Attached files
Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A-1 CONVERTIBLE PREFERRED STOCK
OF
IMAGEWARE SYSTEMS, INC.
The
undersigned, the Chief Executive Officer of ImageWare Systems,
Inc., a Delaware corporation (the “Company”), does hereby certify as
follows:
WHEREAS, on July 1, 2020, the Board of Directors of the
Company (the “Board of
Directors”) duly adopted a resolution (the
“Original Certificate of
Designations of Series A-1 Convertible Preferred
Stock”) creating a series of Preferred Stock
designated as the Series A-1 Convertible Preferred Stock;
and
WHEREAS, the Board of Directors desires
to amend and restate the Original Certificate of Designations of
Series A-1 Convertible Preferred Stock.
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of
Directors by provisions of the Certificate of Incorporation of the
Company (the “Certificate of
Incorporation”), the Original Certificate of
Designations of Series A-1 Convertible Preferred Stock is hereby
amended and restated in its entirety to read as
follows:
1. Designation and
Rank.
(a) The designation of such series
of the Preferred Stock shall be the Series A-1 Convertible
Preferred Stock, par value $0.01 per share (the “Series A-1 Preferred”). The
maximum number of shares of Series A-1 Preferred shall be Thirty
Seven Thousand Four Hundred Sixty-Eight (37,468) shares. The Series
A-1 Preferred shall rank senior to the Company’s common
stock, par value $0.01 per share (the “Common Stock”), and except as
provided in Section 1(b) below, to all other classes and series of
equity securities of the Company which by their terms rank junior
to the Series A-1 Preferred (“Junior Stock”). The Series A-1
Preferred shall rank pari-passu to the Company’s Series A
Convertible Preferred Stock (“Series A Preferred”).
(b) The Series A-1 Preferred shall be
subordinate to and rank junior to (i) the Company’s Series B
Convertible Preferred Stock; (ii) Series C Convertible Preferred
Stock; (iv) Series D Convertible Preferred Stock and (v) all
indebtedness of the Company now or hereafter outstanding. The date
of original issuance of the Series A-1 Preferred is referred to
herein as the “Issuance
Date”.
2. Dividends.
(a) Payment of
Dividends.
(i) The holders of record of shares of
Series A-1 Preferred shall be entitled to receive, out of any
assets at the time legally available therefor, cumulative dividends
at the Specified Rate per share per annum on a daily basis,
commencing on the date hereof and payable quarterly in arrears on
each of March 31, June 30, September 30 and December 31 (each, a
“Dividend Payment
Date”), through the issuance of shares of Common
Stock. The
number of shares of Common Stock to be issued to each applicable
holder shall be determined by dividing the total dividend then
being paid to such holder in shares of Common Stock by the Price
Per Share (as defined below) as of the applicable Dividend Payment
Date, and rounding up to the nearest whole share (the
“Dividend
Shares”). As
used herein, “Price
Per Share” means, with
respect to a share of Common Stock, the VWAP (as defined below) for
the five (5) trading days immediately preceding the applicable
Dividend Payment Date.
“Specified Rate” means the
cumulative dividend rate of four percent (4%) of the stated
Liquidation Preference Amount per share per annum.
“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 (defined below), the daily volume weighted average
price of the Common Stock for such 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 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 daily mean between the closing bid and asked
quotations per share of the Common Stock so reported, or
(c) 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 holders of 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.
“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 OTCQX or OTCQB (or
any successors to any of the foregoing).
(ii) The Company will: (a) prepare and
file with the Securities and Exchange Commission (the
“SEC”), within
thirty (30) days after the date hereof, a Form S-3 (or, if such
form is not available to the Company, a Form S-1) to register under
the Securities Act of 1933, as amended (the “Securities Act”), the resale, by
the holders of shares of Series A-1 Preferred, of any Conversion
Shares (as defined below) and Dividend Shares issuable hereunder
and not otherwise eligible for resale under Rule 144 promulgated
under the Securities Act (“Rule 144”), without volume or
manner-of-sale restrictions or current public information
requirements (the “Registration Statement”); (b) use
its best efforts to cause the Registration Statement to become
effective as soon as reasonably practicable after such filing; (c)
use its best efforts to cause the Registration Statement to remain
effective at all times thereafter until the earlier of (i) the date
as of which such holders of Series A-1 Preferred may sell all of
such Conversion Shares and/or Dividend Shares without restriction
pursuant to Rule 144, without volume or manner-of-sale restrictions
or current public information requirements, as determined by
counsel to the Company as set forth in a written opinion letter to
such effect, addressed and acceptable to the Company’s
transfer agent and the holders of Series A-1 Preferred, or (ii) the
date when all of the Conversion Shares and Dividend Shares
registered thereunder have been disposed of by such holders of
Series A-1 Preferred; and (d) prepare and file with the SEC such
amendments and supplements to the Registration Statement (including
documents filed pursuant to the Securities Exchange Act of 1934, as
amended, and incorporated by reference into the Registration
Statement) and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for the
period specified in this sentence above.
(b) In the event of a Voluntary
Conversion (as defined in Section 5(a) below), all
accrued but unpaid dividends on the Series A-1 Preferred being
converted shall be payable in cash or shares of Common Stock within
five (5) business days of such Voluntary Conversion Date (as
defined in Section
5(b)(i) below). Dividends on the Series A-1 Preferred are
prior and in preference to any declaration or payment of any
distribution on any outstanding shares of Junior Stock. Such
dividends shall accrue on each share of Series A-1 Preferred from
day to day, whether or not earned or declared, so that if such
dividends with respect to any previous dividend period have not
been paid on, or declared and set apart for, all shares of Series
A-1 Preferred at the time outstanding, the deficiency shall be
fully paid on, or declared and set apart for, such shares on a pro
rata basis with all other equity securities of the Company ranking
on a parity with the Series A-1 Preferred as to the payment of
dividends before any distribution shall be paid on, or declared and
set apart for Junior Stock.
(c)
So long as any shares of Series A-1 Preferred 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-1 Preferred.
(d) In
the event of a dissolution, liquidation or winding up of the
Company, all accrued and unpaid dividends on the Series A-1
Preferred shall be payable on the day immediately preceding the
date of payment of the Liquidation Preference Amount payable to the
holders of Series A-1 Preferred, in accordance with Section 4 below. In the event
of the Company’s exercise of its optional redemption right
set forth in Section
7 below or conversion of Series A-1 Preferred in accordance
with Section 5
below, all accrued and unpaid dividends on the Series A-1 Preferred
shall be payable on the day immediately preceding the date of such
redemption or conversion, as the case may be.
(e)
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
Junior securities, or the purchase or redemption of shares of the
Company (other than redemptions set forth in Section 7 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) On
any matter presented to the stockholders of the Company for their
action or consideration at any meeting of stockholders of the
Company (or by written consent of stockholders in lieu of meeting),
each holder of outstanding shares of Series A-1 Preferred shall be
entitled to cast the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series A-1
Preferred held by such holder are convertible as of the record date
for determining stockholders entitled to vote on such matter.
Except as provided by law or by Section 3(b) below, holders of
Series A-1 Preferred shall vote together with the holders of Common
Stock, and with the holders of any other series of Preferred Stock
the terms of which so provide, as a single class.
(b) So
long as shares of the Series A-1 Preferred representing at least
fifty percent (50%) of the total number of shares of Series A-1
Preferred issued on the Issuance Date remain issued and
outstanding, the holders of record of the shares of Series A-1
Preferred, exclusively and as a separate class, shall be entitled
to elect two directors of the Company (the “Series A Directors”). Any
director elected as provided in the preceding sentence may be
removed without cause by, and only by, the affirmative vote of the
holders of the shares of Series A-1 Preferred, given either at a
special meeting of such stockholders duly called for that purpose
or pursuant to a written consent of stockholders. The holders of
record of the shares of Common Stock and of any other class or
series of voting stock (including the Series A-1 Preferred),
exclusively and voting together as a single class, shall be
entitled to elect the balance of the total number of directors of
the Company. At any meeting held for the purpose of electing a
Series A Director, the presence in person or by proxy of the
holders of a majority of the outstanding shares of Series A-1
Preferred shall constitute a quorum for the purpose of electing
such director. A vacancy in any directorship filled by the holders
of Series A-1 Preferred shall be filled only by vote or written
consent in lieu of a meeting of the holders of Series A-1 Preferred
or by any remaining director or directors elected by the holders of
such class or series pursuant to this Section 3(b).
4. Liquidation, Dissolution, Winding-Up
or Distribution.
(a) In the event of the liquidation,
dissolution, winding up of the affairs of the Company or any other
event that causes the Company to make a distribution (as such term
is used in Section
2(e) above), whether voluntary or involuntary, the holders
of shares of the Series A-1 Preferred then outstanding shall be
entitled to receive, out of the assets of the Company available for
distribution to its stockholders, an amount equal to the greater of
(i) $1,000 per share plus all accrued and unpaid dividends, or (ii)
such amount per share as would have been payable had each such
share been converted into Common Stock pursuant to Section 5 immediately prior to
such liquidation, dissolution or winding up (the amount payable
pursuant to the foregoing is referred to herein as the
“Liquidation Preference
Amount”) 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 payable to the
holders of outstanding shares of Series A-1 Preferred and any other
series of Preferred Stock ranking on a parity, as to rights on
liquidation, dissolution or winding up, with the Series A-1
Preferred, then all of said assets will be distributed among the
holders of the Series A-1 Preferred and the holders of the other
Preferred Stock on a parity with the Series A-1 Preferred, 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-1 Preferred shall be equal to a
ratably proportionate amount of the liquidation payment with
respect to each whole outstanding share of Series A-1 Preferred.
All payments for which this Section 4(a) provides shall be
in cash, property (valued at its fair market value as determined
reasonably and in good faith by the Board of Directors of the
Company) 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-1 Preferred has been paid in cash the full
Liquidation Preference Amount to which such holder is entitled, as
provided herein. After payment of the full Liquidation Preference
Amount to which each holder is entitled, such holders of shares of
Series A-1 Preferred will not be entitled to any further
participation as such in any distribution of the assets of the
Company.
(b) 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, to the extent
possible, be given by mail, postage prepaid, no less than twenty
(20) days prior to the payment date stated therein, to the holders
of record of the Series A-1 Preferred at their respective addresses
as recorded on the books of the Company.
5. Conversion. The holders of
Series A-1 Preferred shall have the following conversion rights
(the “Conversion
Rights”):
(a) Voluntary
Conversion.
(i)
Following November 1, 2020 (the “Closing Date”), for a period
extending until August 1, 2021 (the “Series A-1 Holder Optional Conversion
Period”), the holder of any shares of Series A-1
Preferred may, at such holder's option (subject to Section 5(a)(ii) below), elect
to convert (a “Voluntary
Conversion”) all or any portion of the shares of
Series A-1 Preferred held into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i)
the Liquidation Preference Amount of the shares of Series A-1
Preferred being converted, divided by (ii) the Conversion Price (as
defined in Section
5(c) below) in effect as of the date the holder delivers to
the Company their notice of election to convert (the
“Conversion
Shares”); provided, that holders of Series A-1
Preferred shall waive any rights granted by Section 9 hereof for the Series
A-1 Holder Optional Conversion Period. In the event the Company
issues a notice of redemption pursuant to Section 7 hereof, the
Conversion Rights of the shares designated for redemption shall
terminate at the close of business on the last full day preceding
the date fixed for redemption, unless the redemption price is not
paid on such redemption date, in which case the Conversion Rights
for such shares shall continue until the redemption price is paid
in full. In the event of such a redemption, the Company shall
provide to each holder of shares of Series A-1 Preferred notice of
such redemption or liquidation, dissolution or winding up, which
notice shall (i) be given at least fifteen (15) days prior to the
termination of the Conversion Rights and (ii) state the amount per
share of Series A-1 Preferred that will be paid or distributed on
such redemption or liquidation, dissolution or winding up, as the
case may be.
(ii)
During the Series A-1 Holder Optional Conversion Period, each
holder of Series A-1 Preferred shall convert any remaining issued
and outstanding shares of Series A-1 Preferred (together with any
Dividend Shares accrued by such holder in connection therewith
during the Series A-1 Holder Optional Conversion Period), in
accordance with the Series A-1 Conversion Schedule attached hereto
as Exhibit I (the
“Series A-1 Conversion
Schedule”), on or prior to each Conversion Milestone
Date (as defined below). Each holder shall convert a percentage of
the total issued and outstanding shares of Series A-1 Preferred (as
of the Closing Date) held by such holder that is equal to or
greater than such holder’s respective Minimum Conversion
Milestone (as defined below) as of such Conversion Milestone Date;
provided, however, that each holder of Series A-1
Preferred may convert more than the Minimum Conversion Milestone at
any time until all of the shares of Series A-1 Preferred Shares
have been converted.
“Conversion Milestone Date” means
each of the respective dates listed in the column titled
“Conversion Milestone Date” on the Series A-1
Conversion Schedule attached hereto as Exhibit I.
“Minimum Conversion Milestone”
means each of the respective percentages listed in the column
titled “Minimum Conversion Milestone” on the Series A-1
Conversion Schedule attached hereto as Exhibit I.
(b) Mandatory Conversion. If, at
any time, (i) the Common Stock is registered pursuant to Section
12(b) or (g) under the Exchange Act; (ii) there are sufficient
authorized but unissued shares (which have not otherwise been
reserved or committed for issuance) to permit the issuance of
Conversion Shares; (iii) upon issuance, the Conversion Shares will
be either (A) covered by an effective registration statement under
the Securities Act, which is then available for the immediate
resale of such Conversion Shares by the recipients thereof, and the
Board of Directors reasonably believes that such effectiveness will
continue uninterrupted for the foreseeable future, or (B) freely
tradable without restriction pursuant to Rule 144 promulgated under
the Securities Act without volume or manner-of-sale restrictions or
current public information requirements, as determined by the
counsel to the Company as set forth in a written opinion letter to
such effect, addressed and acceptable to the Transfer Agent and the
affected holders; and (iv) the VWAP of the Common Stock is at least
$1.00 per share (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) for twenty (20) consecutive
trading days, then the Company shall have the right, subject to the
terms and conditions of this Section 5, to convert one-half
of the issued and outstanding shares of Series A-1 Preferred into
Conversion Shares, on a pro-rata basis among all holders of Series
A-1 Preferred at such time. Provided that the requirements of
subsections (i), (ii), (iii) and (iv) of the preceding sentence are
satisfied, and the VWAP of the Common Stock is at least $1.00 per
share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar
recapitalization affecting such shares) for at least eighty (80)
consecutive trading days, then the Company shall have the right,
subject to the terms and conditions of this Section 5, to convert all
issued and outstanding shares of Series A-1 Preferred into
Conversion Shares.
(c) Mechanics of Conversion.
Conversions of Series A-1 Preferred shall be conducted in the
following manner:
(i) Voluntary Conversion. To
convert Series A-1 Preferred into Conversion Shares on any date
(the “Voluntary Conversion
Date”), the holder thereof shall 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 II (the
“Conversion
Notice”), to the Company. As soon as practicable
following such Voluntary Conversion Date, the holder shall
surrender to a common carrier for delivery to the Company the
original certificates representing the shares of Series A-1
Preferred 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) Mandatory Conversion.
In the event the Company elects to
convert outstanding shares of Series A-1 Preferred into Conversion
Shares in pursuant to Section 5(b)
above, the Company shall give written
notice (the “Mandatory Conversion
Notice”) to all holders
of the Series A-1 Preferred of its intention to require the
conversion of the shares of Series A-1 Preferred identified
therein. The Mandatory Conversion Notice shall set forth the number
of Series A-1 Preferred being converted, the date on which such
conversion shall be effective (the “Mandatory Conversion
Date”), and shall be
given to the holders of the Series A-1 Preferred not less than
fifteen (15) days prior to the Mandatory Conversion Date. The
Mandatory Conversion Notice shall be delivered to each holder at
the address as it appears on the stock transfer books of the
Company. In order to receive the Conversion Shares into which the
Series A-1 Preferred is convertible pursuant to Section
5(b), each holder of the Series
A-1 Preferred shall surrender to the Company at the place
designated in the Mandatory Conversion Notice the certificates(s)
representing the number of shares of Series A-1 Preferred specified
in the Mandatory Conversion Notice. Upon the Mandatory Conversion
Date, such converted Series A-1 Preferred shall no longer be deemed
to be outstanding, and all rights of the holder with respect to
such shares shall immediately terminate, except the right to
receive the shares of Common Stock into which the Series A-1
Preferred is convertible pursuant to Section
5(b).
(iii) Company's Response. Upon
receipt by the Company of a copy of the fully executed Conversion
Notice or upon giving a Mandatory Conversion Notice, the Company or
its designated transfer agent (the “Transfer Agent”), as applicable,
shall within five (5) business days following the date of receipt
by the Company of a copy of the fully executed Conversion Notice or the Mandatory
Conversion Date, as the case may be, issue and deliver to the
Depository Trust Company (“DTC”) account on each applicable
holder's behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”) as
specified in the Conversion Notice, registered in the name of each
such holder or its designee, for the number of Conversion Shares to
which such holder shall be entitled. Notwithstanding the foregoing
to the contrary, the Company or its Transfer Agent shall only be
required to issue and deliver the Conversion Shares to DTC on a
holder's behalf via DWAC if (i) the Conversion Shares may be issued
without restrictive legends and (ii) the Company and the Transfer Agent are
participating in DTC through the DWAC system. If all of the
conditions set forth in clauses (i) and (ii) above are not
satisfied, the Company shall deliver physical certificates to each
such holder or its designee. If the number of shares of Series A-1
Preferred represented by the Preferred Stock Certificate(s)
submitted for conversion is greater than the number of shares of
Series A-1 Preferred being converted, then the Company shall, as
soon as practicable and in no event later than five (5) business
days after receipt of the Preferred Stock Certificate(s) and at the
Company's expense, issue and deliver to the applicable holder a new
Preferred Stock Certificate representing the number of shares of
Series A-1 Preferred not converted.
(iv) Dispute Resolution. In the case
of a dispute as to the arithmetic calculation of the number of
Conversion Shares to be issued upon conversion, the Company shall
cause its Transfer Agent to promptly issue to the holder the number
of Conversion Shares that is not disputed and shall submit the
arithmetic calculations to the holder via electronic mail or
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 Conversion Shares to be issued within
two (2) business days of such disputed arithmetic calculation being submitted to the holder,
then the Company shall, within two (2) business days, submit via
electronic mail or facsimile the disputed arithmetic calculation of
the number of Conversion Shares to be issued to the Company's
independent, outside accountant (the “Accountant”). The Company shall
cause the Accountant to perform the calculations and notify the
Company and the holder of the results no later than five (5)
business days from the time it receives the disputed calculations.
The 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 Designations 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(c)(iv).
(v) Record Holder. The person or
persons entitled to receive Conversion Shares shall be treated for
all purposes as the record holder or holders of such shares of
Series A-1 Preferred on the Conversion Date.
(d) Conversion Price.
(i) The term “Conversion
Price” shall mean $0.20 per share of Common Stock, subject to
adjustment under Section
5(e) hereof.
(ii) Notwithstanding the foregoing to the
contrary, if during any period (a “Black-Out Period”), a holder of
Series A-1 Preferred is unable to trade any Conversion Shares
immediately because the Company has informed such holder that an
existing prospectus cannot be used at that time in the sale or
transfer of such Conversion Shares (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-1 Preferred) such holder of Series A-1 Preferred
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-1 Preferred that would have been applicable had such
Conversion Date been at any earlier time during the Black-Out
Period.
(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 date hereof, effect a stock split of its
outstanding Common Stock, the Conversion Price shall be
proportionately decreased. If the Company shall at any time or from
time to time after the date hereof, combine its 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 date hereof, 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;
provided, however, that no such adjustment shall
be made if the holders of Series A-1 Preferred 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-1
Preferred had been converted into Conversion Shares on the date of
such event or (ii) a dividend or other distribution of shares of
Series A-1 Preferred which are convertible, as of the date of such
event, into Conversion Shares 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.
(iii) Adjustment for Other Dividends and
Distributions. If the Company shall at any time or from time
to time after the date hereof, 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-1
Preferred shall receive upon conversions thereof, in addition to
the Conversion Shares receivable thereon, the number of securities
of the Company which they would have received had their Series A-1
Preferred been converted into Conversion Shares 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-1 Preferred;
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.
(iv) Adjustments for Reclassification,
Exchange or Substitution. If the Conversion Shares issuable
upon conversion of the Series A-1 Preferred at any time or from
time to time after the date hereof 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-1 Preferred shall have the right thereafter to convert
such share of Series A-1 Preferred 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 Conversion Shares into which such share of
Series A-1 Preferred 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 of Assets. If, at any time or
from time to time after the date hereof 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 fifty percent (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-1 Preferred shall have the right thereafter to
convert such share of Series A-1 Preferred into the kind and amount
of shares of stock and other securities or property which such
holder would have had the right to receive had such holder
converted its shares of Series A-1 Preferred immediately prior to
the consummation of such 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-1 Preferred 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-1 Preferred)
shall be applied after that event in as nearly an equivalent manner
as may be practicable.
(vi) Consideration for Stock. In
case any shares of Common Stock or Convertible Securities other
than the Series A-1 Preferred, 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 Conversion
Shares issuable upon conversion of the Series A-1 Preferred, the
determination of the applicable Conversion Price or the number of
Conversion Shares issuable upon conversion of the Series A-1
Preferred immediately prior to such merger, consolidation or sale,
shall be made after giving effect to such adjustment of the number
of Conversion Shares issuable upon conversion of the Series A-1
Preferred. 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)(vi) shall be allocated among such securities and assets
as determined in good faith by the Board of Directors of the
Company.
(vii) 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.
(1) No Impairment. The Company
shall not, by amendment of 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 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-1 Preferred against impairment. In the event a holder shall elect
to convert any shares of Series A-1 Preferred 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-1
Preferred shall have been issued and the Company posts a surety
bond for the benefit of such holder in an amount equal to one
hundred percent (100%) of the Liquidation Preference Amount of the
Series A-1 Preferred 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.
If the Company is the prevailing party in any legal action or other
legal proceeding relating to the Conversion Rights of the holders
of the Series A-1 Preferred, then the Company shall be entitled to
recover from the holders of Series A-1 Preferred reasonable
attorneys’ fees, costs and disbursements (in addition to any
other relief to which the Company may be entitled).
(b) Certificates as to Adjustments.
Upon occurrence of each adjustment or readjustment of the
Conversion Price or number of Conversion Shares issuable upon
conversion of the Series A-1 Preferred 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-1 Preferred 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-1 Preferred, 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 Conversion Shares 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-1 Preferred. 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.
(c) Issue Taxes. The Company shall
pay any and all issue, stock transfer, documentary stamp and other
taxes, excluding federal, state or local income taxes, that may be
payable in respect of any issue or delivery of the Series A-1
Preferred Stock, Conversion Shares, Dividend Shares or shares of
Common Stock or other securities issued on account of Series A-1
Preferred Stock pursuant hereto or certificates representing such
shares or securities; provided, however, that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer of
Conversion Shares requested by any holder to a person other than
such holder, but only to the extent such transfer taxes exceed the
transfer taxes that would have been payable had the Conversion
Shares been delivered to such holder.
(d) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, by electronic mail, 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-1 Preferred at least thirty (30) 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-1 Preferred 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.
(e) Fractional Shares. No
fractional shares of Common Stock shall be issued upon conversion
of the Series A-1 Preferred. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay
cash equal to the product of such fraction multiplied by the
average of the closing sales price of the Common Stock, as reported
on the applicable Trading Market for the five (5) consecutive
trading days immediately preceding the Voluntary Conversion
Date.
(f) Reservation of Common Stock.
The Company shall, so long as any shares of Series A-1 Preferred
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-1 Preferred, such number of shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A-1 Preferred then outstanding;
provided, that the number
of shares of Common Stock so reserved shall at no time be less than
one hundred percent (100%) of the number of shares of Common Stock
for which the shares of Series A-1 Preferred are at any time
convertible. The initial number of shares of Common Stock reserved
as Conversion Shares and each increase in the number of shares so
reserved shall be allocated pro rata among the holders of the
Series A-1 Preferred based on the number of shares of Series A-1
Preferred held by each holder of record at the time of issuance of
the Series A-1 Preferred 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-1
Preferred, 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-1 Preferred shall be allocated to the remaining holders of
Series A-1 Preferred, pro rata based on the number of shares of
Series A-1 Preferred then held by such holder.
(g) Retirement of Series A-1
Preferred. Conversion of shares of Series A-1 Preferred
shall be deemed to have been effected on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares of
Series A-1 Preferred 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-1 Preferred representing the unconverted
portion of the certificate so surrendered as required by
Section 5(c)(i) or
Section 5(c)(ii),
as the case may be.
(h) Regulatory Compliance. If any
shares of Common Stock to be reserved as Conversion Shares 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.
(i) Validity of Shares. All Series
A-1 Preferred Stock, Conversion Shares, Dividend Shares and shares
of Common Stock or other securities issued on account of Series A-1
Preferred Stock pursuant hereto or certificates representing such
shares or securities will, upon issuance by the Company, be validly
issued, fully paid and nonassessable and free from all taxes, liens
or charges with respect thereto.
6. No Preemptive Rights. Except as
provided in Section
5 hereof, no holder of the Series A-1 Preferred 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. Redemption.
(a) Redemption Option Upon Change of
Control. In addition to any other rights of the Company or
the holders of Series A-1 Preferred contained herein, simultaneous
with the occurrence of a Change of Control (as defined below), the
Company, at its option, shall have the right to redeem all or a
portion of the outstanding Series A-1 Preferred in cash at a price
per share of Series A-1 Preferred equal to one hundred and fifteen
percent (115%) of the Liquidation Preference Amount plus all
accrued and unpaid dividends (the “Change of Control Redemption
Price”). Notwithstanding the foregoing to the
contrary, the Company may effect a redemption pursuant to this
Section 7(a) only
if the Company is in material
compliance with the terms and conditions of this Certificate of
Designations.
(b) “Change of
Control”. A “Change of Control” shall be
deemed to have occurred at such time as a third party not
affiliated with the Company on the Issuance Date or any holders of
the Series A-1 Preferred shall have acquired, in one or a series of
related transactions, equity securities of the Company representing
more than fifty percent (50%) of the outstanding voting securities
of the Company.
(c) Mechanics of Redemption at Option of
Company Upon Change of Control. At any time within ten (10)
days prior to the consummation of a Change of Control transaction,
the Company may elect to redeem, effective immediately prior to the
consummation of such Change of Control, all of the Series A-1
Preferred then outstanding by delivering written notice thereof via
facsimile and overnight courier (“Notice of Redemption at Option of Company Upon
Change of Control”) to each holder of Series A-1
Preferred, which Notice of Redemption at Option of Company Upon
Change of Control shall indicate (i) the number of shares of Series
A-1 Preferred that the Company is electing to redeem from such
holder and (ii) the Change of Control Redemption Price, as
calculated pursuant to Section 7(a) above. The Change
of Control Redemption Price shall be paid in cash in accordance
with Section 7(a)
of this Certificate of Designations. On or prior to the Change of
Control, the holders of Series A-1 Preferred shall surrender to the
Company the certificate or certificates representing such shares,
in the manner and at the place designated in the Notice of
Redemption at Option of Company Upon Change of Control. The Company
shall deliver the Change of Control Redemption Price immediately
prior to or simultaneously with the consummation of the Change of
Control; provided, that a
holder's Preferred Stock Certificates shall have been so delivered
to the Company (or an indemnification undertaking with respect to
such Preferred Stock Certificates in the event of their loss, theft
or destruction). From and after the Change of Control transaction,
unless there shall have been a default in payment of the Change of
Control Redemption Price, all rights of the holders of Series A-1
Preferred as a holder of such Series A-1 Preferred (except the
right to receive the Change of Control Redemption Price without
interest upon surrender of their certificate or certificates) shall
cease with respect to any redeemed shares of Series A-1 Preferred,
and such shares shall not thereafter be transferred on the books of
the Company or be deemed to be outstanding for any purpose
whatsoever. Notwithstanding the foregoing to the contrary, nothing
contained herein shall limit a holder’s ability to convert
its shares of Series A-1 Preferred following the receipt of the
Notice of Redemption at Option of Company Upon Change of Control
and prior to the consummation of the Change of Control
transaction.
8. Inability to Fully
Convert.
(a) Holder's Option if Company Cannot
Fully Convert. In addition to any other right that a holder
of Series A-1 Preferred Stock might have, if, upon the Company's
receipt of a Conversion Notice, the Company cannot issue Conversion
Shares issuable pursuant to such Conversion Notice because the
Company (x) does not have a sufficient number of shares of Common
Stock authorized and available or (y) 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 Conversion Shares to be issued to a holder
of Series A-1 Preferred pursuant to a Conversion Notice, then the
Company shall issue as many Conversion Shares as it is able to
issue in accordance with such holder's Conversion Notice and
pursuant to Section
5(c)(iii) above and, with respect to the unconverted Series
A-1 Preferred, 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) if the Company's inability to fully
convert Series A-1 Preferred is pursuant to Section 8(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(c)(iii)
above; or
(ii) void its Conversion Notice with
respect to all or a portion of the Conversion Shares covered by
such Conversion Notice and retain or have returned, as the case may
be, the shares of Series A-1 Preferred that were to be converted
pursuant to such holder's Conversion Notice (provided that a
holder's voiding its Conversion Notice shall not affect the
Company's obligations to make any payments which have accrued prior
to the date of such notice).
(b) Mechanics of Fulfilling Holder's
Election. The Company shall promptly send via electronic
mail or facsimile to a holder of Series A-1 Preferred, upon receipt
of electronic mail or facsimile copy of a Conversion Notice from
such holder which cannot be fully satisfied as described in
Section 8(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, and (ii) the number of Series A-1
Preferred which cannot be converted. Such holder shall notify the
Company of its election pursuant to Section 8(a) above by
delivering written notice via facsimile to the Company
(“Notice in Response to
Inability to Convert”).
(c) Pro-Rata Conversion and
Redemption. In the event the Company receives a Conversion
Notice from more than one holder of Series A-1 Preferred on the
same day and the Company can convert and redeem some, but not all,
of the Series A-1 Preferred pursuant to this Section 8, the Company shall
convert and redeem from each holder of Series A-1 Preferred
electing to have Series A-1 Preferred converted and redeemed at
such time an amount equal to such holder's pro-rata amount (based
on the number shares of Series A-1 Preferred held by such holder
relative to the number shares of Series A-1 Preferred outstanding)
of all shares of Series A-1 Preferred being converted and redeemed
at such time.
9. Protective Provisions. So long
as shares of the Series A-1 Preferred representing at least fifty
percent (50%) of the total number of shares of Series A-1 Preferred
issued on the Issuance Date remain issued and outstanding, the
Company shall not, without obtaining the approval (by vote or
written consent) of the holders of more than fifty percent (50%) of
the issued and outstanding shares of Series A-1
Preferred:
(a) create, or authorize the creation of,
any class or series, or issue, or authorize the issuance of, any
shares of capital stock that ranks senior to the Series A-1
Preferred,
other than Series C Preferred and Series D
Preferred;
(b) sell, lease or otherwise dispose of
intellectual property rights owned by or licensed to the Company or
any subsidiary of the Company; and
(c) create, or authorize the creation of,
or incur, or authorize the incurrence of, any Indebtedness, other
than Permitted Indebtedness, or permit any subsidiary to take any
such action.
“Indebtedness” means (x) any
liabilities for borrowed money or amounts owed in excess of
$500,000 (other than trade accounts payable incurred in the
ordinary course of business) and (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company's consolidated balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business.
“Permitted Indebtedness” means (x)
all indebtedness of the Company outstanding on the Issuance Date or
thereafter that does not constitute Indebtedness for purposes of
this Section 9; and
(y) monies borrowed under credit lines of the Company existing on
the Issuance Date in an amount not to exceed $6.0
million.
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 two-thirds (2/3) of the then
outstanding shares of Series A-1 Preferred, shall be required for
any change to this Certificate of Designations or the Company's
Certificate of Incorporation which would amend, alter, change or
repeal, or otherwise adversely affect, any of the powers,
designations, preferences and rights of the Series A-1 Preferred;
provided, however, that any changes to (i)
Section 5 hereof,
or (ii) Exhibit I
hereto shall also require the approval of the majority of the Board
of Directors.
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-1 Preferred,
and, in the case of loss, theft or destruction, of an
indemnification undertaking by the holder to the Company (in form
and substance satisfactory 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-1 Preferred into Common Stock and complies with its
obligations to issue Conversion Shares set forth
herein.
12. Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief. The remedies
provided in this Certificate of Designations shall be cumulative
and in addition to all other remedies available under this
Certificate of Designations, 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
Designations. 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-1 Preferred
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,
the holders of the Series A-1 Preferred shall be entitled, in
addition to all other available remedies, to an injunction
restraining any breach or the Series A-1 Preferred holders'
reasonable perception of a threatened breach by the Company of the
provisions of this Certificate of Designations, 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 Designations 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-1 Preferred 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-1 Preferred 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.
[Remainder of page intentionally left blank]
IN
WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true this 12th day of
November, 2020.
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IMAGEWARE
SYSTEMS, INC.
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By:
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/s/ Kristin
Taylor
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Kristin
Taylor
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Chief
Executive Officer
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NY
78202036v1
EXHIBIT I
Series A-1 Conversion Schedule
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Conversion Milestone Date
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Minimum Conversion Milestone
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11/1/2020
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10%
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12/1/2020
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20%
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1/1/2021
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30%
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2/1/2021
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40%
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3/1/2021
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50%
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4/1/2021
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60%
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5/1/2021
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70%
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6/1/2021
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80%
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7/1/2021
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90%
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8/1/2021
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100%
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EXHIBIT II
Conversion Notice
Reference is made
to the Amended and Restated Certificate of Designations,
Preferences and Rights of the Series A-1 Convertible Preferred
Stock (“Series A-1
Preferred”) of ImageWare Systems, Inc. (the
“Certificate of
Designations”). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to
convert the number of shares of Series A-1 Preferred, par value
$0.01 per share (the “Preferred Shares”), of ImageWare
Systems, Inc., a Delaware corporation (the “Company”), indicated below into
shares of Common Stock, par value $0.01 per share (the
“Common
Stock”), of the Company, by tendering the stock
certificate(s) representing the share(s) of Series A-1 Preferred
specified below as of the date specified below.
Date of
Conversion:
Number
of shares of Series A-1 Preferred to be
converted:
Stock
certificate no(s). of Series A-1 Preferred to be
converted:
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:
Name of
bank/broker due to receive the underlying Common
Stock:
Bank/broker's
four-digit “DTC” participant number
(obtained
from the receiving bank/broker):
Authorization:
By:
Title:
Dated: