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Item 5.03.
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Amendments to Articles of Incorporation or Bylaws.
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Certificate of Designation for Series
C Preferred
On August 14, 2017,
the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the
“Certificate of Designation”), designating 4,000 shares of the Company's authorized preferred stock as Series C Preferred,
with the office of the Secretary of State of the State of Delaware. Certain of the material rights, preferences, privileges, and
restrictions applicable to the Series C Preferred are described below.
Conversion
.
Each share of the Series C Preferred will be convertible into that number of shares of Common Stock determined by dividing (i)
the sum of $1,000 plus all accrued and unpaid dividends on such share of Series C Preferred being converted, by (ii) the conversion
price of $0.315 per share, provided that the holder will be prohibited from converting Series C Preferred into shares of the Common
Stock if, as a result of such conversion, the holder would own more than 19.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of the shares of Common Stock issuable upon conversion of the Series C Preferred.
The conversion rate of the Series C Preferred is subject to proportionate adjustments for stock splits, reverse stock splits and
similar events, but is not subject to adjustment based on price anti-dilution provisions. The Series C Preferred automatically
converts into common stock following the approval by the requisite number of the Corporation’s stockholders to waive the
19.99% beneficial ownership limitation described above.
Dividends
. Cumulative
dividends on each share of Series C Preferred 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 15.0% per annum on the
sum of the stated value thereof. All accrued dividends on any share of Series C Preferred shall be paid in cash only when, as and
if declared by the Board of Directors out of funds legally available therefor or upon a liquidation of the Series C Preferred;
provided, that to the extent not paid on the last day of December of each calendar year, all accrued dividends on any share of
Preferred Stock shall accumulate on such dividend payment date whether or not declared by the Board and shall remain accumulated
dividends until paid pursuant hereto or converted and dividends shall compound on a daily basis on such accumulated dividends at
the rate of 15.0% per annum.
Voting Rights
.
Except as provided in the Certificate of Designation or as otherwise required by law,
the holders
of Series C Preferred shall have no voting rights
. The Company may not, without the consent of holders of a majority of
the outstanding shares of Series C Preferred, increase the number of authorized shares of preferred stock, authorize or issue any
securities which are senior or pari passu with the Series C Preferred, alter or change adversely the powers, preferences or rights
given to the Series C Preferred or alter or amend the Certificate of Designation.
Liquidation Rights
.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Preferred
are entitled to receive, before any payment shall be made to holders of Common Stock, out of the assets available for distribution
to stockholders an amount equal to the stated value of all shares of Series C Preferred plus all accrued and unpaid dividends thereon.
Beneficial Ownership
Limitation.
The Company may not effect any conversion of the Series C Preferred, and a holder does not have the right to convert
any portion of the Series C Preferred held by the holder, to the extent that, after giving effect to the conversion set forth in
a notice of conversion, such holder, together with such holder’s affiliates, and any persons acting as a group together with
such holder or affiliates, would beneficially own in excess of the Beneficial Ownership Limitation. The “Beneficial Ownership
Limitation” is 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of Series C Preferred, held by the applicable holder and its affiliates.
Failure to Deliver
Conversion Shares
. If the Company fails to timely deliver shares of Common Stock upon conversion of the Series C Preferred
within the time period specified in the Certificate of Designation (generally, within three trading days after delivery of the
notice of conversion), and if the holder has not exercised its Buy-In rights as described below with respect to such shares, then
the Company is obligated to pay to the holder, as liquidated damages, an amount equal to $50 per trading day (increasing to $100
per trading day after the third trading day and $200 per trading day after the sixth trading day) for each $10,000 of conversion
shares for which the Series C Preferred is converted which are not timely delivered. If the Company makes such liquidated damages
payments, it is not also obligated to make Buy-In payments with respect to the same conversion shares.
Compensation for
Buy-In on Failure to Timely Deliver Shares
. If the Company fails to timely deliver the conversion shares to the holder, and
if after the required delivery date the holder is required by its broker to purchase (in an open market transaction or otherwise)
or the holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the holder
of the conversion shares which the holder anticipated receiving upon such conversion (a “Buy-In”), then the Company
is obligated to (A) pay in cash to the holder the amount, if any, by which (x) the holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the holder by the Company
as liquidated damages for late delivery of such shares, exceeds (y) the amount obtained by multiplying (1) the number of conversion
shares that the Company was required to deliver times (2) the price at which the sell order giving rise to such purchase obligation
was executed, and (B) at the option of the holder, either reinstate the portion of the Series C Preferred and equivalent number
of conversion shares for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver
to the holder the number of shares of Common Stock that would have been issued had the Company timely complied with its conversion
and delivery obligations.
Subsequent Rights
Offerings; Pro Rata Distributions
. If the Company grants, issues or sells any Common Stock equivalents or rights to purchase
stock, warrants, securities or other property, pro rata to the record holders of any class of shares of Common Stock (the “Purchase
Rights”), then a holder of Series C Preferred will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock
acquirable upon conversion of the Series C Preferred (without regard to any limitations on conversion). If the Company declares
or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, then a
holder of Series C Preferred is entitled to participate in such distribution to the same extent as if the holder had held the number
of shares of Common Stock acquirable upon complete conversion of the Series C Preferred (without regard to any limitations on conversion).
Fundamental Transaction.
If, at any time while the Series C Preferred is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another person, (ii) the Company, 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 Company 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) the Company, 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) the Company, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement 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 purchase agreement or other
business combination) (each a “Fundamental Transaction”), then upon any subsequent conversion of the Series C Preferred,
the holder shall have the right to receive, for each conversion share that would have been issuable upon such conversion immediately
prior to the occurrence of such Fundamental Transaction (subject to the Beneficial Ownership Limitation), the number of shares
of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of
the number of shares of Common Stock for which the Series C Preferred is convertible immediately prior to such Fundamental Transaction
(subject to the Beneficial Ownership Limitation). For purposes of any such conversion, the determination of the conversion ratio
will be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental Transaction. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction, then the holder will be given the same choice as
to the Alternate Consideration it receives upon any conversion of the Series C Preferred following such Fundamental Transaction.
The Company shall give the holders of Series C Preferred notice of and information regarding a proposed Fundamental Transaction
prior to the applicable record or effective date, and in lieu of the rights provided above in this paragraph, each holder may elect
to have the Fundamental Transaction be treated as a Liquidation and shall be entitled to receive the amounts, other consideration
and rights as provided in the section entitled “
Liquidation Rights
” above.
The foregoing description
of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the Certificate
of Designation, which is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Certificate of Elimination for Series
A Preferred
In connection with
the adoption of the Rights Agreement in 2013, the Company filed a Certificate of Designation of Series A Junior Participating
Cumulative Preferred Stock with the Secretary of State of the State of Delaware setting forth the rights, powers and preferences
of the Series A Junior Participating Cumulative Preferred Stock issuable upon exercise of the Rights (the “Series A
Preferred Shares”).
Following the amendment
and termination of the Rights Agreement, on August 17, 2017, the Company filed a Certificate of Elimination (the “Certificate
of Elimination”) with the Secretary of State of the State of Delaware eliminating the Series A Preferred Shares and returning
them to authorized but undesignated shares of the Company’s preferred stock.
The foregoing description
of the Certificate of Elimination does not purport to be complete and is qualified in its entirety by reference to the Certificate
of Elimination, which is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated by reference herein.