By resolution of the board of
directors pursuant to a provision in the articles of incorporation this
certificate establishes the following regarding the voting powers, designations,
preferences, limitations, restrictions and relative rights of the following
class or series of stock.
WHEREAS, the articles of
incorporation of the Corporation (the “Articles”) provides for a class of
its authorized stock known as preferred stock, consisting of 10,000,000 shares,
$0.001 par value per share, issuable from time to time in one or more series;
WHEREAS, the Articles authorizes
the Board of Directors to fix and determine the designations, qualifications,
preferences, limitations and terms of the shares of any series of preferred
WHEREAS, it is the desire of the
Board of Directors, pursuant to its authority as aforesaid, to fix and determine
designations, qualifications, preferences, limitations and terms relating to a
series of the preferred stock, which shall consist of 1,020,000 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
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.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal legal holiday in
the United States or any day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.
“Call Option” shall have
the meaning set forth in Section 7(a).
“Call Option Notice” shall
have the meaning set forth in Section 7(b).
“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
“Common Stock Event” shall
have the meaning set forth in Section 6(e).
“Conversion Date” shall
have the meaning set forth in Section 6(b)(ii).
“Conversion Price” shall
have the meaning set forth in Section 6(a).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion of the shares
of Preferred Stock in accordance with the terms hereof.
“Dividend Payment Date”
shall have the meaning set forth in Section 3(a).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
“Holder” shall have the
meaning given such term in Section 2.
Agreement” means the Investors Rights Agreement, dated August 2, 2016,
between the Corporation and the original Holder.
“Liquidation” shall have
the meaning set forth in Section 5.
shall have the meaning set forth in Section 2, as the same may be increased
pursuant to Section 3.
Notice” shall have the meaning set forth in Section 6(c).
“Mandatory Conversion Notice
Date” shall have the meaning set forth in Section 6(c).
“Nasdaq” means the Nasdaq
Stock Market LLC.
“Notice of Conversion”
shall have the meaning set forth in Section 6(b)(ii).
“Original Issue Date”
shall mean, with respect to any shares of Preferred Stock, the date on which
such share of Preferred Stock was issued by the Corporation.
“Permitted Transfer” shall
have the meaning set forth in Section 8.
shall have the meaning set forth in Section 8.
“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
the Securities Purchase Agreement, dated June 28, 2016, between the Corporation
and the original Holder, as amended, modified or supplemented from time to time
in accordance with its terms.
“Redemption Date” shall
mean the date upon which a redemption effected pursuant to the exercise of a
Call Option shall be consummated.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
“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 MKT, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
means this Certificate of Designation, the Purchase Agreement, the Investors
Rights Agreement, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions
contemplated pursuant to the Purchase Agreement.
“Transfer” shall have the
meaning set forth in Section 8.
and Par Value. The series of preferred stock shall be designated as
Non-Voting Series A Convertible Preferred Stock (the “Preferred Stock”)
and the number of shares so designated shall be 1,020,000 (which shall not be
subject to increase, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to the Preferred Stock, without the written consent of all of the
holders of the Preferred Stock (each, a “Holder” and collectively, the
“Holders”)). Each share of Preferred Stock shall have a par value of
$0.001 per share and an original issue price of $2.7451 per share (the
“Liquidation Preference”), subject to increase set forth in Section 3
Dividends in Kind.
From and after the Original Issue Date of any share of Preferred Stock,
cumulative dividends on such Preferred Stock shall accrue, whether or not
declared by the Board of Directors and whether or not there are funds legally
available for the payment of dividends, on a daily basis in arrears at the rate
of 7% per annum on the sum of the Liquidation Preference thereof, payable
annually on the last day of March, June, September and December of each calendar
year beginning on the first such date after the Original Issue Date and on each
Conversion Date (with respect only to Preferred Stock then being converted)
(each such date, a “Dividend Payment Date”). All accrued dividends shall
be paid in kind by increasing the Liquidation Preference of the Preferred Stock,
in an amount equal to the accrued but unpaid interest due to a Holder on the
Dividend Payment Date. All accrued and accumulated dividends on the Preferred
Stock shall be prior and in preference to any dividend on the Common Stock or
other equity securities of the Company and shall be fully declared and paid
before any dividends are declared and paid, or any other distributions or
redemptions are made, on the Common Stock or other equity securities of the
Company, other than to (a) declare or pay any dividend or distribution payable
on the Common Stock in shares of Common Stock or (b) repurchase Common Stock
held by employees or consultants of the Corporation upon termination of their
employment or services pursuant to agreements providing for such repurchase.
Dividends on the Preferred Stock shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date.
Dividends. In addition to the dividends accruing on the Preferred Stock
pursuant to Section 3(a) hereof, if the Corporation declares or pays a dividend
or distribution on the Common Stock, whether such dividend or distribution is
payable in cash, securities or other property, including the purchase or
redemption by the Corporation or any of its subsidiaries of shares of Common
Stock for cash, securities or property, but excluding (i) any dividend or
distribution payable on the Common Stock in shares of Common Stock and (ii) any
repurchases of Common Stock held by employees or consultants of the Corporation
upon termination of their employment or services pursuant to agreements
providing for such repurchase, the Corporation shall simultaneously declare and
pay a dividend on the Preferred Stock on a pro rata basis with the Common Stock
determined on an as-converted basis assuming all shares of Preferred Stock had
been converted pursuant to Section 6 as of immediately prior to the record date
of the applicable dividend (or if no record date is fixed, the date as of which
the record holders of Common Stock entitled to such dividends are to be
Voting Rights; Protective Provisions.
General. Except as
otherwise required by law, the Preferred Stock shall have no voting rights.
As long as 255,000 shares of Preferred Stock, subject to appropriate adjustment
in the event of any stock dividend, stock split, combination or other similar
recapitalization with respect to the Preferred Stock, are outstanding, except
for clause (10) below, which shall require that at least 510,000 shares of
Preferred Stock, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to the Preferred Stock, are outstanding, the Corporation shall not
either directly or indirectly by amendment, merger, consolidation or otherwise,
do any of the following without (in addition to any other vote required by law
or the Articles) the written consent or affirmative vote of the Holders of at
least a majority of the outstanding shares of Preferred Stock:
(1) alter or change the rights, preferences or privileges of the Preferred Stock;
(2) increase or decrease (other than by redemption or conversion) the authorized
number of shares of Preferred Stock;
(3) amend or waive any provision of the Articles or bylaws of the Corporation;
(4) authorize, create, issue, or reclassify any existing security into any class of
equity security that is senior or pari passu to the Preferred Stock;
(5) repurchase or redeem Common Stock except from employees, officers, directors, or
consultants upon termination of their employment or other relationship or in
accordance with any existing repurchase or redemption program that has been
approved by the board of directors;
(6) declare or pay any dividend other than a dividend payable solely in stock or
other securities of the Corporation;
(7) acquire any entity (regardless of the structure of any such acquisition,
including if such acquisition is structured as a license, lease, merger,
reorganization, acquisition of assets or equity or other business combination or
similar corporate transaction) for a consideration of $3 million or more;
(8) materially alter the general nature of the business of the Corporation;
(9) enter into any sale, license, lease or other disposition of assets of the
Corporation having a book value of at least $10 million that is effected outside
of the ordinary course of the business of the Corporation; or
(10) effect any event for which the Liquidation Preference would become payable.
Section 5. Liquidation.
Upon any liquidation, dissolution, or winding down of the Corporation (a
“Liquidation”), the Holders shall be entitled to receive out of the
assets, whether capital or surplus, of the Corporation an amount equal to the
Liquidation Preference, plus any accrued and unpaid dividends thereon, for each
share of Preferred Stock before any distribution or payment shall be made to the
holders of Common Stock, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be ratably distributed among the Holders in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. The Corporation shall mail
written notice of any such Liquidation, not less than 10 days prior to the
payment date stated therein, to each Holder.
Section 6. Conversion. The
outstanding shares of Preferred Stock shall be convertible into Common Stock as
(a) Conversions Price. The
conversion price for the Preferred Stock shall equal $2.7451, subject to
adjustment herein (the “Conversion Price”).
(b) Optional Conversion.
(1) Each share of Preferred Stock shall be convertible, at any time and from time to
time from and after the Original Issue Date at the option of the Holder thereof
and without the payment of additional consideration, subject to applicable
Trading Market rules and the limitations set forth in the Investor Rights
Agreement, into that number of shares of Common Stock determined by dividing the
Liquidation Preference of such share of Preferred Stock by the Conversion
(2) Each holder of Preferred Stock who elects to convert the same into shares of
Common Stock shall give written notice to the Corporation by providing the
Corporation with the written notice (a “Notice of Conversion”). Each
Notice of Conversion shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the conversion
at issue, the number of shares of Preferred Stock owned subsequent to the
conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by
facsimile such Notice of Conversion to the Corporation (such date, the
“Conversion Date”). Thereupon, the Corporation shall promptly deliver the
Conversion Shares required to be delivered by the Corporation to such Holder.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such delivery of shares of Common Stock, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(c) Mandatory Conversion.
Notwithstanding anything herein to the contrary, if at any time the trading
price of the Corporation’s Common Stock (i) is greater than two times the
Conversion Price before the third anniversary of the Original Issue Date or (ii)
is greater than three times the Conversion Price, the Corporation may deliver a
written notice to all Holders (a “Mandatory Conversion Notice” and the
date such notice is delivered to all Holders, the “Mandatory Conversion
Notice Date”) to cause each Holder to convert all or part of such Holder’s
Preferred Stock (as specified in such Mandatory Conversion Notice) plus all
accrued but unpaid dividends thereon. The Corporation shall promptly deliver the
Conversion Shares required to be delivered by the Corporation under this Section
6(c) to each Holder. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such delivery of
shares of Common Stock, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(d) Fractional Shares. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of the Preferred Stock. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such conversion, the
Corporation shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
(e) Adjustment Upon Common
Stock Event. Upon the happening of a Common Stock Event (as hereinafter
defined), the Conversion Price of the Preferred Stock shall, simultaneously with
the happening of such Common Stock Event, be adjusted by multiplying the
Conversion Price of the Preferred Stock in effect immediately prior to such
Common Stock Event by a fraction, (i) the numerator of which shall be the number
of shares of Common Stock issued and outstanding immediately prior to such
Common Stock Event, and (ii) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately after such Common
Stock Event, and the product so obtained shall thereafter be the Conversion
Price for the Preferred Stock. The Conversion Price for the Preferred Stock
shall be readjusted in the same manner upon the happening of each subsequent
Common Stock Event. As used herein, the term “Common Stock Event” shall
mean (i) the issue by the Corporation of additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (ii) a subdivision
of the outstanding shares of Common Stock into a greater number of shares of
Common Stock, or (iii) a combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock.
The Corporation shall have
the option (the “Call Option”) at any time after the third anniversary of
the Original Issue Date to redeem some or all of the outstanding Preferred Stock
for cash, for an amount equal to the Liquidation Preference, plus the amount of
any accrued but unpaid dividends, of the Preferred Stock being redeemed.
The exercise of the Call
Option by the Corporation shall be subject to the transmission of a written
notice of the exercise of the Call Option to the Holders (the “Call Option
Notice”) 30 days prior to the applicable Redemption Date which shall specify
the number of shares Preferred Stock being redeemed.
With respect to exercises of
the Call Option, the Corporation shall remit the applicable cash consideration
in one installment to the Holder between the 31st and 60th day after delivery of
the Call Option Notice.
The Holder shall maintain the
right to convert the Preferred Stock into shares of Common Stock pursuant to
Section 6(a) prior to the Redemption Date.
Restrictions. No Holder of Preferred Stock may sell, assign, transfer,
pledge, encumber or in any manner dispose of the shares of Preferred Stock or
any right or interest therein (including without limitation a voting proxy),
whether voluntarily or by operation of law, or by gift or otherwise (a
“Transfer”), other than by means of a Permitted Transfer. Any Transfer,
or purported Transfer, of Preferred Stock of the Corporation other than a
Permitted Transfer shall be null and void, and of no force or effect; provided
that the Board of Directors may at its sole discretion waive any or all of the
foregoing conditions through prior written consent. The only transaction that is
a “Permitted Transfer” is a Transfer that meets the following conditions:
(i) the Transfer by a Holder must be to an Affiliate of such Holder (a
“Permitted Transferee”) or to the Corporation, (ii) if the Transfer is to
a Permitted Transferee, such Permitted Transferee must become a party to that
certain Investors Rights Agreement, and (iii) the Transfer must comply with all
applicable securities laws including, without limitation, the federal securities
laws of the United States.
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 facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Corporation, Attention:
Seth Grae, 11710 Plaza America Drive, Suite 2000, Reston, VA 20190, facsimile
number (571) 730-1260, or such other facsimile number or address as the
Corporation may specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
such Holder appearing on the books of the Corporation, or if no such facsimile
number or address appears on the books of the Corporation, at the principal
place of business of such Holder, as set forth in the Purchase Agreement. Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth in
this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth in this Section on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (iii) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Certificate of Designation shall be governed by and construed and
enforced in accordance with the internal laws of the State of Nevada, without
regard to the principles of conflict of laws thereof. Each party 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.
Waiver. Any waiver by
the Corporation or a Holder of a breach of any provision of this Certificate of
Designation shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The failure of the
Corporation or a Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be considered a
waiver or deprive that party (or any other Holder) of the right thereafter to
insist upon strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation or a Holder
must be in writing.
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.
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
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
Status of Converted or
Redeemed Preferred Stock. Shares of Preferred Stock may only be issued
pursuant to the Purchase Agreement. If any shares of Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of preferred stock and shall no
longer be designated as Non-Voting Series A Convertible Preferred Stock.
RESOLVED, FURTHER, that the
president or any vice-president, and the secretary or any assistant secretary,
of the Corporation be and they hereby are authorized and directed to prepare and
file this Certificate of Designation of Preferences, Rights and Limitations in
accordance with the foregoing resolution and the provisions of Nevada law.