UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported): October 21, 2014
INTELLICELL BIOSCIENCES, INC.
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| (Exact name of registrant as specified in its charter) |
| Nevada |
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333-49388 |
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91-1966948 |
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(State or other jurisdiction
of incorporation) |
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(Commission File Number) |
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(IRS Employer
Identification No.) |
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460 Park Avenue, 17th Fl
New York, NY 10022 |
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(646) 576-8700
Registrant’s telephone number,
including area code
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement
On October 21, 2014,
Intellicell Biosciences, Inc., a Nevada corporation (the “Company”) executed an Advisory and Consulting Agreement
(the “Agreement”) having an effective date of October 7, 2014 (the “Effective Date”) with
Dawson James Securities, Inc. (“Dawson James”), pursuant to which Dawson James shall render consulting advice
to the Company relating to capital markets and business advisory services as specifically set forth in the Agreement. Such services
shall include, but not be limited to, services as a placement agent as well as services related to merger/acquisition matters.
The Agreement provides
that, in exchange for the services provided thereunder, the Company shall pay Dawson James a nonrefundable fee paid as preferred
stock providing for a future conversion to the number of shares of Company common stock equivalent to ten percent (10%) of the
then fully diluted stock of the Company at the time of conversion. The Company’s completion of a minimum of $15 million of
new investor financing, or the acquisition of the Company, shall be the conversion trigger for such preferred stock. Furthermore,
Dawson James shall be entitled to a Finder’s Closing Fee (as such term is defined in the Agreement) equal to eight percent
(8%) of the aggregate purchase price paid in connection with any transaction consummated in whole or part during the term of the
Agreement with any investor introduced to the Company by Dawson James. The Agreement further provides that the Company shall issue
Dawson James warrants as additional compensation as more specifically provided therein.
Pursuant to the
Agreement, the Company agrees to retain, and Dawson James agrees to act, as the Company’s lead underwriter for the Company
of registered securities to be issued by the Company, including shares, and if applicable, warrants to purchase shares of the Company’s
common stock in connection with a “best efforts” or “firm commitment” offering to be made pursuant to an
effective registration statement to be filed by the Company under the Securities Act of 1933, with said underwriting being completed
concurrent with the listing of the Company’s stock on a national exchange.
The Agreement further
provides that the Company shall indemnify and hold harmless Dawson James and certain other indemnified parties against certain
liabilities incurred. The Agreement may be terminated by the Company only in the event of a material breach by Dawson James of
its obligations thereunder, provided such breach remains uncured for a period of fifteen (15) days after written notice of the
breach and opportunity to cure having been provided to Dawson James.
The foregoing description
of the Agreement is not complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which
is filed as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated by reference herein.
Item 9.01. financial
statements and exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibit No. Description:
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| EXHIBIT NO. |
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DESCRIPTION |
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LOCATION |
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| Exhibit 10.1 |
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Advisory and Consulting Agreement, dated effective as of October 7, 2014, by and between the Company and Dawson James Securities, Inc. |
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Provided herewith |
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto
duly authorized.
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INTELLICELL BIOSCIENCES, INC. |
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| Dated: October 21, 2014 |
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By: |
/s/ Dr. Steven Victor |
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Name: Dr. Steven Victor |
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Title: Chief Executive Officer |
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3
Exhibit 10.1
CAPITAL MARKETS AND ADVISORY AGREEMENT
This Advisory and Consulting Agreement (“Agreement”)
is made and entered into on this 7th day of October, 2014 (the “Effective Date”) between IntelliCell BioSciences,
Inc. (the “Company”), and Dawson James Securities, Inc. a FINRA licensed U.S. broker dealer, One North Federal
Highway, Ste. 500, Boca Raton, FL 33432 (the “Advisor”).
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration (the receipt of which is hereby acknowledged) the parties hereto mutually
agree and intend to be legally bound to the terms of this Agreement as follows:
1. Purpose. The Company hereby retains the Advisor
during the term specified to render consulting advice to the Company relating to capital markets and business advisory services
as set forth in Section 3 below, as well as certain investment banking services, including but not limited to services as a placement
agent and merger/acquisition matters, upon the terms and conditions as set forth herein. The Company and the Advisor agree that
nothing herein shall be construed as a firm commitment or guarantee of any Transaction. The lead representative for the Advisor
will be R. Douglas Armstrong, Ph.D.
2. Terms
and Consideration.
(a)
Term: The term of this Agreement shall be for the sooner of a period of twenty-four (24) months commencing from the Effective
Date of this Agreement (the “Engagement Period”), unless extended by mutual written agreement of the Company and the
Advisor.
(b)
Advisory Fees: The Company shall pay Advisor (due upon execution of this Agreement) a nonrefundable fee paid as a Preferred
Stock that provides for a future conversion to the number of shares of Company common stock equivalent to ten percent (10%) of
the then fully diluted stock of the Company (“Advisor Fee”) at the time of the conversion. The conversion trigger will
be the Company’s completion of a minimum of $15 million of new investor financing, or the acquisition of the Company.
(c)
Finder Fee: In the event any transaction, including any private or public sale transaction, debt, equity, convertible securities,
options, warrants or other financing or securities arrangement or other transaction involving any business combination, sale of
assets, merger, joint venture or consolidation, is consummated in whole or part during the Term with an Investor introduced hereunder
to the Company by Advisor, the Company shall compensate Advisor. Specifically, the Company shall pay to Advisor a cash placement
fee (the “Finder’s Closing Fee”) equal to 8% of the aggregate purchase price paid by each purchaser, identified
by Dawson James (a “DJ Purchaser”), of Securities that are placed in the Offering. The Finder’s Closing Fee shall
be paid at the closing of the Offering (the “Closing”) from the gross proceeds of the Securities sold to a DJ Purchaser.
As additional compensation for the Services, the Company shall issue to Dawson or its designees at the Closing, warrants (the “Dawson
Warrants”) to purchase that number of shares of common stock of the Company (“Shares”) equal to 8% of the aggregate
number of Shares placed in the Offering to a DJ Purchaser, plus any Shares underlying any convertible Securities placed in the
Offering to such purchasers. The Dawson Warrants shall have the same terms, including exercise price and registration rights, as
the warrants issued to investors (“Investors”) in the Offering. If no warrants are issued to Investors, the Dawson
Warrants shall have an exercise price equal to 110% of the price at which equity Securities are issued to Investors, or, if no
equity Securities are issued, 110% of the current market price of the Shares at Closing, an exercise period of five years and registration
rights for the Shares underlying the Dawson Warrants equivalent to those granted with respect to the Securities.
(d)
Notwithstanding anything to the contrary herein, all warrants, common stock or other securities issuable to the Advisor
hereunder shall be due and earned in full as of the date of this Agreement regardless of the issuance date that may otherwise appear
on any securities certificate.
3. Financial
Advisory Services of Advisor. Advisor will assist the Company by performing the capital markets and business advisory
services that are listed below. In connection with Advisor providing such capital markets and business advisory services
to the Company, the Company shall provide Advisor with any information reasonably available to the Company that Advisor deems
appropriate. The Company hereby acknowledges that Advisor will be using and relying on said information without independent
verification and that Advisor assumes no responsibility for the accuracy and completeness of any information provided to it by
the Company. In performance of these duties, the Advisor shall provide the Company with the benefits of its best judgment
and efforts. It is understood and acknowledged by the parties that the value of the Advisor’s advice is not measurable
in any quantitative manner, and that the Advisor shall not be obligated to spend any specific amount of time performing its duties
hereunder.
(a)
Advising the Company on the development of its business strategy and plan.
(b)
Advising the Company about its financial structure and that of its divisions or subsidiaries or any of its projects, as
such relate to the public market for the Company’s equity securities.
(c)
Advising the Company on the development of its capital markets strategy, including:
| a. | Advising on the public market for Company’s securities and the options for timing and structure of any future public
offering or private placement of its equity securities |
| b. | Advising on the requirements and processes for an uplisting to a national exchange |
(d)
Assisting the Company for exposure to the investment community at large with the prior written approval of the company.
(e)
Assisting in the Company’s financial public relations, by participating in discussions with the Company and the financial
community with the company’s approval.
Should the Company desire Advisor to provide any financial advisory
service(s) not listed above, including but not limited to providing placement agent or underwriting services, the Company and Advisor
shall enter into an additional engagement letter to be executed by the parties hereto at the commencement of the additional financial
advisory service(s) to be rendered by Advisor. Such engagement letter if executed would replace the fee designated in Section 2c
of this agreement.
4.
Covenants of the Company.
| a. | The Company hereby agrees to at all times have authorized underlying shares of common stock to enable
the conversion of the preferred shares noted in Section 2b of this Agreement. |
| b. | The Company hereby agrees to retain, and Advisor hereby agrees to act, as the Company’s lead
underwriter for the Company of registered securities (the “Securities”) to be issued by the Company, including
shares, and if applicable, warrants to purchase shares of the Company’s common stock (the “Shares” or
“Common Stock”), in connection with a “best efforts” or “firm commitment” offering to
be made pursuant to an effective registration statement to be filed by the Company under the Securities Act of 1933 (the “Underwriting”),
with said Underwriting being completed concurrent with the listing of the Company’s stock on a national exchange. Dawson
and Company agree to separately negotiate in good faith, provisions for industry typical fees for the Underwriting transaction. |
5.
Advisor’s Relationships with Others. The Company acknowledges that the Advisor or its affiliates is in the business
of providing financial, investment banking and merger/acquisition services and consulting advice (of all types contemplated by
this Agreement) to others.
6.
Confidential Information. In connection with the rendering of services hereunder, Advisor has been or will be
furnished with confidential information concerning the Company including, but not limited to, financial statements and information,
cost and expense data, production data, trade secrets, marketing and customer data, and such other information not generally obtained
from public or published information or trade sources. Such information shall be deemed “Confidential Material”
and, except as specifically provided herein, shall not be disclosed by Advisor without prior written consent of the Company.
In the event Advisor is required by applicable law or legal process to disclose any of the Confidential Material, it is agreed
that Advisor will deliver to the Company prompt notice of such requirement prior to disclosure of same to permit the Company to
seek an appropriate protective order and/or waive compliance of this provision. If, in the absence of a protective order
or receipt of written waiver, Advisor is nonetheless, in the written opinion of counsel, compelled to disclose any Confidential
Material, Advisor may do so without liability hereunder provided that notice of such prospective disclosure is delivered to the
Company prior to actual disclosure. Following the termination of this Agreement and a written request by the Company, Advisor
shall deliver to the Company all Confidential Material. This provision shall survive the termination of this Agreement for any
reason.
7. Advisor’s
Liability & Indemnification of Advisor by Company. In the event that the Advisor or any of its officers, directors,
partners, employees, agents, representatives or stockholders (together, the “Indemnified Parties”, and individually,
the “Indemnified Party”) becomes involved in any capacity in any claim, action, proceeding or investigation brought
by or against any person in connection with any matter referred to herein or relating to the services provided under this Agreement,
the Advisor shall provide the Company with written notice thereof as soon as reasonably possible and in any event within thirty
(30) days of the Advisor's notification or other knowledge of the same and the Company shall be obligated to: (a) reimburse
the Indemnified Party for its legal and other expenses (including the cost of any investigation and preparation) incurred in connection
therewith; and (b) shall be obligated to indemnify the Indemnified Party against any losses, claims, damages, liabilities,
alleged damages or alleged liabilities, to which the Indemnified Party may become subject in connection with any matter referred
to in this letter, except to the extent that any such legal or other expense, loss, claim, damage, liability, alleged damage or
alleged liability results from the recklessness or bad faith of the Advisor in performing the services which are the subject of
this letter; provided, however, that the Company shall have the right, at its own expense, to undertake the defense of any such
action, claim or demand, utilizing counsel selected by the Advisor; and provided further, that the Company
shall have notified the Advisor in writing of its intention to undertake such defense within thirty (30) days of receiving the
Advisor's notice required herein. In the absence of recklessness or willful misconduct on the part of Advisor or Advisor’s
material breach of this Agreement, no Indemnified Party shall be liable to the Company or to any officer, director, control person,
affiliate, employee, agent, representative, stockholder or creditor of the Company for any action or omission of Advisor or any
of its officers, directors, employees, agents, representatives or stockholders in the course of, or in connection with, rendering
or performing any services hereunder.
8. Termination.
This Agreement may be terminated at any time during the Engagement Period by Advisor upon five (5) days prior written notice to
the Company, in the event that Advisor becomes aware of: (i) any change in the business or operations of the Company which Advisor
reasonably believes may adversely affect Advisor’s ability to render the services contemplated hereunder, (ii) any material
misrepresentation by the Company with respect to the business operations, assets, condition (financial or otherwise), results
of operations or prospects of the Company, or (iii) any breach by the Company of its obligations under this Agreement, which remain
uncured for a period of fifteen days after written notice of the breach is provided to the Company.
This Agreement may be terminated by Company
only in the event of a material breach by Advisor of its obligations hereunder, which breach remains uncured for a period of fifteen
days after written notice of the breach and opportunity to cure is provided to Advisor.
In the event of termination (i) this Agreement
shall become void, without liability on the part of either party or their affiliates, directors, officers or stockholders except
as set forth in Section 7(a) above, and (ii) Advisor shall be entitled to expenses it has incurred pursuant to this Agreement up
to the date of such termination; and (iii) all provisions contained in section 6 above survive the termination.
9. Expenses.
The Company shall reimburse the Advisor and/or any other party retained by the Advisor, for any and all reasonable out-of-pocket
expenses incurred in connection with Advisory services provided to the Company including but not limited to legal, travel, lodging
and meals, entertainment, postage, photocopying and long distance telephone expenses, with said expenses to not exceed $5,000
without the prior approval of the Company. The Company shall reimburse the Advisor within 15 days of demand of reimbursement by
the Company. The Company will be required to pay for all expenses in excess of $500 in advance by either providing for direct
billing to the Company or Company’s credit card. Any expenses incurred by Advisor on behalf of the Company, related to this
engagement will be invoiced and due upon receipt. Unpaid or remaining expenses due Advisor will be deducted from the proceeds
of a Close and are subject to applicable late charges.
10. Other
terms and conditions of this Agreement are:
(a)
Indemnification
In consideration of the services to be provided
by the Agent under this Agreement, the Company agrees to Indemnify and hold harmless the Agent and all of its directors, officers,
employees, consultants or agents (each individually an “Indemnified Person”) from and against any losses, claims, damages
or liabilities to which such Indemnified Person may become subject arising out of or in connection with the rendering of services
by the Agent hereunder, except to the extent that such losses, claims, damages or liabilities are determined in judicial rulings
to have primarily resulted from the negligence or willful misconduct of such Indemnified Person and reimburse such Indemnified
Person for reasonable legal and other expenses as they are incurred, that arise in connection with investigating, preparing to
defend or defending any lawsuit, claim or proceeding and any appeals therefrom arising in any manner out of or in connection with
the rendering of services by the Agent, provided, however that in the event a final judicial determination is made to the effect
specified above, such Indemnified Person will promptly remit to the Company any amounts reimbursed under the section.
The Company and the Agent agree that (i) the indemnification
and reimbursement commitments set forth above shall apply whether or not such Indemnified Person is a named party to any such lawsuit,
claim or other proceeding; and (ii) promptly upon receipt by the Company, the Company will immediately disclose to the Agent, in
writing, any new facts as they may arise that may adversely affect the Transaction.
The provisions of this Section shall survive termination
of this Agreement and shall be binding upon any successor or assign of the Company.
(b)
Governing Law and Jurisdiction
This agreement shall be governed by and construed
in accordance with the internal laws of the State of Florida applicable to agreements made in such State.
(c)
Representations and Warranties
Agent makes no representations, expressed or implied
that a Transaction with the Partner will occur as a result of the services furnished under this Agreement. The duties of Agent
shall not include the provision of legal, tax or accounting services or advice, which services and advice shall be procured by
the Company at its own expense. The Company acknowledges that in connection with the performance of its services hereunder, Agent
may, at its sole cost and expense, use the services of companies with which it has an affiliation. The Company shall furnish to
Agent and such affiliated company complete and accurate current and historical business information and shall promptly inform Agent
of any changes that may materially affect its business or Agent’ services under this Agreement.
(d)
Arbitration
Any claim or controversy arising out of or relating
to this agreement, or the interpretation thereof, or any issue as to whether or not this Agreement is subject to arbitration, shall
be settled by arbitration and shall be conducted in Los Angeles, California. Judgment based upon decision of the arbitrators may
be entered in any court having jurisdiction hereof. Both parties agree to accept telephonic testimony in lieu of personal appearances.
The prevailing party shall be entitled to recovery of costs, fees (including attorneys’ fees) and taxes paid or incurred
in obtaining the award. Further, any costs, fees or taxes incurred in enforcing the award shall be fully assessed against and paid
by the party against whom the reward is to be enforced. Both parties agree to limit their respective testimony during the arbitration
session to three hours each.
(e)
Waiver and Amendment
No waiver, amendment or modification of any provision
of this Agreement shall be effective unless consent by both parties in writing. No failure or delay by either party in exercising
any rights, power or remedy under this Agreement shall operate as a waiver of such right, power or remedy. Any terms and/or conditions
of this Agreement may be waived at any time, pursuant to this section, but a waiver in one instance shall not be deemed to constitute
a waiver in any other instance.
(f)
Severability
If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void
or unenforceable.
This Agreement constitutes the entire understanding and agreement
between the parties hereto with respect to its subject matter and there are no agreements or understandings with respect to the
subject matter hereof which are not contained in this Agreement. This Agreement may be modified only in writing signed by the party
to be charged hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date hereof.
Intellicell BioSciences, Inc.
By: /s/ Steven A. Victor
Name: Steven A. Victor, M.D.
Title: Chairman and Chief Executive Officer
Dawson James Securities, Inc.
By: /s/ R. Douglas Armstrong
Name: R. Douglas Armstrong, Ph.D.
Title: Chief
Business Officer
Exhibit
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES __ CONVERTIBLE PREFERRED STOCK
OF
INTELLICELL BIOSCIENCES, INC.
The undersigned, Chief
Executive Officer of Intellicell Biosciences, Inc., a Nevada corporation (the “Corporation”), DOES HEREBY CERTIFY
that the following resolutions were duly adopted by the Board of Directors of the Corporation by unanimous written consent on [__],
2014:
WHEREAS, the Board of Directors
is authorized within the limitations and restrictions stated in the Articles of Incorporation of the Corporation, as amended, to
provide by resolution or resolutions for the issuance of one million (1,000,000) shares of preferred stock of the Corporation,
in such series and with such designations, preferences and relative, participating, optional or other special rights and qualifications,
limitations or restrictions as the Corporation’s Board of Directors shall fix by resolution or resolutions providing for
the issuance thereof duly adopted by the Board of Directors; and
WHEREAS, it is the desire
of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock
and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED:
Section 1. Designation
and Authorized Shares. The Corporation shall be authorized to issue [______] ([_______]) shares of Series __ Preferred
Stock, par value $[0.01] per share (the “Series - Preferred Stock”).
Section 2. Stated
Value. Each share of Series __ Preferred Stock shall have a stated value of $0.01 per share (the “Stated
Value”).
Section 3. Liquidation.
(a) Upon
the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, the holder of
Series __ Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Corporation legally available
therefor, an amount in cash equal to the greater of (i) the Stated Value or (ii) the amount the holder would receive as a holder
of the Corporation’s common stock, par value $[0.001] per share (the “Common Stock”), if the holder had
converted the Series __ Preferred Stock immediately prior to such liquidation, dissolution or winding up (without regard to any
limitations on conversion or beneficial ownership herein or elsewhere) following a Trigger Financing. All amounts to
be paid to the holder of Series __ Preferred Stock in connection with such liquidation, dissolution or winding up shall be paid
following the payment or setting apart for payment of any amount for, or the distribution of any assets of the Corporation to the
holders of any other class or series of capital stock whose terms expressly provide that such class or series of capital stock
are senior to Series __ Preferred Stock in dividend rights or liquidation preference (to the extent of such preference). If
upon any such distribution the assets of the Corporation shall be insufficient to pay the holder of the outstanding shares of Series
__ Preferred Stock (or the holders of any class or series of capital stock ranking on a parity with the Series __ Preferred
Stock as to distributions in the event of a liquidation, dissolution or winding up of the Corporation) the full amounts to which
they shall be entitled, the holders shall share ratably in any distribution of assets in accordance with the sums which would be
payable on such distribution if all sums payable thereon were paid in full.
(b) Any
distribution in connection with the liquidation, dissolution or winding up of the Corporation, or any bankruptcy or insolvency
proceeding, shall be made in cash to the extent possible. Whenever any such distribution shall be paid in property other
than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board
of Directors of the Corporation.
Section 4. Voting. Prior to a Trigger Financing, shares
of Series __ Preferred Stock shall not be entitled to vote on matters submitted for shareholder vote, except as otherwise required
or permitted by law. On or after the occurrence of a Trigger Financing, except as otherwise expressly required by law, the holder
of Series __ Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Corporation and shall be
entitled to the number of votes for the shares of Series __ Preferred Stock owned at the record date for the determination of shareholders
entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent
of shareholders is solicited, equal to the number of shares of Common Stock such shares of Series __ Preferred Stock are convertible
into at such time, taking into account the Beneficial Ownership Limitations set forth in Section 5 herein. Except as
otherwise required by law, the holder of shares of Series __ Preferred Stock shall vote together with the holders of Common Stock
on all matters and shall not vote as a separate class.
Section 5. Conversion.
(a) Conversion
Right. At any time upon the closing of a Trigger Financing (as defined herein), the shares of Series __ Preferred Stock
may convert, at the option of the holder, collectively into such number of fully paid and non-assessable shares of Common Stock
as shall equal 9.99% of the Corporation’s issued and outstanding Common Stock, calculated immediately after giving effect
to the issuance of the Corporation’s securities in connection with the Trigger Financing (which for the avoidance of doubt,
shall be on an “as converted” basis with respect to the securities issued if such securities are convertible securities)
and after giving effect to the conversion of the shares of Series __ Preferred Stock hereunder, subject to the limitations set
forth in this Section 5. For purposes of this Agreement, “Trigger Financing” means completion of capital raises
of a minimum of Fifteen ($15,000,000) million of either new equity financing (excluding any refinancing of notes or other convertible
structures), or any sale, merger, acquisition, joint venture or similar material corporate event involving the Company or its assets.
(b) Conversion
Procedure. In order to exercise the conversion privilege under this Section 5, the holder of shares of Series __ Preferred
Stock to be converted shall give written notice to the Corporation at its principal office that the holder elects to convert such
shares of Series __ Preferred Stock or a specified portion thereof into shares of Common Stock as set forth in such notice (the
“Conversion Notice”, and such date of delivery of the Conversion Notice to the Corporation, the “Conversion
Notice Delivery Date”). The holder shall not be required to deliver the original certificate representing
the Series __ Preferred Stock (the “Series __ Certificate”) in order to effect a conversion hereunder. Execution
and delivery of the Conversion Notice with respect to less than all of the shares of Common Stock issuable upon conversion of the
Series __ Preferred Stock shall have the same effect as cancellation of the original Series __ Certificate and issuance of a new
Series __ Certificate evidencing the ownership of the remaining number of Series __ Preferred Stock. On or before the first (1st)
Trading Day following the date on which the Corporation has received a Conversion Notice, the Corporation shall transmit by facsimile
an acknowledgment of confirmation of receipt of such Conversion Notice to the holder and the Corporation’s transfer agent
(the "Transfer Agent"). On or before the third (3rd) Trading Day following the date on which the Corporation
has received such Conversion Notice (the “Share Delivery Date”), the Corporation shall, (X) provided that the
Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the holder, credit such aggregate number of shares of Common Stock to which the holder is entitled pursuant
to such conversion to the holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian
system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch
by overnight courier to the address as specified in the Conversion Notice, a certificate, registered in the Corporation’s
share register in the name of the holder or its designee, for the number of shares of Common Stock to which the holder is entitled
pursuant to such conversion. Upon delivery of the Conversion Notice, the holder shall be deemed for all corporate purposes to have
become the holder of record of the shares of Common Stock with respect to which the shares of Series __ Preferred Stock have been
converted, irrespective of the date such shares of Common Stock are credited to the holder’s DTC account or the date of delivery
of the certificates evidencing such shares of Common Stock, as the case may be. If a Series __ Certificate is submitted in connection
with any conversion and the number of shares of Series __ Preferred Stock represented by such certificate submitted for conversion
is greater than the number of shares of Series __ Preferred Stock being converted, then the Corporation shall as soon as practicable
and in no event by no later than three (3) Trading Days after any conversion and at its own expense, issue a new Series __ Certificate
representing the number of shares of Series __ Preferred Stock held by the holder immediately prior to submitting the Conversion
Notice, less the number of shares of Series __ Preferred Stock being converted.. The Corporation shall pay any and all transfer
taxes which may be payable with respect to the issuance and delivery of shares of Common Stock upon conversion of the Series __
Preferred Stock. For purposes of this Certificate of Designation, (i) a “Trading Day” means (A) a
day on which the Common Stock is traded on a Trading Market (as defined below), or (B) if the Common Stock is not listed on a Trading
Market, a day on which the Common Stock is traded on the over the counter market, as reported by the OTC Bulletin Board (the “Bulletin
Board”), or (C) if the Common Stock is not quoted on the Bulletin Board, a day on which prices for the Common Stock are
reported on the OTCQB published by OTC Market Group, LLC (or any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common Stock is not listed, quoted or reported as set forth in (A), (B)
and (C) hereof, then Trading Day shall mean a business day and (ii) “Trading Market” means the following markets
or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NASDAQ Global Select Market,
the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange or the NYSE MKT, LLC.
(c) Maximum
Conversion.
| (i) |
Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of shares of Series __ Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the holder at such time, the number of shares of Common Stock which would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder) more than 9.99% of all of the Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation”). |
| |
|
| (ii) |
By written notice to the Corporation, a holder of Series __ Preferred Stock may from time to time decrease the 9.99% Beneficial Ownership Limitation to any other percentage specified in such notice. |
| |
|
| (iii) |
For purposes of this Section 5, in determining the number of outstanding shares of Common Stock, the holder of Series __ Preferred Stock may rely on the number of outstanding shares of Common Stock as reflected in (1) the Corporation’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Corporation or (3) any other notice by the Corporation setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the holder of Series __ Preferred Stock, the Corporation shall within one (1) business day confirm orally and in writing to the holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including shares of Series __ Preferred Stock, held by the holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported, which in any event are convertible or exercisable, as the case may be, into shares of the Corporation’s Common Stock within 60 days’ of such calculation and which are not subject to a limitation on conversion or exercise analogous to the limitation contained herein. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. |
(d) Buy-In. If,
by the Share Delivery Date, the Corporation fails for any reason to deliver the shares of Common Stock issuable upon conversion
of the Series __ Preferred Stock, as set forth in the Conversion Notice, and after such Share Delivery Date, the converting holder
purchases, in an arm’s length open market transaction or otherwise, shares of Common Stock (the “Covering Shares”)
in order to make delivery in satisfaction of a sale of Common Stock by the converting holder (the “Sold Shares”),
which delivery such converting holder reasonably anticipated to make using the shares to be issued upon such conversion (a “Buy-In”),
the converting holder shall have the right to require the Corporation to pay to the converting holder the Buy-In Adjustment Amount. The
Corporation shall pay the Buy-In Adjustment Amount to the converting holder in immediately available funds immediately upon demand
by the converting holder. For purposes of this Certificate of Designation, the term “Buy-In Adjustment Amount”
means the amount equal to the excess, if any, of (i) the converting holder’s total purchase price (including brokerage
commissions, if any) for the Covering Shares associated with a Buy-In, over (ii) the net proceeds (after brokerage commissions,
if any) received by the converting holder from the sale of the Sold Shares. By way of illustration and not in limitation
of the foregoing, if the converting holder purchases shares of Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In, with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Corporation will be required to pay to the converting holder will be $1,000.
Section 6. Other
Provisions.
(a) Reservation
of Common Stock. The Corporation shall at all times [use its best efforts to] reserve from its authorized Common
Stock a sufficient number of shares of Common Stock to provide for conversion of all Series __ Preferred Stock from time to time
outstanding.
(b) Record
Holders. The Corporation and its transfer agent, if any, for the Series __ Preferred Stock may deem and treat the
record holder of any shares of Series __ Preferred Stock as reflected on the books and records of the Corporation as the sole true
and lawful owner thereof for all purposes, and neither the Corporation nor any such transfer agent shall be affected by any notice
to the contrary. Upon request, the Corporation will provide the total number of issued and outstanding shares of Series
__ Preferred Stock to any holder thereof.
Section 7. Restriction
and Limitations. Except as expressly provided herein or as required by law so long as any shares of Series __ Preferred
Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least a majority
of the then outstanding shares of the Series __ Preferred Stock, take any action which would adversely and materially affect any
of the preferences, limitations or relative rights of the Series __ Preferred Stock.
Section 8. Certain
Adjustments.
(a) Stock
Dividends and Stock Splits. If the Corporation, at any time while the Series __ Preferred Stock is outstanding:
(A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares
of Common Stock issued by the Corporation pursuant to the Series __ Preferred Stock), (B) subdivide outstanding shares of Common
Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of
the Corporation, each share of Series __ Preferred Stock shall receive such consideration as if such number of shares of Series
__ Preferred had been, immediately prior to such foregoing dividend, distribution, subdivision, combination or reclassification,
the holder of the number of shares of Common Stock into which it could convert at such time; provided, however, to
the extent that a holder’s right to participate in any such dividend, distribution, subdivision, combination
or reclassification would result in the holder exceeding the Maximum Percentage, if applicable, then the holder shall not be entitled
to participate in such dividend, distribution, subdivision, combination or reclassification to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such dividend, distribution, subdivision, combination or reclassification
to such extent) and the portion of such dividend, distribution, subdivision, combination or reclassification shall be held in abeyance
for the benefit of the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Maximum
Percentage, at which time the holder shall be delivered such dividend, distribution, subdivision, combination or reclassification to
the extent as if there had been no such limitation). Any adjustment made pursuant to this Section 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) Fundamental
Transaction. If, at any time while the Series __ Preferred Stock is outstanding, (A) the Corporation effects any merger or
consolidation of the Corporation with or into another association, corporation, individual, partnership, limited liability
company, trust or any other entity or organization (each, a “Person”),
(B) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Corporation consummates
a transaction pursuant to which another Person becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the aggregate ordinary voting power represented by all of
the Common Stock outstanding at such time, or (E) the Corporation effects any reclassification
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, (in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Series __ Preferred Stock, each holder of Series __ Preferred Stock shall have the right to receive, for each
share of Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of such shares of
Common Stock (without regard to any limitations on conversion herein or elsewhere);
provided, however, to the extent that a holder’s right to receive securities of the Successor Entity
would result in the holder exceeding the Maximum Percentage, if applicable, then the holder shall not be entitled to receive such
shares to such extent (or to beneficially own any shares of common stock (or their equivalent) of the Successor Entity as a result
of such consideration to such extent) and the portion of such shares shall be held in abeyance for the benefit of the holder until
such time, if ever, as its right thereto would not result in the holder exceeding the Maximum Percentage, at which time the holder
shall be delivered such shares to the extent as if there had been no such limitation). The provisions of this Section
8(b) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations
on the conversion of the Series __ Preferred Stock.
For purposes of this Certificate
of Designation, “Successor Entity” means the Person, which may be the Corporation, formed by, resulting from
or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that
if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading
on the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange, the NYSE
MKT, LLC, the OTCBB or the OTCQB (each, an “Eligible Market”), Successor Entity shall mean such entity that,
directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed
on the Eligible Market, or, if there is more than one such Person, the Person with the largest public market capitalization as
of the date of consummation of the Fundamental Transaction.
IN WITNESS WHEREOF, the
undersigned has executed this Certificate this [__] day of [___], 2014.
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