequent listing on any one of, or
the failure of the Common Stock to be listed on at least one of, the OTC
Bulletin Board, the Nasdaq National Market, the Nasdaq Capital Market, the New
York Stock Exchange, Inc.or the American Stock Exchange, Inc., for a period of
five (5) consecutive trading days;
(iii) the Company's notice to any holder of Series A Preferred Stock, including
by way of public announcement, at any time, of its inability to comply
(including for any of the reasons described in Section 9) or its intention not
to comply with proper requests for conversion of any Series A Preferred Stock
into shares of Common Stock; or
(iv) the Company's failure to comply with a Conversion Notice tendered in
accordance with the provisions of this Certificate of Designation within ten
(10) business days after the receipt by the Company of the Conversion Notice and
the Preferred Stock Certificates; or
(v) the Company deregisters its shares of Common Stock and as a result such
shares of Common Stock are no longer publicly traded; or
(vi) the Company consummates a "going private" transaction and as a result the
Common Stock is no longer registered under Sections 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended; or
(vii) the Company breaches any representation, warranty, covenant or other term
or condition of the Purchase Agreement, this Certificate of Designation or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated thereby or hereby, except to the
extent that such breach would not have a Material Adverse Effect (as defined in
the Purchase Agreement) and except, in the case of a breach of a covenant which
is curable, only if such breach continues for a period of a least ten (10)
business days.
(d) Mechanics of Redemption at Option of Buyer Upon Major Transaction.No sooner
than fifteen (15) days nor later than ten (10) days prior to the consummation of
a Major Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Major Transaction") to each holder of Series A
Preferred Stock.At any time after receipt of a Notice of Major Transaction (or,
in the event a Notice of Major Transaction is not delivered at least ten (10)
days prior to a Major Transaction, at any time within ten (10) days prior to a
Major Transaction), any holder of Series A Preferred Stock then outstanding may
require the Company to redeem, effective immediately prior to the consummation
of such Major Transaction, all of the holder's Series A Preferred Stock then
outstanding by delivering written notice thereof via facsimile and overnight
courier ("Notice of Redemption at Option of Buyer Upon Major Transaction") to
the Company, which Notice of Redemption at Option of Buyer Upon Major
Transaction shall indicate (i) the number of shares of Series A Preferred Stock
that such holder is electing to redeem and (ii) the applicable Major Transaction
Redemption Price, as calculated pursuant to Section 8(a) above.
(e) Mechanics of Redemption at Option of Buyer Upon Triggering Event.Within
one (1) business day after the Company obtains knowledge of the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via facsimile
and overnight courier ("Notice of Triggering Event") to each holder of Series A
Preferred Stock.At any time after the earlier of a holder's receipt of a Notice
of Triggering Event and such holder becoming aware of a Triggering Event, any
holder of Series A Preferred Stock then outstanding may require the Company to
redeem all of the Series A Preferred Stock by delivering written notice thereof
via facsimile and overnight courier ("Notice of Redemption at Option of Buyer
Upon Triggering Event") to the Company, which Notice of Redemption at Option of
Buyer Upon Triggering Event shall indicate (i) the number of shares of Series A
Preferred Stock that such holder is electing to redeem and (ii) the applicable
Triggering Event Redemption Price, as calculated pursuant to Section 8(b) above.
(f) Payment of Redemption Price.Upon the Company's receipt of a Notice(s) of
Redemption at Option of Buyer Upon Triggering Event or a Notice(s) of Redemption
at Option of Buyer Upon Major Transaction from any holder of Series A Preferred
Stock, the Company shall immediately notify each holder of Series A Preferred
Stock by facsimile of the Company's receipt of such Notice(s) of Redemption at
Option of Buyer Upon Triggering Event or Notice(s) of Redemption at Option of
Buyer Upon Major Transaction and each holder which has sent such a notice shall
promptly submit to the Company such holder's Preferred Stock Certificates which
such holder has elected to have redeemed.Other than with respect to the
Triggering Event described in clause (iv) of Section 8(d), the Company shall
have the sole option to pay the Redemption Price in cash or shares of Common
Stock in accordance with Sections 8(a) and (b) and Section 9 of this Certificate
of Designation.The Company shall deliver the applicable Major Transaction
Redemption Price immediately prior to the consummation of the Major Transaction;
provided that a holder's Preferred Stock Certificates shall have been so
delivered to the Company; providedfurther that if the Company is unable to
redeem all of the Series A Preferred Stock to be redeemed, the Company shall
redeem an amount from each holder of Series A Preferred Stock being redeemed
equal to such holder's pro-rata amount (based on the number of shares of Series
A Preferred Stock held by such holder relative to the number of shares of Series
A Preferred Stock outstanding) of all Series A Preferred Stock being redeemed.
If the Company shall fail to redeem all of the Series A Preferred Stock
submitted for redemption (other than pursuant to a dispute as to the arithmetic
calculation of the Redemption Price), in addition to any remedy such holder of
Series A Preferred Stock may have under this Certificate of Designation and the
Purchase Agreement, the applicable Redemption Price payable in respect of such
unredeemed Series A Preferred Stock shall bear interest at the rate of 1.0% per
month (prorated for partial months) until paid in full.Until the Company pays
such unpaid applicable Redemption Price in full to a holder of shares of Series
A Preferred Stock submitted for redemption, such holder shall have the option
(the "Void Optional Redemption Option") to, in lieu of redemption, require the
Company to promptly return to such holder(s) all of the shares of Series A
Preferred Stock that were submitted for redemption by such holder(s) under this
Section 8 and for which the applicable Redemption Price has not been paid, by
sending written notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice").Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full applicable Redemption Price to such
holder, (i) the Notice(s) of Redemption at Option of Buyer Upon Major
Transaction shall be null and void with respect to those shares of Series A
Preferred Stock submitted for redemption and for which the applicable Redemption
Price has not been paid and (ii) the Company shall immediately return any Series
A Preferred Stock submitted to the Company by each holder for redemption under
this Section 8(d) and for which the applicable Redemption Price has not been
paid and (iii) the Conversion Price of such returned shares of Series A
Preferred Stock shall be adjusted to the lesser of (A) the Conversion Price and
(B) the lowest Closing Bid Price during the period beginning on the date on
which the Notice(s) of Redemption of Option of Buyer Upon Major Transaction is
delivered to the Company and ending on the date on which the Void Optional
Redemption Notice(s) is delivered to the Company; provided that no adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect.A holder's delivery of a Void Optional Redemption Notice
and exercise of its rights following such notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of such
notice other than interest payments.Payments provided for in this Section 8
shall have priority to payments to other stockholders in connection with a Major
Transaction.
(g) Demand Registration Rights.If the Redemption Price upon the occurrence of a
Major Transaction or a Triggering Event is paid in shares of Common Stock and
such shares have not been previously registered on a registration statement
under the Securities Act, a holder of Series A Preferred Stock may make a
written request for registration under the Securities Act pursuant to this
Section 8(h) of all of its shares of Common Stock issued upon such Major
Transaction or Triggering Event.The Company shall use its reasonable best
efforts to cause to be filed and declared effective as soon as reasonably
practicable (but in no event later than the ninetieth (90th) day after such
holder's request is made) a registration statement under the Securities Act,
providing for the sale of all of the shares of Common Stock issued upon such
Major Transaction or Triggering Event by such holder.The Company agrees to use
its reasonable best efforts to keep any such registration statement continuously
effective for resale of the Common Stock for so long as such holder shall
request, but in no event later than the date that the shares of Common Stock
issued upon such Major Transaction or Triggering Event may be offered for resale
to the public pursuant to Rule 144(k).
9.Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert.If, upon the Company's
receipt of a Conversion Notice, the Company cannot issue shares of Common Stock
registered for resale under the Registration Statement for any reason,
including, without limitation, because the Company (w) does not have a
sufficient number of shares of Common Stock authorized and available, (x) is
otherwise prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities from issuing
all of the Common Stock which is to be issued to a holder of Series A Preferred
Stock pursuant to a Conversion Notice or (y) subsequent to the effective date of
the Registration Statement, fails to have a sufficient number of shares of
Common Stock registered for resale under the Registration Statement, then the
Company shall issue as many shares of Common Stock as it is able to issue in
accordance with such holder's Conversion Notice and pursuant to Section 5(b)(ii)
above and, with respect to the unconverted Series A Preferred Stock, the holder,
solely at such holder's option, can elect, within five (5) business days after
receipt of notice from the Company thereof to:
(i) require the Company to redeem from such holder those Series A Preferred
Stock for which the Company is unable to issue Common Stock in accordance with
such holder's Conversion Notice ("Mandatory Redemption") at a price per share
equal to the Major Transaction Redemption Price as of such Conversion Date (the
"Mandatory Redemption Price"); provided that the Company shall have the sole
option to pay the Mandatory Redemption Price in cash or shares of Common Stock;
(ii) if the Company's inability to fully convert Series A Preferred Stock is
pursuant to Section 9(a)(y) above, require the Company to issue restricted
shares of Common Stock in accordance with such holder's Conversion Notice and
pursuant to Section 5(b)(ii) above;
(iii) void its Conversion Notice and retain or have returned, as the case may
be, the shares of Series A Preferred Stock that were to be converted pursuant to
such holder's Conversion Notice (provided that a holder's voiding its Conversion
Notice shall not effect the Company's obligations to make any payments which
have accrued prior to the date of such notice); or
(iv) exercise its Buy-In rights pursuant to and in accordance with the terms and
provisions of Section 5(b)(vi) hereof.
(b) Mechanics of Fulfilling Holder's Election.The Company shall immediately
send via facsimile to a holder of Series A Preferred Stock, upon receipt of a
facsimile copy of a Conversion Notice from such holder which cannot be fully
satisfied as described in Section 9(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the "Inability to
Fully Convert Notice").Such Inability to Fully Convert Notice shall indicate
(i) the reason why the Company is unable to fully satisfy such holder's
Conversion Notice, (ii) the number of Series A Preferred Stock which cannot be
converted and (iii) the applicable Mandatory Redemption Price.Such holder shall
notify the Company of its election pursuant to Section 9(a) above by delivering
written notice via facsimile to the Company ("Notice in Response to Inability to
Convert").
(c) Payment of Redemption Price.If such holder shall elect to have its shares
redeemed pursuant to Section 9(a)(i) above, the Company shall pay the Mandatory
Redemption Price to such holder within thirty (30) days of the Company's receipt
of the holder's Notice in Response to Inability to Convert, provided that prior
to the Company's receipt of the holder's Notice in Response to Inability to
Convert the Company has not delivered a notice to such holder stating, to the
satisfaction of the holder, that the event or condition resulting in the
Mandatory Redemption has been cured and all Conversion Shares issuable to such
holder can and will be delivered to the holder in accordance with the terms of
Section 2(g).If the Company shall fail to pay the applicable Mandatory
Redemption Price to such holder on a timely basis as described in this Section
9(c) (other than pursuant to a dispute as to the determination of the arithmetic
calculation of the Redemption Price), in addition to any remedy such holder of
Series A Preferred Stock may have under this Certificate of Designation and the
Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0%
per month (prorated for partial months) until paid in full.Until the full
Mandatory Redemption Price is paid in full to such holder, such holder may (i)
void the Mandatory Redemption with respect to those Series A Preferred Stock for
which the full Mandatory Redemption Price has not been paid, (ii) receive back
such Series A Preferred Stock, and (iii) require that the Conversion Price of
such returned Series A Preferred Stock be adjusted to the lesser of (A) the
Conversion Price and (B) the lowest Closing Bid Price during the period
beginning on the Conversion Date and ending on the date the holder voided the
Mandatory Redemption.
(d) Pro-rata Conversion and Redemption.In the event the Company receives a
Conversion Notice from more than one holder of Series A Preferred Stock on the
same day and the Company can convert and redeem some, but not all, of the Series
A Preferred Stock pursuant to this Section 9, the Company shall convert and
redeem from each holder of Series A Preferred Stock electing to have Series A
Preferred Stock converted and redeemed at such time an amount equal to such
holder's pro-rata amount (based on the number shares of Series A Preferred Stock
held by such holder relative to the number shares of Series A Preferred Stock
outstanding) of all shares of Series A Preferred Stock being converted and
redeemed at such time.
10.Vote to Change the Terms of or Issue Preferred Stock.The affirmative vote
at a meeting duly called for such purpose or the written consent without a
meeting, of the holders of not less than seventy-five percent (75%) of the then
outstanding shares of Series A Preferred Stock (in addition to any other
corporate approvals then required to effect such action), shall be required (a)
for any change to this Certificate of Designation or the Company's Articles of
Incorporation which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Series A Preferred Stock or (b) for
the issuance of shares of Series A Preferred Stock other than pursuant to the
Purchase Agreement and the Additional Preferred Stock and Warrant Financing.
11.Lost or Stolen Certificates.Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing the shares of Series A Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
Preferred Stock Certificates if the holder contemporaneously requests the
Company to convert such shares of Series A Preferred Stock into Common Stock.
12.Remedies, Characterizations, Other Obligations, Breaches and InjunctiveRelief.The remedies provided in this Certificate of Designation shall
be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation.Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof).The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of the Series A Preferred
Stock and that the remedy at law for any such breach may be inadequate.The
Company therefore agrees that, in the event of any such breach or threatened
breach, the holders of the Series A Preferred Stock shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
13.Specific Shall Not Limit General; Construction.No specific provision
contained in this Certificate of Designation shall limit or modify any more
general provision contained herein.This Certificate of Designation shall be
deemed to be jointly drafted by the Company and all initial purchasers of the
Series A Preferred Stock and shall not be construed against any person as the
drafter hereof.
14.Failure or Indulgence Not Waiver.No failure or delay on the part of a
holder of Series A Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
IN WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate
and does affirm the foregoing as true this 20th day of June 2017.
EMERALD MEDICAL APPLICATIONS CORP.
By: /s/: Gadi Levin
Name: Gadi Levin
Title: Chief Financial Officer
EXHIBIT I
EMERALD MEDICAL APPLICATIONS CORP. CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Preferred Stock of Emerald Medical Applications
Corp.(the "Certificate of Designation").In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $0.0001 per share (the
"Preferred Shares"), of Emerald Medical Applications Corp., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $0.0001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
Date of Conversion:
Number of Preferred Shares to be converted:
Stock certificate no(s).of Preferred Shares to be converted:
The Common Stock have been sold pursuant to the Registration Statement: YES ____
NO____
Please confirm the following information:
Conversion Price:
Number of shares of Common Stock
to be issued:
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to:
Facsimile Number:
Authorization:
By:
Title:
Dated: