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| EX-10 - FORM OF SERIES A EXCHANGE AGREEMENT BETWEEN MOBILESMITH, INC. AND VARIOUS ENTITI - MobileSmith, Inc. | exchange_agreement.htm |
| 8-K - DEBT EXCHANGE. SECOND CLOSING - MobileSmith, Inc. | most_8k.htm |
Exhibit
3.1
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed with Delaware Secretary of State on December 23, 2020
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed with Delaware Secretary of State on December 23, 2020
MOBILESMITH,
INC.
CERTIFICATE
OF DESIGNATION OF PREFERENCES,
OF
SERIES
A CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION
151(g) OF THE
DELAWARE GENERAL
CORPORATION LAW
The
undersigned, Jerry Lepore and Gleb Mikhailov, do hereby certify
that:
1.They
are the President and Secretary, respectively, of MobileSmith,
Inc., a Delaware corporation (the “Corporation”).
2.
The Corporation is authorized to issue 5,000,000 shares of
preferred stock, none of which have been issued.
3.
The following resolutions were duly adopted by the board of
directors of the Corporation (the “Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 5,000,000 shares, $0.001 par value per share, issuable from time
to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
Series A Preferred Stock and the designation thereof, of any of
them; and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of up to 1,750,000 shares of
the preferred stock which the Corporation has the authority to
issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS
OF PREFERRED STOCK
Section
1. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Agent” means the
individual designated by the Requisite Holders to perform the
functions described herein and agrees to perform such functions in
writing.
“Automatic Conversion
Notice” shall have the meaning set forth in Section
5(c).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of North Carolina are authorized or
required by law or other governmental action to close.
“Commission”
means the United States Securities and Exchange
Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Date” shall
have the meaning set forth in Section 5(a).
“Conversion Ratio” means
thirty (30) shares of Common Stock for each share of Series A
Preferred Stock, subject to adjustment as set forth
herein.
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Series A Preferred Stock in accordance with the
terms hereof.
“Debentures” means the
debt instruments set forth on Exhibit A of the Series A
Exchange Agreement.
“DGCL” means the Delaware
General Corporation Law.
“Dividend Date” shall have
the meaning set forth in Section 3(b).
1
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Fundamental Transaction”
means in the event the Corporation (i) directly or indirectly, in
one or more related transactions effects any merger or
consolidation of the Corporation with or into another Person, (ii)
directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Corporation or another
Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) directly or indirectly, in one
or more related transactions consummates a stock or share exchange
or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock or share exchange
or other business combination).
“Holder” shall have the
meaning given such term in Section 2.
“Liquidation Event” means,
whether in a single transaction or series of transactions, the
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation or such Subsidiaries the assets of which constitute
all or substantially all of the assets of the business of the
Corporation and its Subsidiaries, taken as a whole.
“North Carolina Courts”
shall have the meaning set forth in Section 9(d).
“Notice of Conversion”
shall have the meaning set forth in Section 5(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Payment-in-Kind” shall
have the meaning set forth in Section 3(c).
“Permitted Assigns” means
the Persons identified in the Series A Exchange Agreement to whom
Series A Preferred Stock will be issued contemporaneously with the
issuance of Series A Preferred Stock pursuant to the Series A
Exchange Agreement.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Requisite Holders” means
the written consent or approval of at least two-thirds (2/3rds) of
the then outstanding Series A Preferred Stock.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Securities” means the
Series A Preferred Stock and the Conversion Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series A Exchange
Agreement” means the
Series A Exchange Agreement entered into simultaneously with the
Original Issue Date among the Corporation and the holders of the
Corporation’s outstanding Debentures for the issuance
of 9,778 shares of
Series A Preferred Stock, as amended,
modified or supplemented from time to time in accordance with its
terms.
2
“Series A Preferred Stock”
shall have the meaning set forth in Section 2.
“Series A Preferred Stock
Value” means the Stated Value multiplied by the then
number of outstanding shares of Series A Preferred
Stock.
“Share Delivery Date”
shall have the meaning set forth in Section 5(c).
“Stated Value” shall have
the meaning set forth in Section 2.
“Subsidiaries” means any
subsidiaries of the Corporation as set forth on Schedule 4.1(a)) of the Series
A Exchange Agreement and shall, where applicable, also include any
direct or indirect subsidiary of the Corporation formed or acquired
after the date of the Series A Exchange Agreement.
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the North Carolina Stock Exchange,
OTCQB, OTCQX or OTC Pink (or any successors to any of the
foregoing).
“Transaction Documents”
means this Certificate of Designation, the Series A Exchange
Agreement and all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the
transactions contemplated pursuant to the Series A Exchange
Agreement.
“Transfer Agent” means
Issuer Direct Corporation, the current transfer agent of the
Corporation, with a mailing address of 1 Glenwood Avenue, Suite
1001, Raleigh, North Carolina 27603, and any successor transfer
agent of the Corporation.
3
Section
2. Designation,
Amount and Par Value. The series of preferred stock shall be
designated as its Series A Convertible Preferred Stock (the
“Series A Preferred
Stock”) and the number of shares so designated shall
be up to 1,750,000 (which shall not be subject to increase without
the written consent of the holders of a majority of the then
outstanding Series A Preferred Stock (each, a “Holder” and collectively,
the “Holders”)). Each share of
Series A Preferred Stock shall have a par value of $0.001 per share
and a stated value equal to $42.90 (the “Stated
Value”).
Section
3. Dividends.
a) Dividend Preference. The
Holders of each share of the Series A Preferred Stock then
outstanding shall be entitled to receive an annual dividend equal
to $3.43, subject to proration described below, out of any funds
and assets of the Corporation legally available therefor, prior and
in preference to any declaration or payment of any dividend payable
on the Common Stock, payable bi-annually during the months of
January and July each year (each, a “Dividend Date”). Such
dividends shall accrue and be prorated with respect to each share
of Series A Preferred Stock from the date on which such share is
issued and outstanding and thereafter shall be deemed to accrue
from day to day whether or not earned or declared and whether or
not there exists profits, surplus, or other funds legally available
for the payment of dividends, and shall be cumulative so that, if
such dividends on the Series A Preferred Stock shall not have been
paid, or declared and set apart for payment, the deficiency shall
be fully paid or declared and set apart for payment before any
dividend shall be paid or declared or set apart for the Common
Stock.
b) Payment of Dividends. Each
dividend shall be paid either in shares of Series A Preferred Stock
(“Payment-in-Kind”) or in
cash, at the option of the Corporation, on the respective Dividend
Date. For Payment-in-Kind dividends, each Holder on the record date
for such dividend will receive that number of shares of Series A
Preferred equal to (i) $3.43 divided by (ii) the Stared Value and
(iii) multiplied by the number of shares of Series A Preferred
Stock held by such Holder. No fractional shares shall be issued
upon payment of such dividends pursuant to this Section 3(c) and
the number of shares to be issued upon payment of such dividends
will be rounded up to the nearest whole share based on the
aggregate number of shares of Series A Preferred Stock held by such
Holder.
Section
4. Voting
and Other Rights.
a)
Voting Rights. The
Holders of Series A Preferred Stock shall have no voting rights
with respect to any matters to be voted on by the stockholders of
the Corporation. Holders of the Series A Preferred Stock shall be
entitled to written notice of all stockholder meetings or written
consents (and copies of proxy materials and other information sent
to stockholders) with respect to which they would be entitled by
vote, which notice would be provided pursuant to the
Corporation’s bylaws and the DGCL.
b)
Board Observation
Rights. So long as any shares
of Series A Preferred Stock are outstanding, the Corporation shall
invite a representative of the Agent to attend all meetings of its
Board and any committee thereof in a nonvoting observer capacity
and, in this respect, shall give the representative of the Agent
copies of all notices, minutes, consents, and other materials that
it provides to its directors at the same time and in the same
manner as provided to such directors; provided,
however, that such
representative shall agree in writing to hold in confidence and
trust and to act in a fiduciary manner with respect to all
information so provided; and provided
further, that the Corporation
reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to
such information or attendance at such meeting could adversely
affect the attorney-client privilege between the Corporation and
its counsel or result in disclosure of trade secrets or a conflict
of interest, or if such holder or its representative is a
competitor of the Corporation. The Corporation shall reimburse the
representative of the Agent with board observation rights pursuant
hereto for all reasonable out-of-pocket travel expenses incurred
(consistent with the Corporation’s travel policy) in
connection with attending meetings of the
Board.
c)
Inspection Rights.
The Corporation shall permit the Agent
and its representatives to visit and inspect the
Corporation’s properties; examine its books of account and
records; and discuss the Corporation’s affairs, finances, and
accounts with its officers, during normal business hours of the
Corporation as may be reasonably requested by the Agent;
provided,
however, that the Corporation
shall not be obligated pursuant to this Section 4(c) to provide
access to any information that it reasonably considers to be a
trade secret or confidential information (unless covered by an
enforceable confidentiality agreement, in form acceptable to the
Corporation) or the disclosure of which would adversely affect the
attorney-client privilege between the Corporation and its counsel.
The Corporation shall reimburse the Agent for all reasonable
out-of-pocket travel expenses incurred (consistent with the
Corporation’s travel policy) in connection with the exercise
of its inspection rights under this Section
4(c).
d)
Agent of the
Holders. The Corporation may
look solely to the Agent with respect to any matters relating to
the giving or receipt of notices, consents or waivers from the
Holders under this Certificate of Designation.
4
e) Rights
and Duties of Agent.
(i) In
acting under this Certificate of Designation and in connection with
the Series A Preferred Stock, the Agent is acting solely as agent
of the Holders and does not assume any obligation or relationship
of agency or trust for or with the Corporation or any stockholder
of the Corporation.
(ii) The
Agent may consult with counsel satisfactory to it, and the advice
of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the advice of
such counsel.
(iii)
The
Agent shall be protected and shall incur no liability for or in
respect of any action taken or thing suffered by it in reliance
upon any notice, direction, consent, certificate, affidavit,
statement or other paper or document reasonably believed by it to
be genuine and to have been presented or signed by the Holders, or
any of them. The Agent will not have any liability to any Holder or
other person as a result of its inability to perform any of its
obligations under this Certificate of Designation by reason of any
preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or
any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation.
(iv)
The
Agent shall be obligated to perform only such duties as are herein
and no implied duties or obligations shall be read into this
Certificate of Designation against the Agent. The Agent shall not
be under any obligation to take any action hereunder or thereunder
which may tend to involve it in any expense or liability for which
it does not receive indemnity. The Agent shall have no duty or
responsibility in case of any default by the Corporation in the
performance of its covenants or agreements contained herein except
as directed by the Requisite Holders, including any duty or
responsibility to initiate or attempt to initiate any proceedings
at law or otherwise.
(v)
The
Agent shall not be accountable with respect to the validity or
value of any Conversion Shares or of any securities or property
which may at any time be issued or delivered upon conversion of the
Conversion Shares and it makes no representation with respect
thereto. The Agent shall not be responsible for any failure of the
Corporation to comply with any of the covenants of the Corporation
contained in this Certificate of Designation.
(vi)
The
Agent shall be entitled to use its discretion with respect to
exercising or refraining from exercising any rights which may be
vested in it by, and with respect to taking or refraining from
taking any action or actions which it may be able to take under or
in respect of, this Certificate of Designation, unless the Agent
shall have been instructed by the Requisite Holders to refrain from
exercising such rights or to take or refrain from taking such
action. The Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any officer, director, or manager of any Holder, and
to apply to such officers, directors or managers for advice or
instructions in connection with its duties, and shall not be liable
to such Holder for any action taken or suffered to be taken by it
in good faith in accordance with instructions of any such officer,
director or manager or in good faith reliance upon any statement
signed by any one of such officers, directors or managers of the
Holders with respect to any fact or matter (unless other evidence
in respect thereof is herein specifically prescribed) which may be
deemed to be conclusively proved and established by such signed
statement.
(vii)
Nothing
herein shall preclude the Agent from acting in any other capacity
for any Holder or for any other legal entity.
(viii)
The
Agent shall not be responsible for and makes no representation as
to the validity or adequacy of this Certificate of Designation or
the Series A Preferred Stock and it shall not be responsible for
any statement in this Certificate of Designation or the Series A
Preferred Stock other than its signature thereon as a Holder and
with respect to representations made in such capacity.
(ix)
The
Corporation agrees to reimburse the Agent upon request for all
reasonable out of pocket expenses incurred by it, including the
reasonable expenses of the Agent’s agents and counsel. Each
of the Holders shall indemnify (to the extent not reimbursed by the
Corporation) pro rata according to their respective aggregate
number of Series A Preferred Stock held and hold harmless the Agent
against any loss, liability or reasonable expense (including
reasonable agents’ and attorneys’ fees and expenses)
incurred by it without willful misconduct, gross negligence or bad
faith on its part arising out of or in connection with the
acceptance or performance of its duties under this Certificate of
Designation. The Agent shall notify the Holders promptly of any
claim for which it may seek indemnity and the failure to provide
such notice shall not prejudice the Agent’s right to
indemnity hereunder unless and to the extent that the
Holders’ ability to defend any such claim shall have been
compromised as a result of such failure to notify. The Corporation
need not reimburse any expense and the Holders shall not be
obligated to indemnify against any loss or liability incurred by
the Agent through willful misconduct, gross negligence or bad
faith. The obligations pursuant to this Section
4(d)(i) shall survive regardless of whether any shares of
Series A Preferred Stock remain outstanding.
5
(x)
The Agent may at any time resign by giving written
notice to the Holders of such intention on its part, specifying the
date on which its desired resignation shall become
effective; provided,
however, that such date shall not be less than 30
days after the date on which such notice is given, unless the
Holders otherwise agree. Such resignation under this Section
4(e)(x) shall take effect upon the appointment by the
(remaining) Holders as hereinafter provided of a successor Agent
and the acceptance of such appointment by such successor Agent. Any
successor Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to the Holders an instrument
accepting such appointment hereunder, and thereupon such successor
Agent, without any further act, deed or conveyance, shall become
vested with all the rights and obligations of such predecessor with
like effect as if originally named as Agent hereunder. As soon as
practicable after appointment of the successor Agent, the Holders
shall cause written notice of the change in the Agent to be given
to the Corporation. Failure to give any notice provided for in
this Section 4(d)(i) or any defect therein, shall not affect
the legality or validity of the appointment of a successor Agent,
as the case may be.
f)
Matters Requiring Agent
Approval. So long as any of shares of the Series A Preferred
Stock remain outstanding, the Company will not, without the
approval of the Agent:
(i) make any loan or advance to, or
own any stock or other securities of, any subsidiary or other
corporation, partnership, or
other entity unless it is wholly owned by the Company;
(ii) make any loan or advance to any
person, except advances and similar expenditures in the ordinary
course of business or under the terms of an employee stock or
option plan approved by the Company’s Board of
Directors;
(iii)
guarantee any
indebtedness except for trade accounts of the Company or any
subsidiary arising in the ordinary course of business;
(iv)
make any investment
other than investments in prime commercial paper, money market
funds, certificates of deposit in any United States bank having a
net worth in excess of $100,000,000 or obligations issued or
guaranteed by the United States of America, in each case having a
maturity not in excess of two years;
(v)
incur any
indebtedness in excess of $25,000 individually or in the aggregate,
other than trade credit incurred in the ordinary course of
business;
(vi)
increase or approve
the compensation of the named executive officers, including
benefits, bonuses and issuances of equity compensation; provided,
however, that approval by the Agent of a pool of compensation
benefits to be allocated by the Company will constitute approval of
each specific allocation of such benefits by the
Company;
(vii)
change the
principal business of the Company, enter new lines of business, or
exit the current line of business;
(viii)
sell, transfer,
exclusively license, pledge or encumber any material Intellectual
Property of the Company, except in the ordinary course of
business;
(ix)
create or authorize
the creation of or issue any other security convertible into or
exercisable for any equity security of the Company, other than
issuances to officers, directors, employees, consultants or
advisors pursuant to equity compensation plans approved by the
Company’s Board of Directors;
(x)
purchase or redeem
or pay any dividend on any capital stock, other than stock
repurchased from former employees or consultants in connection with
the cessation of their employment or consulting services, at the
lower of fair market value or cost; or
(xi)
increase the
number of shares authorized for issuance to officers, directors,
employees, consultants and advisors pursuant to equity incentive
plans or other similar compensatory agreements or
arrangement.
6
Section
5. Conversion
of Series A Preferred Stock.
a) Conversions
at Option of the Holder. Subsequent to the Original Issuance
Date, each share of Series A Preferred Stock shall be convertible,
at any time and from time to time, at the option of the Holder
thereof, into that number of shares of Common Stock equal to the
then effective Conversion Ratio. Holders shall effect conversions
by providing the Corporation with the form of conversion notice
attached hereto as Annex
A (a “Notice
of Conversion”). Each Notice of Conversion shall
specify the number of shares of Series A Preferred Stock to be
converted, the number of shares of Series A Preferred Stock owned
prior to the conversion at issue, the number of shares of Series A
Preferred Stock owned subsequent to the conversion at issue and the
date on which such conversion is to be effected, which date may not
be prior to the date the applicable Holder delivers by facsimile
such Notice of Conversion to the Corporation (such date, the
“Conversion
Date”). If no Conversion Date is specified in a Notice
of Conversion, the Conversion Date shall be the date that such
Notice of Conversion to the Corporation is deemed delivered
hereunder. No ink-original Notice of Conversion shall be required,
nor shall any medallion guarantee (or other type of guarantee or
notarization) of any Notice of Conversion form be
required. The
calculations and entries set forth in the Notice of Conversion
shall control in the absence of manifest or mathematical error. To
effect conversions of shares of Series A Preferred Stock, a Holder
shall not be required to surrender the certificate(s) representing
the shares of Series A Preferred Stock to the Corporation unless
all of the shares of Series A Preferred Stock represented thereby
are so converted, in which case such Holder shall deliver the
certificate representing such shares of Series A Preferred Stock
promptly following the Conversion Date at issue. Shares of Series A
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b)
Mechanics of
Conversion.
i. Delivery of Conversion Shares Upon
Conversion. Not later than seven (7) Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Corporation shall deliver, or cause to be delivered, to the
converting Holder (A) Conversion Shares representing the number of
Conversion Shares being acquired upon the conversion of the Series
A Preferred Stock and (B) a bank check in the amount of accrued and
unpaid dividends, if any, payable at the next Dividend Date to
occur.
ii. Failure to Deliver Conversion
Shares. If, in the case of any Notice of Conversion, such
Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Corporation at any time
on or before its receipt of such Conversion Shares, to rescind such
Conversion, in which event the Corporation shall promptly return to
the Holder any original Series A Preferred Stock certificate
delivered to the Corporation and the Holder shall promptly return
to the Corporation the Conversion Shares issued to such Holder
pursuant to the rescinded Conversion Notice.
iii. Reservation
of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out
of its authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of the Series A Preferred
Stock, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other
holders of the Series A Preferred Stock), not less than such
aggregate number of shares of the Common Stock as shall (subject to
the terms and conditions set forth in the Series A Exchange
Agreement) be issuable (taking into account the adjustments and
restrictions of Section 6) upon the conversion of the then
outstanding shares of Series A Preferred Stock. The initial number
of shares of Common Stock reserved for conversions of the Series A
Preferred Stock and each increase in the number of shares so
reserved shall be allocated pro rata among the Holders based on the
number of Preferred Shares held by each Holder on the Original
Issuance Date or increase in the number of reserved shares (as the
case may be) (the “Authorized Share
Allocation”). In the event a Holder shall sell or
otherwise transfer any of such Holder’s Series A Preferred
Stock, each transferee shall be allocated a pro rata portion of
such Holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to
hold any Series A Preferred Stock shall be allocated to the
remaining Holders of Series A Preferred Stock, pro rata based on
the number of Series A Preferred Stock then held by such Holders.
If, notwithstanding this Section 5(b)(iii) and not in limitation
thereof, at any time while any of the Series A Preferred Stock
remain outstanding the Corporation does not have a sufficient
number of authorized and unissued shares of Common Stock to satisfy
its obligation to have available for issuance upon conversion of
the Series A Preferred Stock at least a number of shares of Common
Stock equal to 100% of the Conversion Shares (an
“Authorized Share
Failure”), then the Corporation shall immediately take
all reasonable action (within its control) to increase the
Corporation’s authorized shares of Common Stock to an amount
sufficient to allow the Corporation to reserve and have available
the Conversion Shares for all of the Series A Preferred Stock then
outstanding. Without limiting the generality of the foregoing
sentence, as soon as practical after the date of the occurrence of
an Authorized Share Failure, the Corporation shall hold a meeting
of its stockholders for the approval of an increase in the number
of authorized shares of Common Stock or obtain the approval of its
stockholders for such increase through a written consent if
appropriate under applicable law. In connection with such meeting,
the Corporation shall provide each stockholder with a proxy
statement and shall use its best efforts to solicit its
stockholders’ approval of such increase in authorized shares
of Common Stock. Nothing contained in this Section 5(c)(iii) shall
limit any obligations of the Corporation under any provision of the
Purchase Agreement. The Corporation covenants that all shares of
Common Stock that shall be issuable upon conversion of Series A
Preferred Stock shall, upon issue, be duly authorized, validly
issued, fully paid and nonassessable.
iv. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of the Series A Preferred Stock. As to
any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, the Corporation shall at
its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Stated Value or round up to the next whole share.
c)
Automatic
Conversion. Subsequent to the Original Issuance Date and
immediately prior to the occurrence of a Fundamental Transaction,
the then outstanding shares of Series A Preferred Stock shall be
automatically converted into shares of Common Stock equal to the
then effective Conversion Ratio by delivering to a Holder of Series
A Stock written notice by the Company no less than ten (10) Trading
Days prior to the consummation of a Fundamental Transaction to
effect such automatic conversion (the “Automatic Conversion
Notice”).
7
d)
Procedural Requirement for
Automatic Conversion. Each Holder of Series A Preferred
Stock or the Agent shall be sent the Automatic Conversion Notice
indicating the time and the place for the automatic conversion of
all such shares of Series A Preferred Stock pursuant to Section
5(d). Upon receipt of such notice, each Holder of shares of Series
A Preferred Stock in certificated form shall surrender his, her or
its certificate or certificates for all such shares (or, if such
Holder alleges that such certificate has been lost, stolen or
destroyed, a lost certificate affidavit and agreement reasonably
acceptable to the Corporation to indemnify the Corporation against
any claim that may be made against the Corporation on account of
the alleged loss, theft or destruction of such certificate) to the
Corporation at the place designated in such notice. If so required
by the Corporation, any certificates surrendered for conversion
shall be endorsed or accompanied by written instrument or
instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered Holder or by his, her or its
attorney duly authorized in writing. All rights with respect to the
Series A Preferred Stock converted pursuant to Section 5(c),
including the rights, if any, to receive notices and vote (other
than as a Holder of Common Stock), will terminate upon the
automatic conversion (notwithstanding the failure of the Holder or
Holders thereof to surrender any certificates at or prior to such
time of automatic conversion), except only the rights of the
Holders thereof, upon surrender of any certificate or certificates
of such Holders (or lost certificate affidavit and agreement)
therefor, to receive the items provided for in the next sentence of
this Section 5(d). As soon as practicable after the automatic
conversion and, if applicable, the surrender of any certificate or
certificates (or lost certificate affidavit and agreement) for
Series A Preferred Stock, the Corporation shall issue and deliver
to such Holder, or to his, her or its nominees, a certificate or
certificates for the number of full shares of Common Stock issuable
on such conversion in accordance with the provisions hereof Such
converted Series A Preferred Stock shall be retired and cancelled
and may not be reissued as shares of such series, and the
Corporation may thereafter take such appropriate action (without
the need for stockholder action) as may be necessary to reduce the
authorized number of shares of Series A Preferred Stock
accordingly.
Section
6. Certain
Adjustments.
a) Stock Splits. If the
Corporation, at any time while this Series A Preferred Stock is
outstanding: (i) subdivides outstanding shares of Common Stock into
a larger number of shares, (ii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iii) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Corporation, then the Conversion Ratio shall
be adjusted on an identical basis. Any adjustment made pursuant to
this Section 6(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Calculations. All calculations
under this Section 6 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 6, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
c) Notice to the
Holders.
i. Adjustment to Conversion Ratio.
Whenever the Conversion Ratio is adjusted pursuant to any provision
of this Section 6, the Corporation shall promptly deliver to each
Holder or the Agent a notice setting forth the Conversion Ratio
after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause
to be filed at each office or agency maintained for the purpose of
conversion of this Series A Preferred Stock, and shall cause to be
delivered to each Holder or the Agent at its last address as it
shall appear upon the stock books of the Corporation, at least ten
(10) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Corporation or any of the
Subsidiaries, the Corporation shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K as
such rules are applicable to the Corporation at the time that such
notice filing is required hereunder.
Section
7. Vote
to Change the Terms of or Issue Series A Preferred Stock. In
addition to any other rights provided by law, except where the vote
or written consent of the holders of a greater number of shares is
required by law or by another provision of the Certificate of
Incorporation, without first obtaining either the affirmative vote
at a meeting duly called for such purpose or the written consent
without a meeting of the Requisite Holders, voting together as a
single class, the Corporation shall not: (a) amend or repeal any
provision of, or add any provision to, its Certificate of
Incorporation or bylaws, file any certificate of designations or
certificate of amendment, or issue or agree to issue any security
or debt instrument if such action would adversely alter or change
in any respect the preferences, rights, privileges or powers, or
restrictions provided for the benefit, of the Holders of Series A
Preferred Stock, regardless of whether any such action shall be by
means of amendment to the Certificate of Incorporation or by
merger, consolidation or otherwise; or (b) without limiting any
provision of Section 5, whether or not prohibited by the terms of
the Series A Preferred Stock, circumvent a right of the Series A
Preferred Stock.
Section
8. Noncircumvention.
The Corporation hereby covenants and agrees that the Corporation
will not, by amendment of its Certificate of Incorporation, bylaws
or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this
Certificate of Designations, and will at all times in good faith
carry out all the provisions of this Certificate of Designations
and take all action as may be required to protect the rights of the
Holders.
8
Section
9. Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by email, or sent
by a nationally recognized overnight courier service, addressed to
the Corporation, at 5400 Trinity Road, Suite 208, Raleigh,
North Carolina 27607 Attention: Legal Department, email address
legal@mobilesmith.com or such other
email address or address as the Corporation may specify for such
purposes by notice to the Holders delivered in accordance with this
Section 9(a). Any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be in
writing and delivered personally, by facsimile or e-mail, or
sent by a nationally recognized overnight courier service addressed
to each Holder or the Agent at the facsimile number or address of
such Holder or the Agent appearing on the books of the Corporation,
or if no such facsimile number or e-mail address or address appears on the
books of the Corporation, at the principal place of business of
such Holder or the Agent, as set forth in the Series A Exchange
Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or e-mail
attachment at the e-mail address set forth in this Section 9(a)
prior to 5:30 p.m. (North Carolina time) on any date, (ii) the next
Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or
e-mail attachment at the e-mail address set forth in this Section
9(a) on a day that is not a Trading Day or later than 5:30 p.m.
(North Carolina time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be
given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages and accrued dividends, as applicable, on the shares of
Series A Preferred Stock at the time, place, and rate, and in the
coin or currency, herein prescribed.
c) Lost or Mutilated Series A Preferred
Stock Certificate. If a Holder’s Series A Preferred
Stock certificate shall be mutilated, lost, stolen or destroyed,
the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate,
or in lieu of or in substitution for a lost, stolen or destroyed
certificate, a new certificate for the shares of Series A Preferred
Stock so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such
certificate, and of the ownership hereof reasonably satisfactory to
the Corporation.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Delaware, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal
proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction
Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the
City of Raleigh, North Carolina (the “North Carolina Courts”).
Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the North Carolina Courts for the adjudication of
any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such North Carolina Courts, or such
North Carolina Courts are improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to
this Certificate of Designation or the transactions contemplated
hereby. If any party shall commence an action or proceeding to
enforce any provisions of this Certificate of Designation, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys’ fees and other costs
and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
e) Waiver. Any waiver by the
Corporation or a Holder or the Agent of a breach of any provision
of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Certificate of
Designation or a waiver by any other Holders. The failure of the
Corporation or a Holder or the Agent to insist upon strict
adherence to any term of this Certificate of Designation on one or
more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon
strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation
or a Holder must be in writing.
f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
i) Status of Converted or Redeemed Series
A Preferred Stock. Shares of Series A Preferred Stock may
only be issued pursuant to this Certificate of Designation and the
Series A Exchange Agreement. If any shares of Series A Preferred
Stock shall be converted, redeemed or reacquired by the
Corporation, such shares shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be
designated as Series A Convertible Preferred Stock.
*****************
RESOLVED, FURTHER,
that the Chairman, the chief executive officer, the president or
any vice-president, and the secretary or any assistant secretary,
of the Corporation be and they hereby are authorized and directed
to prepare and file this Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution
and the provisions of Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this 23rd day of December, 2020.
|
/s/
Jerry Lepore_______________________
Name:
Jerry Lepore
Title:
President
|
/s/
Gleb Mikhailov__________________________
Name:
Gleb Mikhailov
Title:
Secretary
|
9
ANNEX
A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
SERIES A PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
A Convertible Preferred Stock indicated below into shares of common
stock, par value $0.001 per share (the “Common Stock”), of
MobileSmith, Inc., a Delaware corporation (the “Corporation”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates as may be required by the Corporation in accordance
with the Series A Exchange Agreement. No fee will be charged to the
Holders for any conversion, except for any such transfer
taxes.
Conversion
calculations:
|
Date to
Effect Conversion:
_____________________________________________
|
|
Number
of shares of Series A Preferred Stock owned prior to Conversion:
_______________
|
|
Number
of shares of Series A Preferred Stock to be Converted:
________________________
|
|
Stated
Value of shares of Series A Preferred Stock to be Converted:
____________________
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
Applicable
Conversion
Ration:____________________________________________
|
|
Number
of shares of Series A Preferred Stock subsequent to Conversion:
________________
|
|
Address
for Delivery: ______________________
or
DWAC
Instructions:
Broker
no: _________
Account
no: ___________
HOLDER
By:___________
Name:
Title:
|
10