NRCG NRC Group Holdings Corp

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Stock

The charter authorizes the issuance of 205,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, $0.0001 par value, 1,050,000 of which have been designated as Series A Convertible Preferred Stock and the remaining 3,950,000 of which are undesignated. The outstanding shares of our common stock are, and the shares of common stock issuable upon exercise of the outstanding Warrants and upon conversion of the outstanding Series A Convertible Preferred Stock will be upon issuance, duly authorized, validly issued, fully paid and non-assessable.

As of September 23, 2019, there were 38,050,385 shares of common stock outstanding.

Common Stock

The charter provides that all shares of common stock will have identical rights, powers, preferences and privileges.

Voting Power

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of our directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders.

Dividends

Holders of common stock will be entitled to receive such dividends, if any, as may be declared from time to time by our board of directors, in its discretion, out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically.

Liquidation, Dissolution and Winding Up

In the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding up, holders of common stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied.

Preemptive or Other Rights

There are no sinking fund provisions applicable to the common stock. Our common stockholders have no preemptive or other subscription rights.

Election of Directors

Our board of directors is divided into three classes, Class I, Class II, and Class III with each class serving a three-year term. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.

Founder Shares

The Founder Shares are identical to the shares of common stock included in the units that were sold in the IPO, and holders of Founder Shares have the same stockholder rights as public stockholders, except that (i) the Founder Shares are subject to certain transfer restrictions, as described in more detail below.

With certain limited exceptions, the Founder Shares are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with HCAC Sponsor, or by private sales or transfers made in connection with the consummation of the Business Combination at prices no greater than the price at which such Founder Shares were originally purchased, provided that, in each case, the transferee enters into a written agreement agreeing to be bound by the same transfer restrictions) until the earlier of one year after the completion of the Business Combination or earlier if, (x) subsequent to the Business Combination, the last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the date following the completion of a business combination on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Preferred Stock

The charter provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors may, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of our common stock and could have anti-takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of the Company or the removal of existing management.

Series A Convertible Preferred Stock

The charter authorizes the issuance of 5,000,000 shares of preferred stock, $0.0001 par value, and, on October 17, 2018, we designated, authorized and issued 1,050,000 shares of preferred stock as Series A Convertible Preferred Stock.

Under the Certificate of Designations, each share of Series A Convertible Preferred Stock is convertible, at the holder’s option at any time, initially into eight shares of our common stock (assuming a conversion price of approximately $12.50 per share), subject to specified adjustments as set forth in the Certificate of Designations. Each holder of Series A Convertible Preferred Stock shall have the right at any time, at its option, to convert, subject to the terms and provisions of the Certificate of Designations, any or all of such holder’s shares of Series A Convertible Preferred Stock into our common stock at the applicable conversion rate.

On or after the third anniversary of the initial issuance date but prior to the fifth anniversary of the initial issuance date, we will have the right, at our option, to give notice of our election to cause all outstanding shares of the Series A Convertible Preferred Stock to be automatically converted into that number of whole shares of our common stock for each share of Series A Convertible Preferred Stock at the then-effective conversion rate. We may exercise the right to cause mandatory conversion only if the weighted average price (as defined in the Certificate of Designations) of our common stock equals or exceeds 140% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the fifth anniversary of the initial issuance date but prior to the seventh anniversary of the initial issuance date, we will have the right, at our option, to give notice of our election to cause all outstanding shares of the Series A Convertible Preferred Stock to be automatically converted into that number of whole shares of our common stock for each share of Series A Convertible Preferred Stock at the then-effective conversion rate. We may exercise the right to cause mandatory conversion only if the weighted average price of our common stock equals or exceeds 115% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the seventh anniversary of the initial issuance date, we will have the right, at our option, to give notice of our election to cause all outstanding shares of the Series A Convertible Preferred Stock to be automatically converted into that number of whole shares of our common stock for each share of Series A Convertible Preferred Stock at the then-effective conversion rate. We may exercise the right to cause mandatory conversion only if the weighted average price of our common stock equals or exceeds the then-current conversion price for at least 10 consecutive trading days.

If we undergo certain fundamental changes (as more fully described in the Certificate of Designations but including, among other things, certain change-in-control transactions, recapitalizations, asset sales and liquidation events), each outstanding share of Series A Convertible Preferred Stock may, within 15 days following the effective date of such fundamental change and at the election of the holder, be converted into our common stock at a conversion rate (subject to certain adjustments) equal to (i) the greater of (A) the sum of the conversion rate on the effective date of such fundamental change, plus the additional shares received by holders of Series A Convertible Preferred Stock following such fundamental change (as set forth in the Certificate of Designations) and (B) the quotient of (x) $100.00, divided by (y) the greater of (1) the applicable holder stock price and (2) 10% of the closing sale price of our common stock on the issue date, plus (ii) the number of shares of our common stock that would be issued if any and all accumulated and unpaid dividends were paid in shares of our common stock. As used herein, “holder stock price” means, (i) in the case of a fundamental change in which the holders of our common stock will receive only cash consideration, the price to be paid (or deemed paid) per share for such fundamental change and (ii) in all other cases, the average closing sale price of our common stock on the 10 consecutive trading days immediately preceding the effective date of the fundamental change.

Holders of the Series A Convertible Preferred Stock are entitled to receive dividends, paid quarterly in arrears, in cash or, at our election (and subject to the receipt of any necessary stockholder approval), our common stock or a combination of cash and our common stock, provided that any shares of our common stock issued as dividends must be the subject of an effective registration statement under the Securities Act. Dividends paid in cash shall be paid at a rate equal to 7.00% per share of Series A Convertible Preferred Stock on the liquidation preference of $100.00. Dividends paid in shares of our common stock, in full or in part, shall be paid at a rate calculated as follows: (i) the cash amount of such dividend payment that would apply if no payment were to be made in our common stock, or such portion, divided by (ii) the product of (x) the weighted average price of our common stock for each of the 10 consecutive trading days ending on the second trading day immediately preceding the date of such dividend payment (subject to certain adjustments) and (y) 0.95; provided, that at least two trading days prior to the beginning of the averaging period described in (ii)(x) above, we will provide written notice of such election to the holder.

The Series A Convertible Preferred Stock contain limitations that prevent the holders thereof from acquiring shares of our common stock upon conversion (unless the 9.99% limitation described below applicable to conversions is waived at the request of a holder) or through dividends that would result in (i) the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of our common stock then outstanding (provided that if a holder’s right to participate in any dividend would result in such holder exceeding 9.99% of the total number of shares of our common stock then outstanding, we must, at our option, waive such 9.99% limitation or pay such dividend in cash) or (ii) the Series A Convertible Preferred Stock being converted into more than 19.99% of the shares of our common stock outstanding on the initial issue date of the Series A Convertible Preferred Stock without stockholder approval of such issuance.

To assist our compliance with the Jones Act, the Certificate of Designations contain provisions that limit the ownership of the Series A Convertible Preferred Stock by non- U.S. Citizens to 24% in the aggregate of such Series A Convertible Preferred Stock and limit certain conversions and participation in the payment of dividends paid in our common stock to ensure that ownership by non-U.S. Citizens will not exceed the maximum percentage permitted by the Jones Act (presently 25%).

The Series A Convertible Preferred Stock also contain terms prohibiting the payment of cash dividends on our common stock unless at the time of payment (i) all accumulated dividends on the Series A Convertible Preferred Stock are paid or set aside and (ii) the payment of the dividend in respect of the Series A Convertible Preferred Stock for the most recent dividend period has been paid in cash or has been declared with the set-aside of a sum sufficient for payment thereof.

In the election of directors to the Company, for so long as the holders of the Series A Convertible Preferred Stock own in the aggregate at least 1/3 of the shares of Series A Convertible Preferred Stock issued at the Closing, such holders, voting as a separate class, by the affirmative vote or consent of the holders of at least 50.1% of the shares of Series A Convertible Preferred Stock outstanding at the time and with each share of Series A Convertible Preferred Stock entitled to one vote, are entitled to appoint one individual to serve on our board of directors (the “Preferred Director”) and, following the expiration of the initial term of the Preferred Director, nominate one individual to stand for election to our board of directors as the Preferred Director at each meeting of our stockholders in which the Class III directors are elected, including, without limitation, at every adjournment or postponement thereof. The initial term of the Preferred Director will begin immediately upon such Preferred Director’s appointment by the holders of the Series A Convertible Preferred Stock. Thereafter, such Preferred Director shall stand for election to the board of directors as a Class III director in accordance with the charter. The Preferred Director must satisfy all requirements regarding service as our director under applicable law and regulation (including the applicable rules of the NYSE American). We have committed to take certain actions to cause the nomination of the Preferred Director. The Preferred Director may be removed at any time as a director on our board of directors (with or without cause) upon, and only upon, the written request of the holders of the Series A Convertible Preferred Stock (voting as a separate class by the affirmative vote or consent of the holders of at least 50.1% of the shares of Series A Convertible Preferred Stock outstanding at the time and with each share of Series A Convertible Preferred Stock entitled to one vote). In the event that a vacancy is created on our board of directors at any time due to the death, disability, retirement, resignation or removal of a Preferred Director, then the holders of the Series A Convertible Preferred Stock (voting as a separate class by the affirmative vote or consent of the holders of at least 50.1% of the shares of Series A Convertible Preferred Stock outstanding at the time and with each share of Series A Convertible Preferred Stock entitled to one vote) will have the right to designate an individual to fill such vacancy. At such time that the holders of the Series A Convertible Preferred Stock are no longer entitled to designate the Preferred Director, the holders of the Series A Convertible Preferred Stock will promptly cause the Preferred Director to offer to resign from our board of directors.

The shares of Series A Convertible Preferred Stock have no voting rights except as set forth in the Certificate of Designations or as required by Delaware law or with respect to the amendment, alteration or repeal of any provision of the charter, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting powers of the shares of Series A Convertible Preferred Stock. For so long as any shares of Series A Convertible Preferred Stock remain outstanding, we may not, without the affirmative vote or consent of the holders of a majority of the shares of Series A Convertible Preferred Stock outstanding at the time, voting together as a single class, (i) create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company), (ii) issue or sell, or obligate itself to issue or sell, any securities of the Company or any subsidiary (or any security convertible into or exercisable for any class or series of capital stock of the Company or any subsidiary), in each case, that constitutes capital stock that will rank senior to the Series A Convertible Preferred Stock as to dividend rights and/or rights upon our liquidation, winding-up or dissolution or, within the first 12 months after the issue date, that constitutes, capital stock or series of preferred stock established after the issue date, that rank on a parity with the Series A Convertible Preferred Stock as to dividend rights, and/or rights upon our liquidation, winding-up or dissolution and/or voting rights, or Parity Stock, or (iii) at any time after the 12-month anniversary of the issue date, issue or sell, or obligate itself to issue or sell, in excess of $50.0 million in the aggregate of any securities of the Company or any subsidiary (or any security convertible into or exercisable for any class or series of capital stock of the Company or any subsidiary), in each case, that constitutes Parity Stock. In addition, certain significant holders of Series A Convertible Preferred Stock may have approval rights with respect to certain key economic terms of the Series A Convertible Preferred Stock, as set forth in the Certificate of Designations.

From the issue date until the earlier of (x) such time as the holders of the Series A Convertible Preferred Stock cease to beneficially own in the aggregate at least 1/3 of the number of shares of Series A Convertible Preferred Stock issued at the Closing and (y) the issuance or sale after the issue date of $50.0 million in the aggregate of Parity Stock, if we, from time to time, makes any public or non-public offering of any Parity Stock, each holder of the Series A Convertible Preferred Stock, (each, a “Preemptive Rights Holder”) and such Preemptive Rights Holder’s affiliates and funds and/or accounts that are managed, advised or sub-advised by a Preemptive Rights Holder (with respect to a Preemptive Rights Holder, the “Preemptive Rights Holder Parties”) will be afforded the opportunity, whether in one or multiple offerings, to acquire from us its Preemptive Rights Portion (as defined below) of such Parity Stock; provided, that any Preemptive Rights Holder Party will not be entitled to acquire any Parity Stock to the extent the issuance of such Parity Stock to such Preemptive Rights Holder Party would require approval of our stockholders under applicable law or pursuant to the rules and listing conditions of the NYSE American until such time as we receive such stockholder approval; provided, further, that the exercise of the preemptive rights will be subject to applicable Jones Act beneficial ownership limitations. The amount of Parity Stock that each Preemptive Rights Holder Party will be entitled to purchase in the aggregate will be determined by multiplying (1) the total number of such offered shares of Parity Stock by (2) a fraction, the numerator of which is the number of shares of Series A Convertible Preferred Stock held by such Preemptive Rights Holder Party, as of such date, and the denominator of which is the number of shares of Series A Convertible Preferred Stock then outstanding, as of such date, or the “Preemptive Rights Portion.”

Warrants

There are currently 19,248,741 Warrants outstanding, which were originally sold as part of the units offered in the IPO. Each Warrant entitles the registered holder to purchase common stock at an exercise price of $11.50 per share, subject to adjustment as discussed below, at any time. Warrants may be exercised only for a whole number of shares of our common stock. No fractional shares will be issued upon exercise of the Warrants. The Warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

We will not be obligated to deliver any shares of common stock pursuant to the exercise of a Warrant and will have no obligation to settle a Warrant exercise unless this registration statement of which this prospectus forms a part is then effective and this prospectus remains current, subject to our satisfying our obligations described below with respect to registration. No Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any common stock to holders seeking to exercise their Warrants, unless the issuance of the common stock upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, unless an exemption is available. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant will not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless.

We agreed that within 60 business days following the Business Combination to have such registration statement to which this prospectus forms a part declared effective. Until such time as the shares issuable upon exercise of the Warrants are registered under the Securities Act, we are required, commencing on the 61st day following the Closing, to permit holders to exercise their Warrants on a cashless basis under certain circumstances specified in the Warrant Agreement. However, no Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, unless an exemption is available.

In no event will we be required to issue cash, securities or other compensation in exchange for the Warrants in the event that we are unable to register or qualify the shares underlying the Warrants under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the Warrants is not so registered or qualified, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In such event, holders who acquired their Warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of common stock included in the units.

We will use our best efforts to cause this registration statement of which this prospectus forms a part to become effective and to maintain the effectiveness of such registration statement until the expiration or redemption of the Warrants in accordance with the provisions of the Warrant Agreement. Notwithstanding the above, if our common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws.

Once the Warrants become exercisable, we may call the Warrants for redemption:

If and when the Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the Warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the Warrants were offered by us in the IPO.

We have established the last of the redemption criteria discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the Warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Warrants, each Warrant holder will be entitled to exercise his, her or its Warrant prior to the scheduled redemption date. However, the price of the common stock may fall below the $18.00 redemption trigger price as well as the Warrant exercise price of $11.50 per share of common stock after the redemption notice is issued.

If we call the Warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or its Warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their Warrant on a “cashless basis,” our management will consider, among other factors, our cash position, the number of Warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of our Warrants. If our management takes advantage of this option, all holders of Warrants would pay the exercise price by surrendering their Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the Warrants, including the fair market value in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a Warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the Warrants.

A holder of a Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the Warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of common stock outstanding immediately after giving effect to such exercise.

If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of common stock issuable on exercise of each Warrant will be increased in proportion to such increase in the outstanding shares of common stock. A rights offering to holders of common stock entitling holders to purchase shares of common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of common stock equal to the product of (i) the number of shares of common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for common stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for common stock, in determining the price payable for common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

In addition, if we, at any time while the Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares of our capital stock into which the Warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of common stock in connection with the Business Combination or (d) as a result of the repurchase of shares of common stock by us, then the Warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common stock in respect of such event.

If the number of outstanding shares of our common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of common stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding shares of common stock.

Whenever the number of shares of common stock purchasable upon the exercise of the Warrants is adjusted, as described above, the Warrant exercise price will be adjusted by multiplying the Warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of common stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of common stock so purchasable immediately thereafter.

In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of our common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised their Warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each Warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by us in connection with redemption rights held by stockholders as provided for in the charter or as a result of the repurchase of shares of common stock by us in connection with the Business Combination) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of common stock, the holder of a Warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the Warrant Agreement. Additionally, if less than 70% of the consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Warrant properly exercises the Warrant within 30 days following public disclosure of such transaction, the Warrant exercise price will be reduced as specified in the Warrant Agreement based on the per share consideration minus the Black-Scholes warrant value (as defined in the Warrant Agreement) of the Warrant in order to determine and realize the option value component of the Warrant. This formula is to compensate the Warrant holder for the loss of the option value portion of the Warrant due to the requirement that the Warrant holder exercise the Warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no quoted market price for an instrument is available.

The Warrants were issued in registered form under a Warrant Agreement. The Warrant Agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Warrants to make any change that adversely affects the interests of the registered holders of Warrants.

The Warrants may be exercised upon surrender of the Warrant certificate on or prior to the expiration date at the offices of the Warrant agent, with the exercise form on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Warrants being exercised. The Warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their Warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

No fractional shares will be issued upon exercise of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of common stock to be issued to the Warrant holder.

In order to protect our eligibility as a U.S. Citizen in case that ownership of our common stock by non-U.S. Citizens exceeds the maximum percentage permitted by the Jones Act (presently 25%), the charter and the bylaws contain provisions that limit the maximum aggregate percentage of ownership by non-U.S. Citizens of the common stock to 24% of the outstanding shares of common stock. At and during such time that the 24% maximum permitted percentage of ownership by Non-U.S. Citizens is reached with respect to shares of common stock, we will be unable to permit the exercise of any Warrants by non-U.S. Citizens. If a holder of the Warrants that is a non-U.S. Citizen is unable to exercise such Warrants, it may have to wait to exercise such Warrants until such time that the 24% maximum permitted percentage of ownership by Non-U.S. Citizens is not reached with respect to shares of common stock or may have to sell such Warrants to a U.S. Citizen who is able to exercise the Warrants.

Restrictions on Ownership and Purchase and Capital Stock by Non-US. Citizens

Certain of our operations are conducted in the U.S. coastwise trade and are governed by the Jones Act, which is principally contained in 46 U.S.C. Chapters 121, 505 and 551 and the related regulations. The Jones Act restricts the transportation of merchandise and passengers for hire by water, or by land and water, between points in the United States and certain of its island territories and possessions, to U.S.-flag vessels that meet certain requirements, including that they are built in the United States, owned and operated by U.S. Citizens (within the meaning of the Jones Act), and manned by predominantly U.S. Citizen crews. Should we fail to satisfy the requirements of the Jones Act to be a U.S. Citizen, we would be prohibited from operating our vessels in the U.S. coastwise trade during the period of such non-compliance. In addition, we could be subject to substantial fines and our vessels could be subject to seizure and forfeiture for violations of the Jones Act.

The following is a summary of the restrictions (the “Maritime Restrictions”), in Article V of the charter. This summary is qualified in its entirety by reference to the full text of the charter.

General Restriction on Ownership of Shares by non-U.S. Citizens

In order to protect our eligibility as a U.S. Citizen, the charter restricts the record or beneficial ownership or control of shares of each class or series of our capital stock, which includes the common stock, by non-U.S. Citizens to no more than 24% in the aggregate of the total issued and outstanding shares of such class or series. We refer to such percentage restriction on ownership by non-U.S. Citizens of any class or series of shares of our capital stock as the “Permitted Percentage” and any such shares owned by non-U.S. Citizens in excess of the Permitted Percentage as “Excess Shares.” The charter provides that a person will not be deemed to be the beneficial owner of shares of our capital stock, if we determine that such person is not the beneficial owner of such shares for the purposes of the Jones Act. All references to beneficial ownership of shares and the derivative phrases thereof in this summary of the Maritime Restrictions include record ownership of shares and the ability to control shares.

Restriction on Transfers of Excess Shares

The Maritime Restrictions provide that no shares of any class or series of our capital stock may be transferred to a non-U.S. Citizen or a holder of record that will hold such shares for or on behalf of a non-U.S. Citizen if, upon completion of such transfer, the number of shares of such class or series beneficially owned by all non-U.S. Citizens in the aggregate would exceed the Permitted Percentage for such class or series. Any transfer or purported transfer of beneficial ownership of any shares of any class or series of our capital stock, the effect of which would be to cause one or more non-U.S. Citizens in the aggregate to beneficially own shares of any class or series of our capital stock in excess of the Permitted Percentage for such class or series, shall, to the fullest extent permitted by law, be void ab initio and ineffective, and, to the extent that we or our transfer agent (if any) knows that such transfer or purported transfer would, if completed, be in violation of the restrictions on transfers to non-U.S. Citizens set forth in the Maritime Restrictions, neither we nor our transfer agent (if any) shall register such transfer or purported transfer on our stock transfer records and neither we nor our transfer agent (if any) shall recognize the transferee or purported transferee thereof as our stockholder for any purpose whatsoever (including for purposes of voting, dividends and other distributions) except to the extent necessary to effect any remedy available to us under the Maritime Restrictions. In no event shall any such registration or recognition make such transfer or purported transfer effective unless the board of directors (or any duly authorized committee thereof, or any officer of the Company who shall have been duly authorized by the board of directors or any such committee thereof) shall have expressly and specifically authorized the same.

In connection with any purported transfer of shares of any class or series of our capital stock, any transferee or proposed transferee of shares and, if such transferee or proposed transferee is acting as a fiduciary or nominee for a beneficial owner, such beneficial owner, may be required by us or our transfer agent to deliver (i) certification (which may include as part thereof a form of affidavit) upon which we and our transfer agent shall be entitled to rely conclusively stating whether such transferee or proposed transferee or, if such transferee or proposed transferee is acting as custodian, nominee, purchaser representative or in any other capacity for a beneficial owner, whether such beneficial owner, is a U.S. Citizen, and (ii) such other documentation and information concerning its citizenship under the Maritime Restrictions as we may request in our sole discretion. Registration and recognition of any transfer of shares may be denied by us upon refusal to furnish any of the foregoing citizenship certifications, documentation or information requested by us. Each proposed transferor of such shares shall reasonably cooperate with any requests from us to facilitate the transmission of requests for such citizenship certifications and such other documentation and information to the proposed transferee and such proposed transferee’s responses thereto.

Notwithstanding any of the Maritime Restrictions, we shall be entitled to rely, without limitation, on the stock transfer and other stockholder records (and our transfer agent) for the purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies, and otherwise conducting votes of stockholders.

Excess Shares

If on any date, including, without limitation, any record date, we refer to each as an Excess Share Date, the number of shares of any class or series of our capital stock beneficially owned by all non- U.S. Citizens in the aggregate should exceed the Permitted Percentage with respect to such class or series of capital stock, irrespective of the date on which such event becomes known to us (such shares in excess of the Permitted Percentage, the “Excess Shares”), then the shares of such class or series of our capital stock that constitute Excess Shares for purposes of the Maritime Restrictions shall be (x) those shares that have been acquired by or become beneficially owned by non-U.S. Citizens, starting with the most recent acquisition of beneficial ownership of such shares by a non-U.S. Citizen and including, in reverse chronological order of acquisition, all other acquisitions of beneficial ownership of such shares by non-U.S. Citizens from and after the acquisition of beneficial ownership of such shares by a non-U.S. Citizen that first caused such Permitted Percentage to be exceeded, or (y) those shares beneficially owned by non-U.S. Citizens that exceed the Permitted Percentage as the result of any repurchase or redemption by us of shares of our capital stock, starting with the most recent acquisition of beneficial ownership of such shares by a non-U.S. Citizen and going in reverse chronological order of acquisition; provided, however, that: (a) we shall have the power to determine, in its sole discretion, those shares of such class or series that constitute Excess Shares in accordance with the provisions of the Maritime Restrictions; (b) we may, in its sole discretion, rely on any documentation provided by non-U.S. Citizens with respect to the date and time of their acquisition of beneficial ownership of Excess Shares; (c) if the acquisition of beneficial ownership of more than one Excess Share occurs on the same date and the time of acquisition is not definitively established, then the order in which such acquisitions shall be deemed to have occurred on such date shall be determined by lot or by such other method as we may, in our sole discretion, deem appropriate; (d) Excess Shares that result from a determination that a beneficial owner has ceased to be a U.S. Citizen shall be deemed to have been acquired, for purposes of the Maritime Restrictions, as of the date that such beneficial owner ceased to be a U.S. Citizen; and (e) we may adjust upward to the nearest whole share the number of shares of such class or series deemed to be Excess Shares. Any determination made by us pursuant to the Maritime Restrictions as to which shares of any class or series of our capital stock constitute Excess Shares of such class or series shall be conclusive and shall be deemed effective as of the applicable Excess Share Date for such class or series.

Redemption of Excess Shares

To the extent that the above ownership and transfer restrictions would be ineffective for any reason, the Maritime Restrictions provide that, to prevent the percentage of aggregate shares of any class or series of our capital stock owned by non-U.S. Citizens from exceeding the Permitted Percentage, we, by action of our board of directors (or any duly authorized committee thereof), in our sole discretion, will have the power (but not the obligation) to redeem all or any number of such Excess Shares, unless such redemption is not permitted under applicable law.

Until such Excess Shares are redeemed or they are no longer Excess Shares, the holders of such shares will not be entitled to any voting rights with respect to such shares and we will pay any dividends or distributions with respect to such shares into a segregated account. Full voting, distribution and dividend rights will be restored to such Excess Shares (and any dividends or distributions paid into a segregated account will be paid to holders of record of such shares), promptly after the time and to the extent that such shares have ceased to be Excess Shares, unless such shares have already been redeemed by us.

If the board of directors (or any duly authorized committee thereof) determines to redeem Excess Shares, the per share redemption price (the “Redemption Price”) for each Excess Share shall be paid by the issuance of one Redemption Warrant (as defined below) for each Excess Share; provided, however, that if (x) we determine that a Redemption Warrant would be treated as capital stock under the Jones Act or (y) we are prevented from legally issuing Redemption Warrants under applicable law, then the Redemption Price shall be paid, as determined by the board of directors (or any duly authorized committee thereof) in our sole discretion, (A) in cash (by wire transfer or bank or cashier’s check), (B) by the issuance of Redemption Notes (as defined below), (C) by any combination of cash and Redemption Notes, or (D) by any other means authorized or permitted under the DGCL.

With respect to the portion of the Redemption Price being paid in whole or in part by cash and/or by the issuance of Redemption Notes, such portion of the Redemption Price shall be an amount equal to, in the case of cash, or a principal amount equal to, in the case of Redemption Notes, the sum of (A) the fair market value of such Excess Share as of the date of redemption of such Excess Share less (B) an amount equal to the amount of any dividend or any other distribution (upon liquidation or otherwise) which were paid to the holder of record of such Excess Share prior to the date on which such Excess Share is called for redemption instead of being paid into a segregated account by us. Written notice of the redemption of the Excess Shares containing the information set forth in the Maritime Restrictions, together with a letter of transmittal to accompany certificates, if any, representing the Excess Shares that have been called for redemption, shall be given either by hand delivery or by overnight courier service or by first-class mail, postage prepaid, to each holder of record of the Excess Shares to be redeemed, at such holder’s last known address as the same appears on our stock register (the “Redemption Notice”), unless such notice is waived in writing by any such holders.

The date on which the Excess Shares shall be redeemed (the “Redemption Date”) shall be the later of (A) the date specified in the Redemption Notice sent to the record holder of the Excess Shares (which shall not be earlier than the date of such notice), and (B) the date on which we have irrevocably deposited in trust with a paying agent or set aside for the benefit of such record holder consideration sufficient to pay the Redemption Price to such record holders of such Excess Shares in Redemption Warrants, cash and/or Redemption Notes.

Each Redemption Notice to each holder of record of the Excess Shares to be redeemed shall specify (A) the Redemption Date (as determined pursuant to the Maritime Restrictions), (B) the number and the class or series of shares of capital stock to be redeemed from such holder as Excess Shares (and, to the extent such Excess Shares are certificated, the certificate number(s) representing such Excess Shares), (C) the Redemption Price and the manner of payment thereof, (D) the place where certificates for such Excess Shares (if such Excess Shares are certificated) are to be surrendered for cancellation, (E) any instructions as to the endorsement or assignment for transfer of such certificates (if any) and the completion of the accompanying letter of transmittal, and (F) the fact that all right, title and interest in respect of the Excess Shares to be redeemed (including, without limitation, voting, dividend and distribution rights) shall cease and terminate on the Redemption Date, except for the right to receive the Redemption Price, without interest.

On and after the Redemption Date, all right, title and interest in respect of the Excess Shares selected for redemption (including, without limitation, voting and dividend and distribution rights) shall forthwith cease and terminate, such Excess Shares shall no longer be deemed to be outstanding shares for any purpose, including, without limitation, for purposes of voting or determining the total number of shares entitled to vote on any matter properly brought before the stockholders for a vote thereon or receiving any dividends or distributions (and may be either cancelled or held by us as treasury stock), and the holders of record of such Excess Shares shall thereafter be entitled only to receive the Redemption Price, without interest.

Upon surrender of the certificates (if any) for any Excess Shares so redeemed in accordance with the requirements of the Redemption Notice and the accompanying letter of transmittal (and otherwise in proper form for transfer as specified in the Redemption Notice), the holder of record of such Excess Shares shall be entitled to payment of the Redemption Price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate (or certificates), to the extent such shares were certificated, shall be issued representing the shares not redeemed, without cost to the holder of record. On the Redemption Date, to the extent that dividends or other distributions (upon liquidation or otherwise) with respect to the Excess Shares selected for redemption were paid into a segregated account, then, to the fullest extent permitted by applicable law, such amounts shall be released to us upon the completion of such redemption.

Nothing in the Maritime Restrictions will prevent the recipient of a Redemption Notice from transferring its shares before the Redemption Date if such transfer is otherwise permitted under the Maritime Restrictions and applicable law and the recipient provides notice of such proposed transfer to us along with the documentation and information required under the Maritime Restrictions establishing that such proposed transferee is a U.S. Citizen to the satisfaction of us in our sole discretion before the Redemption Date. If such conditions are met, the board of directors (or any duly authorized committee thereof) will withdraw the Redemption Notice related to such shares, but otherwise the redemption thereof will proceed on the Redemption Date in accordance with the Maritime Restrictions and the Redemption Notice.

Permitted Actions by the Company to Enforce the Maritime Restrictions

We have the power to determine the citizenship of the beneficial owners and the transferees or proposed transferees (and, if such transferees or proposed transferees are acting as fiduciaries or nominees for any beneficial owners, the citizenship of such beneficial owners) of any class or series of our capital stock and to require confirmation from time to time of the citizenship of the beneficial owners of any shares of its capital stock. As a condition to acquiring and having beneficial ownership of any shares of its capital stock, every beneficial owner of our shares must comply with certain provisions in the Maritime Restrictions concerning citizenship, which are summarized below. We have the right under the Maritime Restrictions to require additional reasonable proof of the citizenship of beneficial owners, transferees or proposed transferees (and any beneficial owners for whom such transferees or proposed transferees are acting as fiduciaries or nominees) of any shares of its capital stock, and the determination of us at any time as to the citizenship of such persons is conclusive.

The Maritime Restrictions require that promptly upon a beneficial owner’s acquisition of beneficial ownership of 5% or more of the outstanding shares of any class or series of our capital stock, and at such other times as we may determine by written notice to such beneficial owner, such beneficial owner must provide to us by a written statement or an affidavit, as specified by us, stating the name and address of such beneficial owner, the number of shares of each class or series of our capital stock beneficially owned by such beneficial owner as of a recent date, the legal structure of such beneficial owner, a statement as to whether such beneficial owner is a U.S. Citizen, and such other information and documents required by the United States Coast Guard (“USCG”) or the U.S. Maritime Administration under the Jones Act, including 46 C.F.R. part 355. In addition, under the Maritime Restrictions, a beneficial owner is required to provide such a written statement or affidavit when we determine, in our sole discretion, that the citizenship status of such beneficial owner may have changed or that it is necessary under the Jones Act for us to confirm our citizenship status.

Under the Maritime Restrictions, when a beneficial owner of any shares of our capital stock ceases to be a U.S. Citizen, such beneficial owner is required to provide to us, as promptly as practicable but in no event less than five business days after the date such beneficial owner becomes aware that it is no longer a U.S. Citizen, a written statement, stating the name and address of such beneficial owner, the number of shares of each class or series of its capital stock beneficially owned by such beneficial owner as of a recent date, the legal structure of such beneficial owner, and a statement as to such change in status of such beneficial owner to a non-U.S. Citizen.

The Maritime Restrictions require that, promptly after becoming a beneficial owner, every beneficial owner must provide, or authorize such beneficial owner’s broker, dealer, custodian, depositary, nominee or similar agent with respect to the shares of each class or series of our capital stock beneficially owned by such beneficial owner to provide, to us such beneficial owner’s address. A beneficial owner of our capital stock is also required by the Maritime Restrictions to provide promptly upon our request, a written statement or an affidavit, as specified by us, stating the name and address of such beneficial owner, together with reasonable documentation of the date and time of such beneficial owner’s acquisition of beneficial ownership of the shares of any class or series of our capital stock specified by us in our request.

In the event that we request the documentation described above and a beneficial owner fails to provide it by the specified date, the Maritime Restrictions provide for the suspension of the voting rights of such beneficial owner’s shares of our capital stock and for the payment of dividends and distributions (upon liquidation or otherwise) with respect to those shares into a segregated account until the requested documentation is submitted in form and substance reasonably satisfactory to us (subject to the other Maritime Restrictions). In addition, we, upon approval by the board of directors (or any duly authorized committee thereof) in our sole discretion, have the power to treat such beneficial owner as a non-U.S. Citizen unless and until we receive the requested documentation confirming that such beneficial owner is a U.S. Citizen.

In the event that we request a transferee or proposed transferee (and, if such transferee or proposed transferee is acting as a fiduciary or nominee for a beneficial owner, such beneficial owner) of, shares of any class or series of our capital stock to provide the documentation described above, and such person fails to submit it in form and substance reasonably satisfactory to us by the specified date, we, acting through our board of directors (or any duly authorized committee thereof, or any officer who shall have been duly authorized by our board of directors or any such committee thereof), will have the power, in its sole discretion, to refuse to accept any application to transfer ownership of such shares (if any) or to register such shares on our stock transfer records and may prohibit and/or void such transfer, including by placing a stop order with our transfer agent, until such requested documentation is submitted and we are satisfied that the proposed transfer of shares will not result in Excess Shares.

Certificates representing shares of any class or series of our capital stock will bear legends concerning the Maritime Restrictions.

Maritime Restrictions Severable

The Maritime Restrictions are intended to be severable. If any one or more of the Maritime Restrictions is held to be invalid, illegal or unenforceable, the charter provides that the validity, legality or enforceability of any other provision will not be affected.

National Securities Exchange

In order for us to comply with any conditions to listing the shares of the common stock that may be specified by the NYSE American or any other national securities exchange or automated inter-dealer quotation system, the charter provides that nothing therein, such as the provisions voiding transfers to non-U.S. Citizens, will preclude the settlement of any transaction entered into through the NYSE American or any other such national securities exchange or automated inter-dealer quotation system for so long as the common stock is listed on the NYSE American. However, the fact that the settlement of any transaction occurs shall not negate the effect of any provision of the Maritime Restrictions and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in therein (including, without limitation, the redemption provisions applicable to Excess Shares).

Summary of Requirements to be a U.S. Citizen

The following is a summary of the requirements to be a U.S. Citizen within the meaning of the Jones Act. Each holder and potential purchaser of our stock should consult its own counsel as to whether it is a U.S. Citizen or a non-U.S. Citizen before purchasing our stock. The Jones Act specifies that ownership of at least 75% of the equity interest by U.S. Citizens means ownership free from any trust or fiduciary obligations in favor of, or any agreement, arrangement or understanding whereby voting power or control may be exercised directly or indirectly by, non-U.S. Citizens. In addition, these citizenship requirements apply at each tier in our ownership chain, which means that they must be satisfied by each person that contributes to our eligibility as a U.S. Citizen, and each person that contributes to the eligibility of such other person as a U.S. Citizen at each tier of ownership. For entities of a kind not described below, citizenship requirements may vary.

If we should fail to comply with the above described ownership requirements, our vessels could lose their ability to engage in U.S. coastwise trade. To assist our compliance with these requirements, the charter will:

All potential investors will be required to certify to us if it is a U.S. Citizen before investing in our common stock. If you or a proposed transferee cannot or do not make such certification, or a sale of stock to you or a transfer of your stock would result in the ownership by non-U.S. Citizens of 24% or more of our common stock, such person may not be allowed to purchase or transfer our common stock, or such purchase or transfer may be reversed or the shares so purchased or transferred may be redeemed under our organizational documents. All certificates representing the shares of our common stock will bear legends referring to the foregoing restrictions.