Exhibit 10.1

 

FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated
as of August 29, 2018 (the “Amendment Effective Date”), is entered into by and
among FuelCell Energy, Inc., a Delaware corporation (“Parent”), Versa Power
Systems, Inc., a Delaware corporation (“Versa Delaware”), Versa Power Systems
Ltd. a corporation organized under the laws of Alberta, Canada (“Versa Canada”),
and each of Parent’s Subsidiaries that delivers a Joinder Agreement pursuant to
Section 7.13 of the Loan and Security Agreement (hereinafter collectively
referred to as the “Borrowers” and each, a “Borrower”), the several banks and
other financial institutions or entities from time to time parties thereto as
Lender, constituting the Required Lenders, and HERCULES CAPITAL, INC., a
Maryland corporation, in its capacity as administrative agent and collateral
agent for itself and the Lender (in such capacity, together with its successors
and assigns in such capacity, “Agent”).

 

Borrower, the Lender and Agent are parties to a Loan and Security Agreement
dated as of April 14, 2016 (as amended as of September 5, 2017, October 27, 2017
and March 28, 2018, and as may be further amended, restated or modified from
time to time, the “Loan and Security Agreement”). The Borrowers have requested
that Agent and Lender agree to certain amendments to the Loan and Security
Agreement. Agent and Lender have agreed to such request, subject to the terms
and conditions hereof.

 

Accordingly, the parties hereto agree as follows:

 

SECTION 1         Definitions; Interpretation.

 

(a)           Terms Defined in Loan and Security Agreement. All capitalized
terms used in this Amendment (including in the recitals hereof) and not
otherwise defined herein shall have the meanings assigned to them in the Loan
and Security Agreement.

 

(b)           Interpretation. The rules of interpretation set forth in
Section 1.1 of the Loan and Security Agreement shall be applicable to this
Amendment and are incorporated herein by this reference.

 

SECTION 2         Amendments to the Loan and Security Agreement.

 

(a)          The Loan and Security Agreement shall be amended as follows
effective as of the Amendment Effective Date:

 

(i)            New Definitions. The following definitions are added to Section
1.1 in their proper alphabetical order:

 

“Fourth Amendment” means that certain Fourth Amendment to Loan and Security
Agreement dated as of August 29, 2018, among Borrowers, Lender and Agent.

 

“Fourth Amendment Effective Date” means August 29, 2018.

 

“Series D Convertible Preferred Certificate” means that certain Certificate of
Designations, Preferences and Rights of the Series D Convertible Preferred Stock
of FuelCell Energy, Inc., in the form attached as Exhibit B to the Fourth
Amendment, in each case as in effect on the Fourth Amendment Effective Date.

 

“Series D Convertible Preferred Documents” means (a) that certain Underwriting
Agreement between Parent and Oppenheimer & Co. Inc. dated as of August 27, 2018
in the form attached as Exhibit A to the Fourth Amendment and (b) the Series D
Convertible Preferred Certificate.

 

“Series D Convertible Preferred Stock” means the Series D Convertible Preferred
Stock issued by the Borrower pursuant to the Series D Convertible Preferred
Certificate.

 

 

 

 

(ii)           Amended Definitions. The definition of “Permitted Indebtedness”
is amended by removing the word “and” at the end of clause (xiii), inserting the
word “and” at the end of clause (xii) and adding a new clause (xiv) as follows:
“(xiv) subject to Section 7.7, redemption and/or conversion rights as set forth
in the Series C Convertible Preferred Documents and/or the Series D Convertible
Preferred Documents”.

 

(iii)          Section 7.7. Section 7.7 is hereby amended and restated in its
entirety as follows:

 

7.7   Distributions. Borrower shall not, and shall not allow any Subsidiary to,
(a) repurchase or redeem any class of stock or other equity interest in cash
other than (i) pursuant to employee, director or consultant repurchase plans or
other similar agreements, provided, however, in each case the repurchase or
redemption price does not exceed the original consideration paid for such stock
or equity interest and (ii) so long as no Event of Default has occurred and is
continuing, pursuant to the redemption and/or conversion rights set forth in the
Series C Convertible Preferred Documents and/or the Series D Convertible
Preferred Documents; provided that, Borrower shall make any such repurchase,
redemption or payment in the form of its common stock and not in cash or other
consideration unless prohibited pursuant to the terms of the Series C
Convertible Preferred Certificate or the Series D Convertible Preferred
Certificate (as applicable) or otherwise prohibited by applicable law or (b)
declare or pay any cash dividend or make a cash distribution on any class of
stock or other equity interest, except that (i) a Subsidiary may pay dividends
or make distributions to Borrower and (ii) so long as no Event of Default has
occurred and is continuing, Borrower may pay cash dividends under Borrower’s (A)
Series 1 Preferred Shares in an amount not to exceed Canadian $1,250,000 per
year, (B) Series B Preferred Shares in an amount not to exceed U.S. $3,300,000
per year, (C) Series C Convertible Preferred Shares as required in the Series C
Convertible Preferred Documents provided that, Borrower shall pay such dividend
or distribution in the form of common stock and not in cash or other
consideration unless prohibited pursuant to the terms of the Series C
Convertible Preferred Certificate or otherwise prohibited by applicable law, and
(D) Series D Convertible Preferred Shares as required in the Series D
Convertible Preferred Documents provided that, Borrower shall pay such dividend
or distribution in the form of common stock and not in cash or other
consideration unless prohibited pursuant to the terms of the Series D
Convertible Preferred Certificate or otherwise prohibited by applicable law, or
(c) lend money to any employees, officers or directors or guarantee the payment
of any such loans granted by a third party in excess of $100,000 in the
aggregate or (d) waive, release or forgive any Indebtedness owed by any
employees, officers or directors in excess of $100,000 in the aggregate. For the
avoidance of doubt, Borrower shall not use cash to retire, redeem or make
principal payments other than those referenced in (ii) above on its Convertible
Perpetual Preferred Stock (which, for the avoidance of doubt, does not include
the Series C Convertible Preferred Stock or the Series D Convertible Preferred
Stock) without the consent of Agent.

 

(iv)          Section 9.9. A new Section 9.9 is hereby added as follows:

 

9.9   Series D Convertible Preferred Stock. The delivery of any Triggering Event
Redemption Notice (as defined under the Series D Convertible Preferred
Certificate) under the Series D Convertible Preferred Certificate, both as in
effect on the Fourth Amendment Effective Date and as may be amended.

 

(v)           In no event shall any provision of the Loan Documents or otherwise
limit any rights of the Agent and Lenders to be paid prior to the holders of the
Series D securities upon any exercise of remedies by Agent or the Lenders
(whether such exercise is automatic or upon the direction of any parties), in
any action either before or after the consummation of any Insolvency Proceeding.

 

(b)           References within Loan and Security Agreement. Each reference in
the Loan and Security Agreement to “this Agreement” and the words “hereof,”
“herein,” “hereunder,” or words of like import, shall mean and be a reference to
the Loan and Security Agreement as amended by this Amendment.

 

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SECTION 3         Conditions of Effectiveness. The effectiveness of Section 2 of
this Amendment shall be subject to the satisfaction of each of the following
conditions precedent:

 

(a)           Fees and Expenses. The Parent shall have paid all attorney fees
and other costs and expenses then due in accordance with Section 5(e), and (ii)
all other fees, costs and expenses, if any, due and payable as of the Amendment
Effective Date under the Loan and Security Agreement.

 

(b)           This Amendment. Agent shall have received this Amendment, executed
by Agent, the Lender and the Borrowers.

 

(c)           Series D Convertible Preferred Documents. Agent shall have
received executed copies of each Series D Convertible Preferred Document, in
form and substance satisfactory to Agent.

 

(d)           Representations and Warranties; No Default. On the Amendment
Effective Date, after giving effect to the amendment of the Loan and Security
Agreement contemplated hereby:

 

(i)            The representations and warranties contained in Section 4 shall
be true and correct on and as of the Amendment Effective Date as though made on
and as of such date; and

 

(ii)           There exist no Events of Default or events that with the passage
of time would result in an Event of Default.

 

SECTION 4         Representations and Warranties. To induce Agent and Lender to
enter into this Amendment, each Borrower hereby confirms, as of the date hereof,
(a) that the representations and warranties made by it in Section 5 of the Loan
and Security Agreement and in the other Loan Documents are true and correct in
all material respects; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; (b) that there has not
been and there does not exist a Material Adverse Effect; and (c) that the
information included in the Perfection Certificate delivered to Agent on the
Effective Date remains true and correct. For the purposes of this Section 4,
(i) each reference in Section 5 of the Loan and Security Agreement to “this
Agreement,” and the words “hereof,” “herein,” “hereunder,” or words of like
import in such Section, shall mean and be a reference to the Loan and Security
Agreement as amended by this Amendment, and (ii) any representations and
warranties which relate solely to an earlier date shall not be deemed confirmed
and restated as of the date hereof (provided that such representations and
warranties shall be true, correct and complete as of such earlier date).

 

SECTION 5         Miscellaneous.

 

(a)           Loan Documents Otherwise Not Affected; Reaffirmation. Except as
expressly amended pursuant hereto or referenced herein, the Loan and Security
Agreement and the other Loan Documents shall remain unchanged and in full force
and effect and are hereby ratified and confirmed in all respects. The Lender’s
and Agent’s execution and delivery of, or acceptance of, this Amendment shall
not be deemed to create a course of dealing or otherwise create any express or
implied duty by any of them to provide any other or further amendments, consents
or waivers in the future. Each Borrower hereby reaffirms the grant of security
under Section 3.1 of the Loan and Security Agreement and hereby reaffirms that
such grant of security in the Collateral secures all Secured Obligations under
the Loan and Security Agreement and the other Loan Documents.

 

(b)           Conditions. For purposes of determining compliance with the
conditions specified in Section 3, each Lender that has signed this Amendment
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter required thereunder to be consented to or
approved by or acceptable or satisfactory to a Lender unless Agent shall have
received notice from such Lender prior to the Amendment Effective Date
specifying its objection thereto.

 

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(c)           Release. In consideration of the agreements of Agent and each
Lender contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Borrower, on
behalf of itself and its successors, assigns, and other legal representatives,
hereby fully, absolutely, unconditionally and irrevocably releases, remises and
forever discharges Agent and each Lender, and its successors and assigns, and
its present and former shareholders, affiliates, subsidiaries, divisions,
predecessors, directors, officers, attorneys, employees, agents and other
representatives (Agent, Lenders and all such other persons being hereinafter
referred to collectively as the “Releasees” and individually as a “Releasee”),
of and from all demands, actions, causes of action, suits, covenants, contracts,
controversies, agreements, promises, sums of money, accounts, bills, reckonings,
damages and any and all other claims, counterclaims, defenses, rights of
set-off, demands and liabilities whatsoever of every name and nature, known or
unknown, suspected or unsuspected, both at law and in equity, which any
Borrower, or any of its successors, assigns, or other legal representatives may
now or hereafter own, hold, have or claim to have against the Releasees or any
of them for, upon, or by reason of any circumstance, action, cause or thing
whatsoever which arises at any time on or prior to the day and date of this
Amendment, including, without limitation, for or on account of, or in relation
to, or in any way in connection with the Loan Agreement, or any of the other
Loan Documents or transactions thereunder or related thereto. Each Borrower
understands, acknowledges and agrees that the release set forth above may be
pleaded as a full and complete defense and may be used as a basis for an
injunction against any action, suit or other proceeding which may be instituted,
prosecuted or attempted in breach of the provisions of such release. Each
Borrower agrees that no fact, event, circumstance, evidence or transaction which
could now be asserted or which may hereafter be discovered shall affect in any
manner the final, absolute and unconditional nature of the release set forth
above. Borrower waives the provisions of California Civil Code section 1542,
which states:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

 

(d)           No Reliance. Each Borrower hereby acknowledges and confirms to
Agent and the Lender that such Borrower is executing this Amendment on the basis
of its own investigation and for its own reasons without reliance upon any
agreement, representation, understanding or communication by or on behalf of any
other Person.

 

(e)           Costs and Expenses. Each Borrower agrees to pay to Agent on the
Amendment Effective Date the out-of-pocket costs and expenses of Agent and the
Lenders party hereto, and the fees and disbursements of counsel to Agent and the
Lenders party hereto (including allocated costs of internal counsel), in
connection with the negotiation, preparation, execution and delivery of this
Amendment and any other documents to be delivered in connection herewith on the
Amendment Effective Date or after such date.

 

(f)            Binding Effect. This Amendment binds and is for the benefit of
the successors and permitted assigns of each party.

 

(g)           Governing Law. This Agreement and the other Loan Documents shall
be governed by, and construed and enforced in accordance with, the laws of the
State of California, excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.

 

(h)           Complete Agreement; Amendments. This Amendment and the Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements with respect to such subject matter. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Amendment and the Loan
Documents merge into this Amendment and the Loan Documents.

 

(i)            Severability of Provisions. Each provision of this Amendment is
severable from every other provision in determining the enforceability of any
provision.

 

(j)            Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Amendment. Delivery of an executed counterpart of a signature page of this
Amendment by facsimile, portable document format (.pdf) or other electronic
transmission will be as effective as delivery of a manually executed counterpart
hereof.

 

(k)           Loan Documents. This Amendment shall constitute a Loan Document.

 

[Balance of Page Intentionally Left Blank; Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of
the date first above written.

 

  BORROWERS:       FuelCell Energy, Inc.       Signature: /s/ Michael S. Bishop
        Print Name:   Michael S. Bishop         Title: Senior Vice President &
Chief Financial Officer               Versa Power Systems, Inc.       Signature:
/s/ Michael S. Bishop         Print Name: Michael S. Bishop         Title:
Senior Vice President & Chief Financial Officer               Versa Power
Systems Ltd.       Signature: /s/ Michael S. Bishop         Print Name: Michael
S. Bishop         Title: Senior Vice President & Chief Financial Officer

 

 

[Signature Page to Fourth Amendment to Loan and Security Agreement]

 

 

 

  AGENT:       HERCULES CAPITAL, INC.       Signature: /s/ Jennifer Choe        
Print Name:   Jennifer Choe         Title: Assistant General Counsel            
  LENDER:       HERCULES FUNDING II, LLC       Signature: /s/ Jennifer Choe    
    Print Name: Jennifer Choe         Title: Assistant General Counsel

 

 

[Signature Page to Fourth Amendment to Loan and Security Agreement]

 

 

 

Exhibit A

 

Underwriting Agreement

 

30,680 Shares of Series D Convertible Preferred Stock

 

par value $0.01

 

FUELCELL ENERGY, INC.

UNDERWRITING AGREEMENT

 

August 27, 2018

 

Oppenheimer & Co. Inc.

85 Broad Street

New York, NY 10004

 

Dear Sirs:

 

1.       Introduction. FuelCell Energy, Inc., a Delaware corporation (the
“Company”), proposes to issue and sell to the Underwriter (defined below),
pursuant to the terms and conditions of this Underwriting Agreement (this
“Agreement”), an aggregate of 30,680 shares of its Series D Convertible
Preferred Stock, $0.01 par value per share (the “Securities”). The shares of the
common stock (the “Common Stock”) underlying the Securities are hereinafter
referred to as the “Conversion Securities.” The Company hereby confirms that
Oppenheimer & Co. Inc. (“OpCo” or the “Underwriter”) acted as the sole
Underwriter in accordance with the terms and conditions hereof. The offering and
sale of the Securities is hereinafter referred to as the “Offering.”

 

2.       Delivery and Payment. On the basis of the representations, warranties
and agreements of the Company herein contained, and subject to the terms and
conditions set forth in this Agreement:

 

2.1       The Company agrees to issue and sell and the Underwriter agrees to
purchase from the Company an aggregate of 30,680 shares of Series D Convertible
Preferred Stock at a purchase price of $838.2497 per share (the “Purchase
Price”), which represents an underwriting discount of 4.75 percent to the Public
Offering Price (defined below). The Company has been advised by you that you
propose to make a public offering of the Securities as soon after this Agreement
has become effective as in your judgment is advisable. The Company is further
advised by you that the Securities are to be offered to the public initially at
$880.0522 per share of Series D Convertible Preferred Stock (“Public Offering
Price”).

 

2.2       Payment of the Purchase Price for, and delivery of, the Securities
shall be made at the time and date of closing and delivery of the documents
required to be delivered to the Underwriter pursuant to Sections 4 and 6 hereof
and shall be at 10:00 A.M., New York time, on August 29, 2018 (the “Closing
Date”) at the office of Foley & Lardner LLP, 111 Huntington Avenue, Suite 2500,
Boston MA 02199 or at such other time and date as the Underwriter and the
Company determine pursuant to Rule 15c6-1(a) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). The Company shall deliver the
Securities, which shall be registered in the name or names and shall be in such
denominations as the Underwriter may request at least one (1) business day
before the Closing Date, to the Underwriter. The Company shall make
certificates, if any,for the Securities available to the Underwriter for
examination in New York, New York at least one (1) full business day prior to
the Closing Date. The Securities shall be delivered on the Closing Date for the
account of the Underwriter, with any transfer taxes payable in connection with
the transfer of the Securities to the Underwriter duly paid, against payment of
the Purchase Price therefor.

 

 

 

2.3       Prior to the Closing Date, the Company shall not, without the prior
written consent of the Underwriter, solicit or accept offers to purchase shares
of the Series D Convertible Preferred Stock, the Common Stock or securities
convertible into, exchangeable or exercisable for, shares of the Series D
Convertible Preferred Stock or Common Stock (other than pursuant to the exercise
of options or warrants to purchase shares of Common Stock that are outstanding
as of the date hereof) other than through the Underwriter in accordance
herewith.

 

2.4       No Securities which the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or sold by the
Company, until such Securities shall have been delivered to the Underwriter
thereof against payment by the Underwriter. If the Company shall default in its
obligations to deliver any Securities to the Underwriter, the Company shall
indemnify and hold the Underwriter harmless against any loss, claim, damage or
expense arising from or as a result of such default by the Company in accordance
with the procedures set forth in Section 7(c) herein.

 

3.       Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter, as of the date hereof and as of the Closing
Date, and agrees with the Underwriter that:

 

(a)       The Company has prepared and filed in conformity with the requirements
of the Securities Act of 1933, as amended (the “Securities Act”), and published
rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”) a “shelf” Registration
Statement (as hereinafter defined) on Form S-3 (File No. 333-226792), which
became effective as of August 21, 2018 (the “Effective Date”), including a base
prospectus relating to the Securities (the “Base Prospectus”), and such
amendments and supplements thereto as may have been required up to the date of
this Agreement. The term “Registration Statement” as used in this Agreement
means the registration statement (including all exhibits, financial schedules
and all documents and information deemed to be a part of the Registration
Statement pursuant to Rule 430B of the Rules and Regulations), as amended and/or
supplemented to the date of this Agreement, including the Base Prospectus. The
Registration Statement is effective under the Securities Act and no stop order
preventing or suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus has been issued by the
Commission and no proceedings for that purpose have been instituted or, to the
Company’s knowledge, are threatened by the Commission. The Company, if required
by the Rules and Regulations of the Commission, will file the Prospectus (as
defined below), with the Commission pursuant to Rule 424(b) of the Rules and
Regulations. The term “Prospectus” as used in this Agreement means the
Prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations as of August 27, 2018, except that if any revised
prospectus or prospectus supplement shall be provided to the Underwriter by the
Company for use in connection with the Offering which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations), the term “Prospectus” shall refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Underwriter for such use (or in the form first made available to
the Underwriter by the Company to meet requests of prospective purchasers
pursuant to Rule 173 under the Securities Act). Any reference herein to the
Registration Statement or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), on or before the last to occur of the Effective Date or the
date of the Prospectus, and any reference herein to the terms “amend,”
“amendment,” or “supplement” with respect to the Registration Statement or the
Prospectus shall be deemed to refer to and include (i) the filing of any
document under the Exchange Act after the Effective Date or the date of the
Prospectus, as the case may be, which is incorporated by reference and (ii) any
such document so filed. If the Company has filed an abbreviated registration
statement to register additional securities pursuant to Rule 462(b) under the
Rules and Regulations (the “462(b) Registration Statement”), then any reference
herein to the Registration Statement shall also be deemed to include such 462(b)
Registration Statement.

 

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(b)       As of the Applicable Time (as defined below) and as of the Closing
Date, neither (i) any General Use Free Writing Prospectus (as defined below)
issued at or prior to the Applicable Time, and the Prospectus, all considered
together (collectively, the “General Disclosure Package”), (ii) any individual
Limited Use Free Writing Prospectus (as defined below), nor (iii) the bona fide
electronic road show (as defined in Rule 433(h)(5) of the Rules and
Regulations), if any, that has been made available without restriction to any
person, when considered together with the General Disclosure Package, included
or will include, any untrue statement of a material fact or omitted or as of the
Closing Date will omit, to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from any
Issuer Free Writing Prospectus, in reliance upon, and in conformity with,
written information furnished to the Company by the Underwriter specifically for
inclusion therein, which information the parties hereto agree is limited to the
Underwriter’s Information (as defined in Section 16). As used in this paragraph
(b) and elsewhere in this Agreement:

 

“Applicable Time” means 8:30 A.M., New York time, on the date of this Agreement.

 

“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus
that is identified on Schedule A to this Agreement.

 

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“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 of the Rules and Regulations relating to the Securities in
the form filed or required to be filed with the Commission or, if not required
to be filed, in the form retained in the Company’s records pursuant to Rule
433(g) of the Rules and Regulations.

 

“Limited Use Free Writing Prospectuses” means any Issuer Free Writing Prospectus
that is not a General Use Free Writing Prospectus.

 

(c)       No order preventing or suspending the use of any Issuer Free Writing
Prospectus or the Prospectus relating to the Offering has been issued by the
Commission, and no proceeding for that purpose or pursuant to Section 8A of the
Securities Act has been instituted or threatened by the Commission, and the
Prospectus, at the time of filing thereof, conformed in all material respects to
the requirements of the Securities Act and the Rules and Regulations, and did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Prospectus, in reliance upon, and
in conformity with, written information furnished to the Company by the
Underwriter specifically for inclusion therein, which information the parties
hereto agree is limited to the Underwriter’s Information (as defined in Section
16).

 

(d)       At the time the Registration Statement became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement conformed
and will conform in all material respects to the requirements of the Securities
Act and the Rules and Regulations and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; the
Prospectus, at the time the Prospectus was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing
representations and warranties in this paragraph (d) shall not apply to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Underwriter specifically for inclusion therein,
which information the parties hereto agree is limited to the Underwriter’s
Information (as defined in Section 16).

 

(e)       Each Issuer Free Writing Prospectus, if any, as of its issue date and
at all subsequent times through the completion of the public offer and sale of
the Securities or until any earlier date that the Company notified or notifies
the Underwriter as described in Section 4(e), did not, does not and will not
include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement or the Prospectus, including
any document incorporated by reference therein and any prospectus supplement
deemed to be a part thereof that has not been superseded or modified, or include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing sentence does not apply to statements in or omissions from any Issuer
Free Writing Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriter specifically for
inclusion therein, which information the parties hereto agree is limited to the
Underwriter’s Information (as defined in Section 16).

 

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(f)       The documents incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder and none of such documents contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the case may be,
will conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

(g)       (i) At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the
Securities and (ii) at the date hereof, the Company was not and is not an
“ineligible issuer,” as defined in Rule 405 under the Securities Act. The
Company has not, directly or indirectly, distributed and will not distribute any
offering material in connection with the Offering other than the Prospectus and
other materials, if any, permitted under the Securities Act and consistent with
Section 4(b) below. The Company will file with the Commission all Issuer Free
Writing Prospectuses (other than a “road show,” as described in Rule 433(d)(8)
of the Rules and Regulations), if any, in the time and manner required under
Rules 163(b)(2) and 433(d) of the Rules and Regulations.

 

(h)       The Company and each of its subsidiaries (as defined in Section 14)
have been duly organized and are validly existing as corporations or other legal
entities in good standing (or the foreign equivalent thereof) under the laws of
their respective jurisdictions of organization. The Company and each of its
subsidiaries are duly qualified to do business and are in good standing as
foreign corporations or other legal entities in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification and have all power and authority
(corporate or other) necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to so
qualify or have such power or authority would not (i) have, singly or in the
aggregate, a material adverse effect on the condition (financial or otherwise),
results of operations, assets, properties, business or prospects of the Company
and its subsidiaries taken as a whole, or (ii) impair in any material respect
the ability of the Company to perform its obligations under this Agreement or to
consummate any transactions contemplated by this Agreement, the General
Disclosure Package or the Prospectus (any such effect as described in clauses
(i) or (ii), a “Material Adverse Effect”). The Company owns or controls,
directly or indirectly, only the corporations, partnerships, limited liability
partnerships, limited liability companies, associations or other entities
included on Annex A hereto.

 

5

 

(i)       The Company has the full right, power and authority to enter into this
Agreement, and to perform and to discharge its obligations hereunder; and this
Agreement has been duly authorized, executed and delivered by the Company, and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as rights to indemnify
hereunder may be limited by federal or state securities laws and except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.

 

(j)       The Securities have been duly authorized and, upon the filing of the
Certificate of Designation (as defined below) with the Secretary of State of
Delaware and when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Securities will not be subject to any preemptive or similar
rights, except such rights as have been waived or satisfied and subject to the
conditions described in the last sentence of this paragraph (j). All necessary
corporate action has been duly and validly taken by the Company to authorize the
issuance and delivery of the Conversion Securities by the Company, other than
the approval of the Company’s stockholders to issue a number of Conversion
Securities in excess of 19.9% of the number of shares of Common Stock
outstanding as of the issuance of the Securities. The Conversion Securities,
when issued, paid for and delivered as provided for in the Certificate of
Designation will be duly authorized and validly issued, fully paid and
nonassessable, will be issued in compliance with all applicable securities laws,
and will be free of preemptive, registration or similar rights. The Conversion
Securities have been reserved for issuance. The Securities and Conversion
Securities, when issued, will conform in all material respects to the
descriptions thereof set forth in the Prospectus or the General Disclosure
Package. The Company has received a written waiver from POSCO Energy Co., Ltd.
(“POSCO”) of its participation rights under that certain Securities Purchase
Agreement, dated as of June 9, 2009, by and between the Company and POSCO
(formerly known as POSCO Power), and that certain Securities Purchase Agreement,
dated as of April 30, 2012, between the Company and POSCO (“POSCO Securities
Purchase Agreements”), with such waiver being subject to the removal of the
restrictive legend from POSCO’s shares of the Company’s common stock and the
transfer of such shares to a brokerage account designated by POSCO, and, in
connection with this Offering, the Company and Hercules Capital, Inc.
(“Hercules”) have agreed to amend certain terms of that certain Loan and
Security Agreement between Hercules and the Company, dated April 14, 2016 and
previously amended as of September 5, 2017, October 27, 2017 and March 28, 2018
(“Hercules Loan and Security Agreement”), with such amendment to be effective
upon the delivery by the Company to Hercules of a final, executed copy of this
Agreement and the Certificate of Designation (as defined below).

 

6

 

(k)       The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable, have been
issued in compliance with federal and state securities laws, and conform to the
description thereof contained in the General Disclosure Package and the
Prospectus.  As of July 31, 2018, there were (i) 92,280,169 shares of Common
Stock, par value $0.0001, issued and outstanding, (ii) 64,020 shares of Series B
Cumulative Convertible Perpetual Preferred Stock issued and outstanding,
convertible into 454,043 shares of Common Stock, (iii) 11,681 shares of the
Series C Convertible Preferred Stock issued and outstanding, convertible into
6,348,401 shares of Common Stock, (iv) 1,000,000 shares of the Company’s
subsidiary, FuelCell Energy, Ltd.’s, Class A Cumulative Redeemable Exchangeable
Preferred Shares (also referred to as Series 1 preferred shares), issued and
outstanding, which would require 15,168 shares of the Company’s Common Stock to
settle the outstanding principal and accrued and unpaid dividends, and (v)
 22,854,641 shares of Common Stock issuable upon the exercise of all other
options, warrants and convertible securities outstanding as of such date,
excluding any shares that could be used to satisfy interest amounts due on
convertible securities if not paid in cash. Since such date, the Company has not
issued any securities, other than (i) Common Stock of the Company issued
pursuant to the exercise of stock options outstanding under the Company’s stock
plans, (ii) the issuance of options, restricted Common Stock or other equity
awards under the Company’s stock plans, (iii) Common Stock of the Company issued
upon vesting of restricted stock units outstanding under the Company’s stock
plans, (iv) Common Stock issued pursuant to the Sales Agreement, dated June 13,
2018, among the Company, B. Riley FBR, Inc. and OpCo, and/or (v) Common Stock
issued upon conversion or redemption of the Series C Convertible Preferred Stock
of the Company.  All of the stock options, warrants and other rights to purchase
or exchange any securities for shares of the Company’s capital stock have been
duly authorized and validly issued, and were issued in compliance with U.S.
federal and state securities laws, except as set forth in the “Description of
Capital Stock” section in the Prospectus.  None of the outstanding shares of
Common Stock was issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities of the
Company.  There are no authorized or outstanding shares of capital stock,
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its subsidiaries
other than those described above or accurately described in the General
Disclosure Package.  The description of the Company’s stock option, stock bonus
and other stock plans or arrangements, and the stock options or other rights
granted thereunder, as described in the General Disclosure Package and the
Prospectus, accurately and fairly present the information required to be shown
with respect to such plans, arrangements, stock options and rights.

 

7

 

(l)       All the outstanding shares of capital stock or other equity interests
of each subsidiary of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and, except to the extent set forth in the
General Disclosure Package or the Prospectus, are owned by the Company directly
or indirectly through one or more wholly-owned subsidiaries, free and clear of
any claim, lien, encumbrance, security interest, restriction upon voting or
transfer or any other claim of any third party.

 

(m)       The execution, delivery and performance of this Agreement by the
Company, the issuance and sale of the Securities and Conversion Securities by
the Company and the consummation of the transactions contemplated hereby and
thereby will not (with or without notice or lapse of time or both) (i) conflict
with or result in a breach or violation of any of the terms or provisions of,
constitute a default or Debt Repayment Triggering Event (as defined below)
under, give rise to any right of termination or other right or the cancellation
or acceleration of any right or obligation or loss of a benefit under, or give
rise to the creation or imposition of any lien, encumbrance, security interest,
claim or charge upon any property or assets of the Company or any subsidiary
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter or
by-laws (or analogous governing instruments, as applicable) of the Company or
any of its subsidiaries or (iii) result in any violation of any law, statute,
rule, regulation, judgment, order or decree of any court or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets, except with respect to
clauses (i) and (iii) above, to the extent any such conflict, breach or
violation has been waived (or, in the case of the Hercules Loan and Security
Agreement, will be addressed in an amendment thereto, with such amendment to be
effective upon the delivery by the Company to Hercules of a final, executed copy
of this Agreement and the Certificate of Designation (as defined below)) or
would not result in a Material Adverse Effect and except, in each case (other
than with respect to the Hercules Loan and Security Agreement and the amendment
thereto), as set forth in the Prospectus. A “Debt Repayment Triggering Event”
means any event or condition that gives, or with the giving of notice or lapse
of time would give the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any of its subsidiaries.

 

(n)       No consent, approval, authorization or order of, or filing,
qualification or registration with, any court or governmental agency or body,
foreign or domestic, which has not been made, obtained or taken and is not in
full force and effect, is required for the execution, delivery and performance
of this Agreement by the Company, the offer or sale of the Securities or the
consummation of the transactions contemplated hereby or thereby, except for the
registration of the Common Stock under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws, the Financial
Industry Regulatory Authority (“FINRA”) and the NASDAQ Global Market (the
“NASDAQ GM”) in connection with the Offering by the Company, and the listing of
the Conversion Securities on the NASDAQ GM.

 

8

 

(o)       KPMG LLP, who has certified certain financial statements and related
schedules included or incorporated by reference in the Registration Statement,
the General Disclosure Package and the Prospectus, and have audited the
Company’s internal control over financial reporting and management’s assessment
thereof, is an independent registered public accounting firm as required by the
Securities Act and the Rules and Regulations and the Public Company Accounting
Oversight Board (United States) (the “PCAOB”). Except as pre-approved in
accordance with the requirements set forth in Section 10A of the Exchange Act,
KPMG LLP has not been engaged by the Company to perform any “prohibited
activities” (as defined in Section 10A of the Exchange Act).

 

(p)       The financial statements, together with the related notes and
schedules, included or incorporated by reference in the General Disclosure
Package, the Prospectus and in the Registration Statement fairly present the
financial position and the results of operations and changes in stockholders’
equity and cash flows of the Company and its consolidated subsidiaries and other
consolidated entities at the respective dates or for the respective periods
therein specified. Such statements and related notes and schedules have been
prepared in accordance with generally accepted accounting principles in the
United States (“GAAP”) applied on a consistent basis throughout the periods
involved except as may be set forth in the related notes included or
incorporated by reference in the General Disclosure Package. The financial
statements, together with the related notes and schedules, included or
incorporated by reference in the General Disclosure Package and the Prospectus
comply in all material respects with the Securities Act, the Exchange Act, and
the Rules and Regulations and the rules and regulations under the Exchange Act.
No other financial statements or supporting schedules or exhibits are required
by the Securities Act or the Rules and Regulations to be described, or included
or incorporated by reference in the Registration Statement, the General
Disclosure Package or the Prospectus. There is no pro forma or as adjusted
financial information which is required to be included in the Registration
Statement, the General Disclosure Package, or the Prospectus or a document
incorporated by reference therein in accordance with the Securities Act and the
Rules and Regulations which has not been included or incorporated as so
required.

 

(q)       Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements included or incorporated by
reference in the General Disclosure Package, any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the General
Disclosure Package; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any of its subsidiaries or any
material adverse changes, or any development involving a prospective material
adverse change, in or affecting the business, assets, general affairs,
management, financial position, prospects, stockholders’ equity or results of
operations of the Company and its subsidiaries taken as a whole, otherwise than
as set forth or contemplated in the General Disclosure Package.

 

9

 

(r)       There are no legal or governmental actions, suits, claims or
proceedings pending or, to the Company’s knowledge, threatened or contemplated
to which the Company or any of its subsidiaries is or would be a party or of
which any of their respective properties is or would be subject at law or in
equity, before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency, or before or by any
self-regulatory organization or other non-governmental regulatory authority
which are required to be described in the Registration Statement, the General
Disclosure Package or the Prospectus or a document incorporated by reference
therein and are not so described therein, or which, singly or in the aggregate,
if resolved adversely to the Company or such subsidiary, would reasonably be
likely to result in a Material Adverse Effect or prevent or materially and
adversely affect the ability of the Company to consummate the transactions
contemplated hereby. To the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by other
third parties except as set forth in the Registration Statement or the
Prospectus.

 

(s)       Neither the Company nor any of its subsidiaries is in (i) violation of
its charter or by-laws (or analogous governing instrument, as applicable), (ii)
default in any respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant, obligation, agreement or condition contained
in any indenture, mortgage, deed of trust, bank loan or credit agreement, other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which it is a party or by which the Company or its subsidiaries
are bound or to which any of its property or assets is subject or (iii)
violation in any respect of any statute, law, ordinance, governmental rule,
regulation, ordinance, or court order, decree or judgment to which it or its
property or assets may be subject except, in the case of clauses (ii) and (iii)
of this paragraph (s), for any violations or defaults which would not, singly or
in the aggregate, have a Material Adverse Effect or which are described in the
Registration Statement or the Prospectus.

 

(t)       The Company and each of its subsidiaries have made all material
filings, applications and submissions required by, and own or possess all
material approvals, licenses, certificates, certifications, clearances,
consents, exemptions, marks, notifications, orders, authorizations and permits
issued by, and have made all material declarations and filings with, the
appropriate local, state, federal or foreign regulatory agencies or bodies that
are necessary or desirable for the ownership of their respective properties or
the conduct of their respective businesses as described in the General
Disclosure Package and the Prospectus (collectively, the “Governmental Permits”)
and is in compliance in all material respects with the terms and conditions of
all such Governmental Permits, except where any failures to possess or make the
same would not, singly or in the aggregate, have a Material Adverse Effect. All
such Governmental Permits are valid and in full force and effect. All such
Governmental Permits are free and clear of any restriction or condition that are
in addition to, or materially different from those normally applicable to
similar licenses, certificates, authorizations and permits. Neither the Company
nor any of its subsidiaries has received any notice of any proceedings relating
to revocation or modification of, any such Governmental Permit, which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect. Except as may be
required under the Securities Act and state and foreign Blue Sky laws and the
rules and regulations of FINRA, no other Governmental Permits are required for
the Company or any of its subsidiaries to enter into, deliver and perform this
Agreement and to issue and sell the Securities to be issued and sold by the
Company hereunder.

 

10

 

(u)       Neither the Company nor any of its subsidiaries is or, after giving
effect to the Offering and the application of the proceeds thereof as described
in the General Disclosure Package and the Prospectus, will be (i) required to
register as an “investment company” as defined in the Investment Company Act of
1940, as amended (the “Investment Company Act”), and the rules and regulations
of the Commission thereunder or (ii) a “business development company” (as
defined in Section 2(a)(48) of the Investment Company Act).

 

(v)       Neither the Company, its subsidiaries nor, to the Company’s knowledge,
any of the Company’s or its subsidiaries’ officers, directors or affiliates has
taken or will take, directly or indirectly, any action designed or intended to
stabilize or manipulate the price of any security of the Company, or which
caused or resulted in, or which could in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company.

 

(w)       The Company and each of its subsidiaries owns or possesses the right
to use all patents, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, licenses, inventions, software,
databases, know-how, Internet domain names, trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures, and other intellectual property (collectively, “Intellectual
Property”) necessary to carry on their respective businesses as currently
conducted, and as proposed to be conducted and described in the General
Disclosure Package and the Prospectus, and the Company is not aware of any claim
to the contrary or any challenge by any other person to the rights of the
Company and its subsidiaries with respect to the foregoing except for those that
would not reasonably be expected to have a Material Adverse Effect. The Company
and each of its subsidiaries has complied in all material respects with, and is
not in breach nor has received any asserted or threatened claim of breach of,
any Intellectual Property license, and the Company has no knowledge of any
breach or anticipated breach by any other person to any Intellectual Property
license. To the Company’s knowledge, the Company’s and each of its subsidiaries’
businesses as now conducted and as proposed to be conducted do not and will not
infringe or conflict with any valid and enforceable patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses or other Intellectual
Property or franchise right of any person. Neither the Company nor any of its
subsidiaries has received notice of any claim against the Company or any of its
subsidiaries alleging the infringement by the Company or any of its subsidiaries
of any patent, trademark, service mark, trade name, copyright, trade secret,
license in or other intellectual property right or franchise right of any
person. The Company and each of its subsidiaries has taken all reasonable steps
to protect, maintain and safeguard its rights in all Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this Agreement
will not result in the loss or impairment of or payment of any additional
amounts with respect to, nor require the consent of any other person in respect
of, the Company’s or any of its subsidiaries’ right to own, use, or hold for use
any of the Intellectual Property as owned, used or held for use in the conduct
of the businesses as currently conducted. The Company and each of its
subsidiaries has at all times complied in all material respects with all
applicable laws relating to privacy, data protection, and the collection and use
of personal information collected, used, or held for use by the Company and any
of its subsidiaries in the conduct of the Company’s and its subsidiaries
businesses. No claims have been asserted or threatened against the Company or
any of its subsidiaries alleging a violation of any person’s privacy or personal
information or data rights and, to the knowledge of the Company, the
consummation of the transactions contemplated hereby will not breach or
otherwise cause any violation of any law related to privacy, data protection, or
the collection and use of personal information collected, used, or held for use
by the Company or any of its subsidiaries in the conduct of the Company’s or any
of its subsidiaries’ businesses. The Company and each of its subsidiaries takes
reasonable measures to ensure that such information is protected against
unauthorized access, use, modification, or other misuse.

 

11

 

(x)       The Company and each of its subsidiaries have good, valid and
marketable title in fee simple to, or have valid rights to lease or otherwise
use, all items of real or personal property which are material to the business
of the Company and its subsidiaries taken as a whole, in each case free and
clear of all liens, encumbrances, security interests, claims and defects that do
not, singly or in the aggregate, materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company or any of its subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries holds
properties described in the General Disclosure Package and the Prospectus, are
in full force and effect, and neither the Company nor any subsidiary has
received any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the rights of
the Company or such subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.

 

(y)       No labor disturbance or dispute with the employees of the Company or
any of the Company’s subsidiaries exists, or, to the Company’s knowledge, is
threatened or imminent, which would reasonably be expected to result in a
Material Adverse Effect. The Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or its subsidiaries’ principal
suppliers, manufacturers, customers or contractors, that singly or in the
aggregate, might be expected to have a Material Adverse Effect. The Company is
not aware that any key employee or significant group of employees of the Company
or any of the Company’s subsidiaries plans to terminate employment with the
Company or any of the Company’s subsidiaries. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practice; except for matters which
would not, singly or in the aggregate, result in a Material Adverse Effect, (i)
there is (A) no unfair labor practice complaint pending or, to the Company’s
knowledge, threatened against the Company or any of its subsidiaries before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending or to the
Company’s knowledge, threatened, (B) no strike, labor dispute, slowdown or
stoppage pending or, to the Company’s knowledge, threatened against the Company
or any of its subsidiaries and (C) no union representation dispute currently
existing concerning the employees of the Company or any of its subsidiaries and
(ii) to the Company’s knowledge, no union organizing activities are currently
taking place concerning the employees of the Company or any of its subsidiaries.

 

12

 

(z)       No “prohibited transaction” (as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder (“ERISA”), or Section 4975 of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”)) has
occurred or could reasonably be expected to occur with respect to any employee
benefit plan of the Company or any of its subsidiaries which could, singly or in
the aggregate, have a Material Adverse Effect. Each employee benefit plan of the
Company or any of its subsidiaries is in compliance in all material respects
with applicable law, including ERISA and the Code. For purposes of this section,
an “employee benefit plan” and an “employee pension benefit plan” are as defined
in ERISA section 3(2), and an employee welfare benefit plan as defined in ERISA
section 3(1). The Company and its subsidiaries have not incurred and could not
reasonably be expected to incur liability under Title IV of ERISA with respect
to the termination of, or withdrawal from, any pension plan (as defined in
ERISA). Each pension plan for which the Company or any of its subsidiaries would
have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified, and, to the knowledge of the Company, nothing has
occurred, whether by action or by failure to act, which could, singly or in the
aggregate, cause the loss of such qualification.

 

(aa) The Company and its subsidiaries are and have been in compliance with all
foreign, federal, state and local statutes, laws (including the common law),
ordinances, rules, regulations, orders, judgments, decrees or Governmental
Permits, relating to the use, treatment, storage and disposal of hazardous or
toxic substances, materials or wastes or the protection of health and safety or
the environment which are applicable to their businesses (“Environmental Laws”),
except where the failure to comply would not, singly or in the aggregate, have a
Material Adverse Effect. There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other release of any kind
of hazardous or toxic substances, materials or wastes by, due to, or caused by
the Company or any of its subsidiaries (or, to the Company’s knowledge, any
other entity for whose acts or omissions the Company or any of its subsidiaries
is or may otherwise be liable) upon any of the property now or previously owned,
leased or operated by the Company or any of its subsidiaries, or upon any other
property, in violation of, or which would give rise to any liability under, any
Environmental Law, except for any violation or liability which would not have,
singly or in the aggregate with all such violations and liabilities, a Material
Adverse Effect; and there has been no disposal, discharge, emission or other
release of any kind onto such property or into the environment surrounding such
property of any hazardous or toxic substances, materials or wastes with respect
to which the Company has knowledge, except for any such disposal, discharge,
emission, or other release of any kind which would not have, singly or in the
aggregate with all such discharges and other releases, a Material Adverse
Effect. In the ordinary course of business, the Company and its subsidiaries
conduct reviews of the effect of Environmental Laws on their businesses and
assets, as part of which they identify and evaluate associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws and Governmental Permits issued thereunder, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such reviews, the Company and its subsidiaries have
reasonably concluded that such associated costs and liabilities would not have,
singly or in the aggregate, a Material Adverse Effect.

 

13

 

(bb) The Company and its subsidiaries are in compliance in all respects with all
applicable provisions of the Occupational Safety and Health Act of 1970, as
amended, including all applicable regulations thereunder, except for such
noncompliance as would not, singly or in the aggregate, have a Material Adverse
Effect.

 

(cc) The Company and each of its subsidiaries (i) has timely filed all necessary
federal, state, local and foreign tax returns (or timely filed applicable
extensions therefor) that have been required to be filed, and all such returns
were true, complete and correct, (ii) has paid all federal, state, local and
foreign taxes, assessments, governmental or other charges that are due and
payable for which it is liable, including, without limitation, all sales and use
taxes and all taxes which the Company or any of its subsidiaries is obligated to
withhold from amounts owing to employees, creditors and third parties, except
for any such taxes, assessments, governmental or other charges that are being
contested in good faith and by appropriate procedures, and (iii) does not have
any tax deficiency or claims outstanding or assessed or, to the Company’s
knowledge, proposed against it, except those, in each of the cases described in
clauses (i), (ii) and (iii) of this paragraph (cc), that would not, singly or in
the aggregate, have a Material Adverse Effect. Neither the Company nor any of
its subsidiaries has engaged in any transaction which is a corporate tax shelter
or which could be characterized as such by the Internal Revenue Service or any
other taxing authority. The accruals and reserves on the books and records of
the Company and its subsidiaries in respect of tax liabilities for any taxable
period not yet finally determined are adequate to meet any assessments and
related liabilities for any such period, and in the last three years, neither
the Company nor any of its subsidiaries has incurred any liability for taxes
other than in the ordinary course.

 

(dd) The Company and each of its subsidiaries maintains or is covered by
insurance provided by recognized, financially sound and reputable institutions
with insurance policies in such amounts and covering such risks as is adequate
for the conduct of its business and the value of its properties and as is
customary for companies engaged in similar businesses in similar industries. All
such insurance is fully in force on the date hereof and will be fully in force
as of the Closing Date. The Company has no reason to believe that it and its
subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries has
been denied any material insurance policy or coverage for which it has applied.
Neither the Company nor any of its subsidiaries insures risk of loss through any
captive insurance, risk retention group, reciprocal group or by means of any
fund or pool of assets specifically set aside for contingent liabilities other
than as described in the General Disclosure Package.

 

14

 

(ee) The Company and each of its subsidiaries maintains a system of internal
accounting and other controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as described in the General Disclosure Package, since the
end of the Company’s most recent audited fiscal year, there has been (A) no
material weakness in the Company’s internal control over financial reporting
(whether or not remediated) and (B) no change in the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.

 

(ff) The Company has established, maintains and evaluates “disclosure controls
and procedures” (as such term is defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act), which (i) are designed to ensure that material information
relating to the Company and its subsidiaries is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared, (ii) have been evaluated for
effectiveness as of the end of the last fiscal period covered by the
Registration Statement, and (iii) such disclosure controls and procedures are
effective to perform the functions for which they were established. There are no
significant deficiencies or material weaknesses in the design or operation of
internal controls which could adversely affect the Company’s ability to record,
process, summarize, or report financial data to management and the Board of
Directors of the Company. The Company is not aware of any fraud, whether or not
material, that involves management or other employees who have a role in the
Company’s internal controls; and since the date of the most recent evaluation of
such disclosure controls and procedures, there have been no significant changes
in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses. Except as set forth in the General
Disclosure Package, the Audit Committee of the Board of Directors of the Company
(the “Audit Committee”) is not reviewing or investigating, and neither the
Company’s independent auditors nor its internal auditors have recommended that
the Audit Committee review or investigate, (i) adding to, deleting, changing the
application of or changing the Company’s disclosure with respect to, any of the
Company’s material accounting policies, (ii) any manner which could result in a
restatement of the Company’s financial statements for any annual or interim
period during the current or prior three fiscal years, or (iii) a significant
deficiency, material weakness, change in internal control over financial
reporting or fraud involving management or other employees who have a
significant role in the internal control over financial reporting.

 

15

 

(gg) Except as described in the General Disclosure Package and the Prospectus,
there are no material off-balance sheet transactions (including, without
limitation, transactions related to, and the existence of, “variable interest
entities” within the meaning of Financial Accounting Standards Board
Interpretation No. 46), arrangements, obligations (including contingent
obligations), or any other relationships with unconsolidated entities or other
persons, that may have a material current or future effect on the Company’s
financial condition, changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or significant components of
revenues or expenses.

 

(hh) The Company’s Board of Directors has validly appointed an Audit Committee
whose composition satisfies the requirements of Rule 5605(c)(2) of the NASDAQ
Marketplace Rules and Section 10A-3 of the Exchange Act, and the Board of
Directors and/or the Audit Committee has adopted a charter that satisfies the
requirements of Rule 5605(c)(1) of the NASDAQ Marketplace Rules and Section
10A-3 of the Exchange Act. The Audit Committee has reviewed the adequacy of its
charter within the past twelve months. Neither the Board of Directors nor the
Audit Committee has been informed, nor is any director of the Company aware, of
(i) any significant deficiencies in the design or operation of the Company’s
internal controls that could adversely affect the Company’s ability to record,
process, summarize and report financial data or any material weakness in the
Company’s internal controls; or (ii) any fraud, whether or not material, that
involves management or other employees of the Company who have a significant
role in the Company’s internal controls.

 

(ii)       The minute books of the Company and each of its subsidiaries that
would be a “significant subsidiary” within the meaning of Rule 1-02(w) of
Regulation S-X under the Exchange Act (such a significant subsidiary of the
Company, a “Significant Subsidiary”) have been made available to the Underwriter
and counsel for the Underwriter, and such books (i) contain a complete summary
of all meetings and actions of the board of directors (including each board
committee) and stockholders of the Company (or analogous governing bodies and
interest holders, as applicable), and each of its Significant Subsidiaries since
the time of its respective incorporation or organization through the date of the
latest meeting and action, and (ii) accurately in all material respects reflect
all transactions referred to in such minutes.

 

(jj) There is no franchise, lease, contract, agreement or document required by
the Securities Act or by the Rules and Regulations to be described in the
General Disclosure Package and in the Prospectus or a document incorporated by
reference therein or to be filed as an exhibit to the Registration Statement or
a document incorporated by reference therein which is not described or filed
therein as required; and all descriptions of any such franchises, leases,
contracts, agreements or documents contained in the Registration Statement or in
a document incorporated by reference therein are accurate and complete
descriptions of such documents in all material respects. Other than as described
in the General Disclosure Package, no such franchise, lease, contract or
agreement has been suspended or terminated for convenience or default by the
Company or any of its subsidiaries or any of the other parties thereto, and
neither the Company nor any of its subsidiaries has received notice nor does the
Company have any other knowledge of any such pending or threatened suspension or
termination, except for such pending or threatened suspensions or terminations
that would not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

16

 

(kk) No relationship, direct or indirect, exists between or among the Company
and any of its subsidiaries on the one hand, and the directors, officers,
stockholders (or analogous interest holders), customers or suppliers of the
Company or any of its subsidiaries or any of their affiliates on the other hand,
which is required to be described in the General Disclosure Package and the
Prospectus or a document incorporated by reference therein and which is not so
described.

 

(ll) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company or any of its subsidiaries
because of the filing or effectiveness of the Registration Statement or
otherwise, except for persons and entities who have expressly waived such right
in writing or who have been given timely and proper written notice and have
failed to exercise such right within the time or times required under the terms
and conditions of such right. There are no contracts, agreements or
understandings between the Company or any of its subsidiaries and any person
granting such person the right (other than (i) registration rights granted to
POSCO under the POSCO Securities Purchase Agreements, which have been satisfied
to date and (ii) rights which have been waived in writing in connection with the
transactions contemplated by this Agreement or otherwise satisfied) to require
the Company or any of its subsidiaries to register any securities with the
Commission.

 

(mm) Neither the Company nor any of its subsidiaries owns any “margin
securities” as that term is defined in Regulation U of the Board of Governors of
the Federal Reserve System (the “Federal Reserve Board”), and none of the
proceeds of the sale of any of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Securities to be considered a “purpose credit” within the
meanings of Regulation T, U or X of the Federal Reserve Board.

 

(nn) At the Applicable Time there were, and as of the Closing Date there will
be, no securities of or guaranteed by the Company that are rated by a
“nationally recognized statistical rating organization,” as that term is defined
in Rule 436(g)(2) promulgated under the Act.

 

(oo)       Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person (other than this Agreement)
that would give rise to a valid claim against the Company or the Underwriter for
a brokerage commission, finder’s fee or like payment in connection with the
offering and sale of any of the Securities or any transaction contemplated by
this Agreement, the Registration Statement, the General Disclosure Package or
the Prospectus.

 

17

 

(pp) No forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in either the
General Disclosure Package or the Prospectus has been made or reaffirmed without
a reasonable basis or has been disclosed other than in good faith.

 

(qq) The Company is subject to and in compliance in all material respects with
the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.
The Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act and is listed on the NASDAQ GM, and the Company has taken no action
designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the NASDAQ GM, nor has the Company received any notification that the
Commission, FINRA or the NASDAQ Stock Market LLC is currently contemplating
terminating such registration or listing. The Company has complied in all
material respects with the applicable requirements of the NASDAQ GM for
maintenance of inclusion of the Common Stock thereon. No consent, approval,
authorization or order of, or filing, notification or registration with, the
NASDAQ GM is required for the listing and trading of the shares of Common Stock
on the NASDAQ GM, except for (i) a Notification Form: Listing of Additional
Shares; and (ii) a Notification Form: Change in the Number of Shares
Outstanding.

 

(rr) The Company has filed in a timely manner all reports required to be filed
pursuant to Sections 13(a), 13(e), 14 and 15(d) of the Exchange Act during the
preceding 12 months (except to the extent that Section 15(d) requires reports to
be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act, which shall
be governed by the next clause of this sentence); and the Company has filed in a
timely manner all reports required to be filed pursuant to Sections 13(d) and
13(g) of the Exchange Act since January 1, 2004, except where the failure to
timely file would not reasonably be expected singly or in the aggregate to have
a Material Adverse Effect.

 

(ss) The Company, and to its knowledge, each of the Company’s directors or
officers, in their capacities as such, is, and after giving effect to the
Offering will be, in compliance in all material respects with all applicable
effective provisions of the Sarbanes-Oxley Act of 2002 and any related rules and
regulations promulgated by the Commission thereunder (the “Sarbanes-Oxley Act”).
Each of the principal executive officer and the principal financial officer of
the Company (and each former principal executive officer of the Company and each
former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents
required to be filed by him or her with the Commission. For purposes of the
preceding sentence, “principal executive officer” and “principal financial
officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

(tt) The Company is, and after giving effect to the Offering will be, in
compliance with all applicable corporate governance requirements set forth in
the NASDAQ Marketplace Rules.

 

18

 

(uu) Neither the Company nor any of its subsidiaries nor, to the Company’s
knowledge, any other person associated with or acting on behalf of the Company,
including without limitation any director, officer, agent or employee of the
Company or any of its subsidiaries has, directly or indirectly, while acting on
behalf of the Company or any of its subsidiaries (i) used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity or failed to disclose fully any contribution in
violation of law, (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof, (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

 

(vv) Any statistical, industry-related or market-related data included or
incorporated by reference in the Registration Statement, the Prospectus or the
General Disclosure Package, are based on or derived from sources that the
Company reasonably and in good faith believes to be reliable and accurate, and
such data agree with the sources from which they are derived.

 

(ww) Neither the Company nor any subsidiary nor any of their affiliates (within
the meaning of FINRA’s NASD Conduct Rule 2720(f)(1)) directly or indirectly
controls, is controlled by, or is under common control with, or is an associated
person (within the meaning of Article I, Section 1(ee) of the By-laws of FINRA)
of, any member firm of FINRA.

 

(xx)       The operations of the Company and its subsidiaries are and have been
conducted at all times in compliance in all material respects with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the USA PATRIOT Act, applicable
money laundering statutes of all jurisdictions and the applicable rules, related
rules and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Money Laundering Laws is pending, or to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries.

 

(yy) Neither the Company nor any of its subsidiaries nor, to the Company’s
knowledge, any director, officer, agent, employee or affiliate of the Company or
any of its subsidiaries is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”); and the Company will not directly or indirectly use the proceeds of
the Offering, or lend, contribute or otherwise make available such proceeds to
any subsidiary, joint venture partner or other person or entity, which, to the
Company’s knowledge, will use such proceeds for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by
OFAC.

 

19

 

(zz) No approval of the stockholders of the Company under the rules and
regulations of The NASDAQ Stock Market (including Rule 5635 of the NASDAQ
Marketplace Rules) is required for the Company to issue and deliver to the
Underwriter the Securities.

 

(aaa) Neither the Company nor its subsidiaries are subject to regulation as a
“public utility”, “public service company”, “holding company” or similar
designation by any governmental or regulatory authority, including under the
Federal Power Act, as amended or any applicable state utility laws; and the
Company and its subsidiaries are not required to file with any applicable state
or local commissions, governmental authorities or regulatory bodies that
regulate utilities any forms, statements, reports, registrations or documents
under such applicable state or local laws to which the Company or its
subsidiaries are subject.

 

Any certificate signed by or on behalf of the Company and delivered to the
Underwriter or to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.

 

4.       Further Agreements of the Company. The Company agrees with the
Underwriter:

 

(a)       Subject to the Rules and Regulations, to prepare the Rule 462(b)
Registration Statement, if necessary, in a form approved by the Underwriter and
file such Rule 462(b) Registration Statement with the Commission on the date
hereof; to prepare the Prospectus in a form approved by the Underwriter
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rules 430A, 430B and 430C of the Rules and
Regulations and to file such Prospectus pursuant to Rule 424(b) of the Rules and
Regulations not later than the second (2nd) business day following the execution
and delivery of this Agreement or, if applicable, such earlier time as may be
required by Rule 430A of the Rules and Regulations; to notify the Underwriter
immediately of the Company’s intention to file or prepare any supplement or
amendment to the Registration Statement or to the Prospectus in connection with
this Offering and to make no amendment or supplement to the Registration
Statement, the General Disclosure Package or to the Prospectus to which the
Underwriter shall reasonably object by notice to the Company after a reasonable
period to review; to advise the Underwriter, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the General Disclosure Package
or the Prospectus or any amended Prospectus has been filed and to furnish the
Underwriter copies thereof; to file promptly all material required to be filed
by the Company with the Commission pursuant to Rule 433(d) or 163(b)(2), as the
case may be, of the Rules and Regulations; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus (or in lieu thereof, the notice referred to in Rule
173(a) of the Rules and Regulations) is required for sale of the Securities; to
advise the Underwriter, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Issuer Free Writing Prospectus or the Prospectus, of
the suspension of the qualification of the Securities for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement, the General Disclosure Package or
the Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any Issuer
Free Writing Prospectus or the Prospectus or suspending any such qualification,
and promptly to use its best efforts to obtain the withdrawal of such order.

20

 

(b)       The Company represents and agrees that it has not made, and unless it
obtains the prior consent of the Underwriter, it will not make, any offer
relating to the Securities that would constitute a “free writing prospectus” as
defined in Rule 405 of the Rules and Regulations (each, a “Permitted Free
Writing Prospectus”); provided that the prior written consent of the Underwriter
hereto shall be deemed to have been given in respect of the Issuer Free Writing
Prospectus(es) included in Schedule A hereto. The Company represents that it has
treated and agrees that it will treat each Permitted Free Writing Prospectus as
an Issuer Free Writing Prospectus, comply with the requirements of Rules 164 and
433 of the Rules and Regulations applicable to any Issuer Free Writing
Prospectus, including the requirements relating to timely filing with the
Commission, legending and record keeping and will not take any action that would
result in the Underwriter or the Company being required to file with the
Commission pursuant to Rule 433(d) of the Rules and Regulations a free writing
prospectus prepared by or on behalf of such Underwriter that such Underwriter
otherwise would not have been required to file thereunder.

 

(c)       If at any time when a Prospectus relating to the Securities is
required to be delivered under the Securities Act, any event occurs or condition
exists as a result of which the Prospectus, as then amended or supplemented,
would include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or the Registration
Statement, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading, or if for any other reason it is necessary at
any time to amend or supplement any Registration Statement or the Prospectus to
comply with the Securities Act or the Exchange Act, the Company will promptly
notify the Underwriter, and upon the Underwriter’s request, the Company will
promptly prepare and file with the Commission, at the Company’s expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance
and will deliver to the Underwriter, without charge, such number of copies
thereof as the Underwriter may reasonably request. The Company consents to the
use of the Prospectus or any amendment or supplement thereto by the Underwriter.

 

21

 

(d)       If the General Disclosure Package is being used to solicit offers to
buy the Securities at a time when the Prospectus is not yet available to
prospective purchasers and any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriter, it
becomes necessary to amend or supplement the General Disclosure Package in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or to make the statements therein not conflict
with the information contained or incorporated by reference in the Registration
Statement then on file and not superseded or modified, or if it is necessary at
any time to amend or supplement the General Disclosure Package to comply with
any law, the Company promptly will either (i) prepare, file with the Commission
(if required) and furnish to the Underwriter and any dealers an appropriate
amendment or supplement to the General Disclosure Package or (ii) prepare and
file with the Commission an appropriate filing under the Exchange Act which
shall be incorporated by reference in the General Disclosure Package so that the
General Disclosure Package as so amended or supplemented will not, in the light
of the circumstances under which they were made, be misleading or conflict with
the Registration Statement then on file, or so that the General Disclosure
Package will comply with law.

 

(e)       If at any time following issuance of an Issuer Free Writing Prospectus
there occurred or occurs an event or development as a result of which such
Issuer Free Writing Prospectus conflicted or will conflict with the information
contained in the Registration Statement or Prospectus, including any document
incorporated by reference therein and any prospectus supplement deemed to be a
part thereof and not superseded or modified or included or would include an
untrue statement of a material fact or omitted or would omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, the Company has promptly notified or will promptly notify the
Underwriter so that any use of the Issuer Free Writing Prospectus may cease
until it is amended or supplemented and has promptly amended or will promptly
amend or supplement, at its own expense, such Issuer Free Writing Prospectus to
eliminate or correct such conflict, untrue statement or omission. The foregoing
sentence does not apply to statements in or omissions from any Issuer Free
Writing Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Underwriter specifically for inclusion therein,
which information the parties hereto agree is limited to the Underwriter’s
Information (as defined in Section 16).

 

(f)       To the extent not available on the Commission’s EDGAR system or any
successor system, to furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally filed with
the Commission, and of each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith.

 

22

 

(g)       To the extent not available on the Commission’s EDGAR system or any
successor system, to deliver promptly to the Underwriter in New York City such
number of the following documents as the Underwriter shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed with the
Commission (in each case excluding exhibits), (ii) any Issuer Free Writing
Prospectus, (iii) the Prospectus (the delivery of the documents referred to in
clauses (i), (ii) and (iii) of this paragraph (g) to be made not later than
10:00 A.M., New York time, on the business day following the execution and
delivery of this Agreement), (iv) conformed copies of any amendment to the
Registration Statement (excluding exhibits), (v) any amendment or supplement to
the General Disclosure Package or the Prospectus (the delivery of the documents
referred to in clauses (iv) and (v) of this paragraph (g) to be made not later
than 10:00 A.M., New York City time, on the business day following the date of
such amendment or supplement) and (vi) any document incorporated by reference in
the General Disclosure Package or the Prospectus (excluding exhibits thereto)
(the delivery of the documents referred to in clause (vi) of this paragraph (g)
to be made not later than 10:00 A.M., New York City time, on the business day
following the date of such document).

 

(h)       To the extent required, to make generally available to its
stockholders as soon as practicable, but in any event not later than eighteen
(18) months after the effective date of each Registration Statement (as defined
in Rule 158(c) of the Rules and Regulations), an earnings statement of the
Company and its subsidiaries (which need not be audited) complying with Section
11(a) of the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158); and, if not available on the Commission’s
EDGAR System or any successor system, to furnish to its stockholders after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders’ equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and after
each of the first three fiscal quarters of each fiscal year (beginning with the
first fiscal quarter after the effective date of such Registration Statement),
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail.

 

(i)       To take promptly from time to time such actions as the Underwriter may
reasonably request to qualify the Securities for offering and sale under the
securities or blue sky laws of such jurisdictions (domestic or foreign) as the
Underwriter may designate and to continue such qualifications in effect, and to
comply with such laws, for so long as required to permit the offer and sale of
Securities in such jurisdictions; provided that the Company and its subsidiaries
shall not be obligated to qualify as foreign corporations in any jurisdiction in
which they are not so qualified or to file a general consent to service of
process in any jurisdiction.

 

(j)       During the period of five (5) years from the date hereof, to the
extent not available on the Commission’s EDGAR system or any successor system,
to deliver to the Underwriter, (i) upon request, copies of all reports or other
communications furnished generally to stockholders, and (ii) upon request,
copies of any reports and financial statements furnished or filed with the
Commission or any national securities exchange or automatic quotation system on
which the Common Stock is listed or quoted.

 

23

 

(k)       That the Company will not, for a period of 60 days from the date of
the Prospectus, (the “Lock-Up Period”) without the prior written consent of
OpCo, directly or indirectly offer, sell, assign, transfer, pledge, contract to
sell, or otherwise dispose of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, other than (i)
the Company’s sale of the Securities hereunder, including the issuance of the
Conversion Securities (including for this purpose any shares of Common Stock
issued or issuable with respect to the Securities under the terms of the
Certificate of Designation with respect thereto, whether upon conversion, upon
redemption, or otherwise), (ii) the issuance of restricted Common Stock, options
to acquire Common Stock, or other equity awards pursuant to the Company’s
employee benefit plans, qualified stock option plans or other employee
compensation plans as such plans are in existence on the date hereof and
described in the Prospectus, the issuance of Common Stock upon vesting of
restricted stock units outstanding on the date hereof, and the issuance of
Common Stock pursuant to the valid exercises of options, warrants or rights
outstanding on the date hereof, (iii) pursuant to warrants or options to
purchase common stock that are outstanding on the date hereof and which have
been publicly disclosed, (iv) pursuant to the Company’s employee stock purchase
place as currently in effect, and (v) the issuance of Common Stock pursuant to
the Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock or under the terms of any other series of preferred
stock described in the Registration Statement or Prospectus. The Company will
cause each executive officer and director listed in Schedule B to furnish to the
Underwriter, prior to the Closing Date, a letter, substantially in the form of
Exhibit A hereto. The Company also agrees that during such period (other than
for the sale of the Securities hereunder), the Company will not file any
registration statement, preliminary prospectus or prospectus, or any amendment
or supplement thereto, under the Securities Act for any such transaction or
which registers, or offers for sale, Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, except for a registration
statement on Form S-8 relating to employee benefit plans.

 

(l)       To supply the Underwriter with copies of all correspondence to and
from, and all documents issued to and by, the Commission in connection with the
registration of the Securities under the Securities Act or the Registration
Statement or the Prospectus, or any amendment or supplement thereto or document
incorporated by reference therein.

 

(m)       Prior to the Closing Date to furnish to the Underwriter, as soon as
they have been prepared, copies of any unaudited interim consolidated financial
statements of the Company for any periods subsequent to the periods covered by
the financial statements appearing in the Registration Statement and the
Prospectus.

 

(n)       Prior to the Closing Date not to issue any press release or other
communication directly or indirectly or hold any press conference with respect
to the Company, its condition, financial or otherwise, or earnings, business
affairs or business prospects (except for routine oral marketing communications
in the ordinary course of business and consistent with the past practices of the
Company and of which the Underwriter is notified), without the prior written
consent of the Underwriter, unless in the judgment of the Company and its
counsel, and after notification to the Underwriter, such press release or
communication is required by law or applicable stock exchange rules.

 

(o)       Until the Underwriter shall have notified the Company of the
completion of the offering of the Securities, that the Company will not, and
will cause its affiliated purchasers (as defined in Regulation M under the
Exchange Act) not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers has a
beneficial interest, any Securities, or attempt to induce any person to purchase
any Securities; and not to, and to cause its affiliated purchasers not to, make
bids or purchases for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Securities.

 

24

 

(p)       To maintain, at its expense, a registrar and transfer agent for the
Common Stock.

 

(q)       Not to take any action prior to the Closing Date, which would require
the Prospectus to be amended or supplemented pursuant to Section 4.

 

(r)       To at all times comply with all applicable provisions of the
Sarbanes-Oxley Act in effect from time to time.

 

(s)       To reserve and keep available for the exercise of the Securities such
number of authorized but unissued shares of Common Stock as are sufficient to
permit the exercise in full of the Securities for the Conversion Securities.

 

(t)       To apply the net proceeds from the sale of the Securities as set forth
in the Registration Statement, the General Disclosure Package and the Prospectus
under the heading “Use of Proceeds.”

 

(u)       To use its commercially reasonable best efforts to list, subject to
notice of issuance, effect and maintain the quotation and listing of the Common
Stock (including the Conversion Securities, if and when issued) on the NASDAQ
GM.

 

(v)       To use its commercially reasonable best efforts to assist the
Underwriter with any filings with FINRA and obtaining clearance from FINRA as to
the amount of compensation allowable or payable to the Underwriter.

 

(w)       So long as the Securities are outstanding, to comply with the
Certificate of Designation.

 

(x)       To use its commercially reasonable best efforts to do and perform all
things required to be done or performed under this Agreement by the Company
prior to the Closing Date, and to satisfy all conditions precedent to the
delivery of the Securities.

 

25

 

5.       Payment of Expenses. The Company agrees to pay, or reimburse if paid by
the Underwriter, upon consummation of the transactions contemplated hereby: (a)
the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities to the Underwriter and any taxes payable in that
connection; (b) the costs incident to the registration of the Securities under
the Securities Act; (c) the costs incident to the preparation, printing and
distribution of the Registration Statement, the Base Prospectus, any Issuer Free
Writing Prospectus, the General Disclosure Package, the Prospectus, any
amendments, supplements and exhibits thereto or any document incorporated by
reference therein and the costs of printing, reproducing and distributing any
transaction document by mail or other means of communications; (d) the
reasonable fees and expenses (including related fees and expenses of counsel for
the Underwriter) incurred in connection with securing any required review by
FINRA of the terms of the sale of the Securities and any filings made with
FINRA; (e) any applicable listing, quotation or other fees; (f) the reasonable
fees and expenses (including related fees and expenses of counsel to the
Underwriter) of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(i) and of preparing, printing and
distributing wrappers, “Blue Sky Memoranda” and “Legal Investment Surveys”; (g)
the cost of preparing and printing stock certificates; (h) all fees and expenses
of the registrar and transfer agent of the Common Stock; and (i) all other
reasonable costs and expenses incident to the offering of the Securities or the
performance of the obligations of the Company under this Agreement (including,
without limitation, the fees and expenses of the Company’s counsel and the
Company’s independent accountants and the travel and other expenses incurred by
Company’s and Underwriter’s personnel in connection with any “road show”
including, without limitation, any expenses advanced by the Underwriter on the
Company’s behalf (which will be promptly reimbursed)); provided, however, that
the Company shall have no obligation to reimburse the fees and expenses of
counsel for the Underwriters pursuant to clauses (d) and (f) of this Section 5
in excess of $20,000 in the aggregate.

 

6.       Conditions to the Obligations of the Underwriter, and the Sale of the
Securities. The respective obligations of the Underwriter hereunder, and the
closing of the sale of the Securities, are subject to the accuracy, when made
and as of the Applicable Time and on the Closing Date, of the representations
and warranties of the Company contained herein, to the accuracy of the
statements of the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:

 

(a)       No stop order suspending the effectiveness of the Registration
Statement or any part thereof, preventing or suspending the use of any Base
Prospectus, the Prospectus or any Permitted Free Writing Prospectus or any part
thereof shall have been issued and no proceedings for that purpose or pursuant
to Section 8A under the Securities Act shall have been initiated or threatened
by the Commission, and all requests for additional information on the part of
the Commission (to be included or incorporated by reference in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Underwriter; the Rule 462(b) Registration
Statement, if any, each Issuer Free Writing Prospectus, if any, and the
Prospectus shall have been filed with the Commission within the applicable time
period prescribed for such filing by, and in compliance with, the Rules and
Regulations and in accordance with Section 4(a), and the Rule 462(b)
Registration Statement, if any, shall have become effective immediately upon its
filing with the Commission; and FINRA shall have raised no objection to the
fairness and reasonableness of the terms of this Agreement or the transactions
contemplated hereby.

 

(b)       The Underwriter shall not have discovered and disclosed to the Company
on or prior to the Closing Date that the Registration Statement or any amendment
or supplement thereto contains an untrue statement of a fact which, in the
opinion of counsel for the Underwriter, is material or omits to state any fact
which, in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading, or that
the General Disclosure Package, any Issuer Free Writing Prospectus or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of fact which, in the opinion of such counsel, is material or omits to state any
fact which, in the opinion of such counsel, is material and is necessary in
order to make the statements, in the light of the circumstances in which they
were made, not misleading.

 

26

 

(c)       All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Securities, the
Conversion Securities, the Registration Statement, the General Disclosure
Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all
other legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Underwriter, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.

 

(d)       Foley & Lardner LLP shall have furnished to the Underwriter such
counsel’s written opinion and negative assurances statement, as counsel to the
Company, addressed to the Underwriter and dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriter.

 

(e)       The Underwriter shall have received from Proskauer Rose LLP, counsel
for the Underwriter, such opinion or opinions and negative assurances statement,
dated the Closing Date, with respect to such matters as the Underwriter may
reasonably require, and the Company shall have furnished to such counsel such
documents as they request for enabling them to pass upon such matters.

 

(f)       At the time of the execution of this Agreement, the Underwriter shall
have received from KPMG LLP a letter, addressed to the Underwriter, executed and
dated such date, in form and substance satisfactory to the Underwriter (i)
confirming that they are an independent registered accounting firm with respect
to the Company and its subsidiaries within the meaning of the Securities Act and
the Rules and Regulations and PCAOB and (ii) stating the conclusions and
findings of such firm, of the type ordinarily included in accountants’ “comfort
letters” to underwriters, with respect to the financial statements and certain
financial information contained or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectus.

 

(g)       On the effective date of any post-effective amendment to any
Registration Statement and on the Closing Date, the Underwriter shall have
received a letter (the “Bring-Down Letter”) from KPMG LLP addressed to the
Underwriter and dated the Closing Date confirming, as of the date of the
Bring-Down Letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the General Disclosure Package and the Prospectus, as the case may be, as of
a date not more than three (3) business days prior to the date of the Bring-Down
Letter), the conclusions and findings of such firm, of the type ordinarily
included in accountants’ “comfort letters” to underwriters, with respect to the
financial information and other matters covered by its letter delivered to the
Underwriter concurrently with the execution of this Agreement pursuant to
paragraph (f) of this Section 6.

 

27

 

(h)       The Company shall have furnished to the Underwriter a certificate,
dated the Closing Date, of its Chairman of the Board, Chief Executive Officer or
President and its Chief Financial Officer or a Vice President of Finance, each
in his capacity as an officer of the Company, stating that (i) such officers
have carefully examined the Registration Statement, the General Disclosure
Package, any Permitted Free Writing Prospectus and the Prospectus and, in their
opinion, the Registration Statement and each amendment thereto, at the
Applicable Time and as of the date of this Agreement and as of the Closing Date
did not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the General Disclosure Package, as of the
Applicable Time and as of the Closing Date, any Permitted Free Writing
Prospectus as of its date and as of the Closing Date, the Prospectus and each
amendment or supplement thereto, as of the respective date thereof and as of the
Closing Date, did not include any untrue statement of a material fact and did
not omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, (ii) since the effective date of the Registration Statement, no
event has occurred which should have been set forth in a supplement or amendment
to the Registration Statement, the General Disclosure Package or the Prospectus
that has not been so set forth therein, (iii) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct, and the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date, and
(iv) there has not been, subsequent to the date of the most recent audited
financial statements included or incorporated by reference in the General
Disclosure Package, any material adverse change in the financial position or
results of operations of the Company and its subsidiaries or any change or
development that, singly or in the aggregate, would involve a material adverse
change or a prospective material adverse change, in or affecting the condition
(financial or otherwise), results of operations, business, assets or prospects
of the Company and its subsidiaries taken as a whole, except as set forth in the
Prospectus.

 

(i)       Since the date of the latest audited financial statements included in
the General Disclosure Package or incorporated by reference in the General
Disclosure Package as of the date hereof, (i) neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth in the General Disclosure Package, and (ii)
there shall not have been any change in the capital stock (other than a change
in the number of outstanding shares of Common Stock due to the issuance of
shares upon the exercise of outstanding options or warrants or the conversion of
convertible indebtedness) or short-term or long-term debt of the Company or any
of its subsidiaries, or any change, or any development involving a prospective
change, in or affecting the business, general affairs, management, financial
position, stockholders’ equity or results of operations of the Company and its
subsidiaries otherwise than as set forth in the General Disclosure Package, the
effect of which, in any such case described in clause (i) or (ii) of this
paragraph (i), is, in the judgment of the Underwriter, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or delivery
of the Securities on the terms and in the manner contemplated in the General
Disclosure Package.

 

28

 

(j)       No action shall have been taken and no law, statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
or body which would prevent the issuance or sale of the Securities or materially
and adversely affect or potentially materially and adversely affect the business
or operations of the Company or its subsidiaries and no injunction, restraining
order or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Securities or materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company or its subsidiaries.

 

(k)       Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange, the NASDAQ GM or the NYSE American or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or
materially limited, or minimum or maximum prices or maximum range for prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities, or the subject of an act of terrorism, or there shall have been an
outbreak of or escalation in hostilities involving the United States, or there
shall have been a declaration of a national emergency or war by the United
States, or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Underwriter, impracticable or
inadvisable to proceed with the sale or delivery of the Securities on the terms
and in the manner contemplated in the General Disclosure Package and the
Prospectus.

 

(l)       The Company shall have filed a Notification: Listing of Additional
Shares with the NASDAQ GM covering the Conversion Securities and shall have
received no objection thereto from the NASDAQ GM.

 

(m)       The Underwriter shall have not have received any unresolved objection
from the FINRA as to the fairness and reasonableness of the amount of
compensation allowable or payable to the Underwriter in connection with the
issuance and sale of the Securities.

 

(n)       The Underwriter shall have received the written agreements,
substantially in the form of Exhibit A hereto, of the executive officers and
directors of the Company listed in Schedule B to this Agreement.

 

29

 

(o)       The Underwriter shall have received (i) the written waiver from POSCO
relating to its participation rights arising under and pursuant to the terms of
the POSCO Securities Purchase Agreements and (ii) the amendment to the Hercules
Loan and Security Agreement.

 

(p)       The Certificate of Designation, Preferences and Rights for the
Securities, substantially in the form of Exhibit B hereto (the “Certificate of
Designation”), shall have been filed with, and accepted by, the Secretary of
State of the State of Delaware.

 

(q)       Prior to the Closing Date, the Company shall have furnished to the
Underwriter such further information, opinions, certificates (including a
Secretary’s Certificate), letters or such other documents as the Underwriter
shall have reasonably requested.

 

(r)       The Company shall have furnished to the Underwriter a certificate,
dated as of the date of this Agreement and as of the Closing Date, of its Chief
Financial Officer, in form and substance reasonably satisfactory to counsel for
the Underwriter and customary for the type of offering contemplated by this
Agreement.

 

(s)       At or prior to the execution of this Agreement, the Company’s Board of
Directors shall have approved the reduction to the conversion price of the
Series C Convertible Preferred Stock pursuant to Section 8(d) of the Certificate
of Designation, Preferences and Rights of the Series C Convertible Preferred
Stock to $1.50 (the “Series C Conversion Price Change”) and such Series C
Conversion Price Change shall be effective on or prior to the Closing.

 

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriter.

 

30

 

7.       Indemnification and Contribution.

 

(a)       The Company shall indemnify and hold harmless the Underwriter, each of
its affiliates and each of its and their respective directors, officers,
members, employees, representatives and agents, and each person, if any, who
controls such Underwriter within the meaning of Section 15 of the Securities Act
of or Section 20 of the Exchange Act (collectively, the “Underwriter Indemnified
Parties,” and each an “Underwriter Indemnified Party”) against any loss, claim,
damage, expense or liability whatsoever (or any action, investigation or
proceeding in respect thereof), joint or several, to which such Underwriter
Indemnified Party may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, expense, liability, action, investigation
or proceeding arises out of or is based upon (A) any untrue statement or alleged
untrue statement of a material fact contained in any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) of the Rules and Regulations, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto or document incorporated
by reference therein, (B) the omission or alleged omission to state in any
Issuer Free Writing Prospectus, any “issuer information” filed or required to be
filed pursuant to Rule 433(d) of the Rules and Regulations, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto or
document incorporated by reference therein, a material fact required to be
stated therein or necessary to make the statements therein not misleading or (C)
any breach of the representations and warranties of the Company contained
herein, or the failure of the Company to perform its obligations hereunder or
pursuant to any law, and which is included as part of or referred to in any
loss, claim, damage, expense, liability, action, investigation or proceeding
arising out of or based upon matters covered by subclause (A), (B) or (C) above
of this Section 7(a), and shall reimburse the Underwriter Indemnified Party for
any legal fees or other expenses reasonably incurred by that Underwriter
Indemnified Party in connection with investigating, or preparing to defend, or
defending against, settling, compromising, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any such loss, claim,
damage, expense, liability, action, investigation or proceeding, as such fees
and expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage, expense
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in, or omission or alleged omission from the Registration
Statement or the Prospectus, or any such amendment or supplement thereto, or any
Issuer Free Writing Prospectus made in reliance upon and in conformity with
written information furnished to the Company by the Underwriter specifically for
use therein, which information the parties hereto agree is limited to the
Underwriter’s Information (as defined in Section 16). This indemnity agreement
is not exclusive and will be in addition to any liability which the Company
might otherwise have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to each Underwriter Indemnified
Party.

 

(b)       The Underwriter shall indemnify and hold harmless the Company and its
directors, its officers who signed the Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Company
Indemnified Parties,” and each a “Company Indemnified Party”) against any loss,
claim, damage, expense or liability whatsoever (or any action, investigation or
proceeding in respect thereof), joint or several, to which such Company
Indemnified Party may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, expense, liability, action, investigation
or proceeding arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) of the Rules and Regulations, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or (ii) the omission or
alleged omission to state in any Issuer Free Writing Prospectus, any “issuer
information” filed or required to be filed pursuant to Rule 433(d) of the Rules
and Regulations, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Underwriter specifically for
use therein, which information the parties hereto agree is limited to the
Underwriter’s Information as defined in Section 16, and shall reimburse the
Company Indemnified Party for any legal or other expenses reasonably incurred by
such party in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss,
claim, damage, liability, action, investigation or proceeding, as such fees and
expenses are incurred. Notwithstanding the provisions of this Section 7(b), in
no event shall any indemnity by the Underwriter under this Section 7(b) exceed
the total discount and commission received by such Underwriter in connection
with the Offering.

 

31

 

(c)       Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 7, notify such indemnifying party in writing of the commencement of that
action; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 7
except to the extent it has been materially prejudiced by such failure; and,
provided, further, that the failure to notify an indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 7. If any such action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of
the indemnified party, be counsel to the indemnifying party). After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such action, except as provided herein, the indemnifying party shall
not be liable to the indemnified party under Section 7 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense of such action other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense of such action but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized in writing by the Company in
the case of a claim for indemnification under Section 7(a) or Section 2.4 or
OpCo in the case of a claim for indemnification under Section 7(b), (ii) such
indemnified party shall have been advised by its counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party, or (iii) the indemnifying party has
failed to assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party within a reasonable period of time after
notice of the commencement of the action or the indemnifying party does not
diligently defend the action after assumption of the defense, in which case, if
such indemnified party notifies the indemnifying party in writing that it elects
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of (or, in the
case of a failure to diligently defend the action after assumption of the
defense, to continue to defend) such action on behalf of such indemnified party
and the indemnifying party shall be responsible for legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
of such action; provided, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties (in addition to any local counsel), which firm shall be designated in
writing by OpCo if the indemnified parties under this Section 7 consist of any
Underwriter Indemnified Party or by the Company if the indemnified parties under
this Section 7 consist of any Company Indemnified Parties. Subject to this
Section 7(c), the amount payable by an indemnifying party under Section 7 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement of
any of the foregoing. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of judgment with respect to any pending or threatened action or any claim
whatsoever, in respect of which indemnification or contribution could be sought
under this Section 7 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party in form and
substance reasonably satisfactory to such indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party. Subject to the provisions of the following sentence, no
indemnifying party shall be liable for settlement of any pending or threatened
action or any claim whatsoever that is effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with its written consent, if its consent has been unreasonably withheld or
delayed or if there be a judgment for the plaintiff in any such matter, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
In addition, if at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated herein effected without its written
consent if (i) such settlement is entered into more than forty-five (45) days
after receipt by such indemnifying party of the request for reimbursement, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least thirty (30) days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement.

 

32

 

(d)       If the indemnification provided for in this Section 7 is unavailable
or insufficient to hold harmless an indemnified party under Section 7(a) or
Section 7(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid, payable or otherwise incurred
by such indemnified party as a result of such loss, claim, damage, expense or
liability (or any action, investigation or proceeding in respect thereof), as
incurred, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriter on the
other hand from the Offering of the Securities, or (ii) if the allocation
provided by clause (i) of this Section 7(d) is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) of this Section 7(d) but also the relative fault of
the Company on the one hand and the Underwriter on the other with respect to the
statements, omissions, acts or failures to act which resulted in such loss,
claim, damage, expense or liability (or any action, investigation or proceeding
in respect thereof) as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriter on
the other with respect to such Offering shall be deemed to be in the same
proportion as the total net proceeds from the Offering of the Securities
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discount and commission received by the
Underwriter in connection with the Offering, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company on
the one hand and the Underwriter on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriter on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement, omission, act or failure to act; provided that the parties
hereto agree that the written information furnished to the Company by the
Underwriter for use in any Registration Statement or the Prospectus, or in any
amendment or supplement thereto, consists solely of the Underwriter’s
Information as defined in Section 16. The Company and the Underwriter agree that
it would not be just and equitable if contributions pursuant to this Section
7(d) were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage, expense, liability, action, investigation or proceeding
referred to above in this Section 7(d) shall be deemed to include, for purposes
of this Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing to defend or
defending against or appearing as a third party witness in respect of, or
otherwise incurred in connection with, any such loss, claim, damage, expense,
liability, action, investigation or proceeding. Notwithstanding the provisions
of this Section 7(d), no Underwriter shall be required to contribute any amount
in excess of the total discount and commission received by such Underwriter in
connection with the Offering, less the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement, omission or alleged omission, act or alleged act or
failure to act or alleged failure to act. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

 

33

 

8.       Termination. The obligations of the Underwriter hereunder may be
terminated by the Underwriter, in its absolute discretion by notice given to the
Company prior to delivery of and payment for the Securities if, prior to that
time, any of the events described in Sections 6(i), 6(j), or 6(k) have occurred
or if the Underwriter shall decline to purchase the Securities for any reason
permitted under this Agreement.

 

9.       Reimbursement of Underwriter’s Expenses. Notwithstanding anything to
the contrary in this Agreement, if (a) this Agreement shall have been terminated
pursuant to Section 8, (b) the Company shall fail to tender the Securities for
delivery to the Underwriter for any reason not permitted under this Agreement,
(c) the Underwriter shall decline to purchase the Securities for any reason
permitted under this Agreement or (d) the sale of the Securities is not
consummated because any condition to the obligations of the Underwriter set
forth herein is not satisfied or because of the refusal, inability or failure on
the part of the Company to perform any agreement herein or to satisfy any
condition or to comply with the provisions hereof, then, in addition to the
payment of out-of-pocket expenses in accordance with Section 5, the Company
shall reimburse the Underwriter for the fees and expenses of the Underwriter’s
counsel and for such other accountable out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Agreement and the proposed
purchase of the Securities, and upon demand the Company shall pay the full
amount thereof to the Underwriter.

 

10.       Absence of Fiduciary Relationship. The Company acknowledges and agrees
that:

 

(a)       the Underwriter’s responsibility to the Company is solely contractual
in nature, the Underwriter has been retained solely to act as an underwriter in
connection with the Offering and no fiduciary, advisory or agency relationship
between the Company and such Underwriter has been created in respect of any of
the transactions contemplated by this Agreement, irrespective of whether any
underwriter or any of its affiliates has advised or is advising the Company on
other matters;

 

(b)       the price of the Securities set forth in this Agreement was
established by the Company following discussions and arms-length negotiations
with the Underwriter, and the Company is capable of evaluating and
understanding, and understands and accepts, the terms, risks and conditions of
the transactions contemplated by this Agreement;

 

(c)       it has been advised that the Underwriter and its respective affiliates
are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and that the Underwriter has no obligation to
disclose such interests and transactions to the Company by virtue of any
fiduciary, advisory or agency relationship; and

 

(d)       it waives, to the fullest extent permitted by law, any claims it may
have against the Underwriter for breach of fiduciary duty or alleged breach of
fiduciary duty and agrees that the Underwriter shall have no liability (whether
direct or indirect) to the Company in respect of such a fiduciary duty claim or
to any person asserting a fiduciary duty claim on behalf of or in right of the
Company, including stockholders, employees or creditors of the Company.

 

34

 

11.       Successors; Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriter, the Company,
and their respective successors and assigns. Notwithstanding the foregoing, the
determination as to whether any condition in Section 6 hereof shall have been
satisfied, and the waiver of any condition in Section 6 hereof, may be made by
the Underwriter in its sole discretion. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, other than the
persons mentioned in the preceding sentences, any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the Underwriter Indemnified Parties and the
several indemnities of the Underwriter shall be for the benefit of the Company
Indemnified Parties. It is understood that the Underwriter’s responsibility to
the Company is solely contractual in nature and the Underwriter does not owe the
Company, or any other party, any fiduciary duty as a result of this Agreement.

 

12.       Survival of Indemnities, Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the Underwriter, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Underwriter, the Company or any person controlling any of them and shall
survive delivery of and payment for the Securities. Notwithstanding any
termination of this Agreement, including without limitation any termination
pursuant to Section 8, the indemnity and contribution and reimbursement
agreements contained in Sections 7 and 9 and the representations and warranties
set forth in this Agreement shall not terminate and shall remain in full force
and effect at all times.

 

13.       Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and:

 

(a)       if to the Underwriter, shall be delivered or sent by mail, facsimile
transmission or email to c/o Oppenheimer & Co. Inc., 85 Broad Street, New York,
NY 10004 Attention: Equity Capital Markets, with a copy to 85 Broad Street, New
York, NY 10004 Attention: General Counsel; and

 

(b)       if to the Company, shall be delivered or sent by mail, facsimile
transmission or email to: FuelCell Energy, Inc., 3 Great Pasture Road, Danbury,
CT 06813, Attention: Jennifer Arasimowicz, Esq., General Counsel, Fax: (203)
825-6069; with copies to Foley & Lardner LLP, 111 Huntington Avenue, Suite 2500,
Boston, MA 02199, Attention: Paul D. Broude;

 

provided, however, that any notice to the Underwriter pursuant to Section 7
shall be delivered or sent by mail or facsimile transmission to the Underwriter
at its address set forth in its acceptance communication to the Underwriter,
which address will be supplied to any other party hereto by the Underwriter upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof, except that any such statement, request, notice
or agreement delivered or sent by email shall take effect at the time of
confirmation of receipt thereof by the recipient thereof.

 

35

 

14.       Definition of Certain Terms. For purposes of this Agreement, (a)
“business day” means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) “knowledge” means the knowledge of the directors and officers
of the Company after reasonable inquiry and (c) “subsidiary” has the meaning set
forth in Rule 405 of the Rules and Regulations.

 

15.       Governing Law, Agent for Service and Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, including without limitation Section 5-1401 of the New York General
Obligations Law. No legal proceeding may be commenced, prosecuted or continued
in any court other than the courts of the State of New York located in the City
and County of New York or in the United States District Court for the Southern
District of New York, which courts shall have jurisdiction over the adjudication
of such matters, and the Company and the Underwriter each hereby consent to the
jurisdiction of such courts and personal service with respect thereto. The
Company and the Underwriter each hereby waive all right to trial by jury in any
legal proceeding (whether based upon contract, tort or otherwise) in any way
arising out of or relating to this Agreement. The Company agrees that a final
judgment in any such legal proceeding brought in any such court shall be
conclusive and binding upon the Company and the Underwriter and may be enforced
in any other courts in the jurisdiction of which the Company is or may be
subject, by suit upon such judgment.

 

16.       Underwriter’s information. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the “Underwriter’s Information”
consists solely of the following information in the Prospectus: (i) the last
paragraph on the front cover page concerning the terms of the offering; and (ii)
the statements concerning the Underwriter contained in the fourth and ninth
paragraphs, in each case under the heading “Underwriting.”

 

17.       Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph, clause or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph, clause or provision
hereof. If any section, paragraph, clause or provision of this Agreement is for
any reason determined to be invalid or unenforceable, there shall be deemed to
be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.

 

18.       General. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. In this Agreement, the masculine, feminine and neuter
genders and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This Agreement
may be amended or modified, and the observance of any term of this Agreement may
be waived, only by a writing signed by the Company and the Underwriter.

 

36

 

19.        Research Analyst Independence. The Company acknowledges that the
Underwriter’s research analysts and research departments are required to be
independent from its investment banking division and are subject to certain
regulations and internal policies, and that such Underwriter’s research analysts
may hold views and make statements or investment recommendations and/or publish
research reports with respect to the Company and/or the Offering that differ
from the views of their investment banking division. The Company hereby waives
and releases, to the fullest extent permitted by law, any claims that the
Company may have against the Underwriter with respect to any conflict of
interest that may arise from the fact that the views expressed by its
independent research analysts and research departments may be different from or
inconsistent with the views or advice communicated to the Company by such
Underwriter’s investment banking division. The Company acknowledges that the
Underwriter is a full service securities firm and as such from time to time,
subject to applicable securities laws, rules and regulations, may effect
transactions for its own account or the account of its customers and hold long
or short positions in debt or equity securities of the Company; provided,
however, that nothing in this Section 19 shall relieve the Underwriter of any
responsibility or liability it may otherwise bear in connection with activities
in violation of applicable securities laws, rules or regulations.

 

20.       Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument and such signatures
may be delivered by facsimile or by electronic mail attaching a portable
document file (.pdf).

 

[Signature Page Follows]

 

37

 

If the foregoing is in accordance with your understanding of the agreement
between the Company and the Underwriter, kindly indicate your acceptance in the
space provided for that purpose below.

 

  Very truly yours,       FUELCELL ENERGY, INC.         By: /s/ Michael S.
Bishop     Name: Michael S. Bishop     Title:  Sr. Vice President, Chief
Financial Officer

 

Confirmed as of the date first above written, on behalf of itself:   OPPENHEIMER
& CO. INC.

 

By: /s/ Eric Helenek     Name:  Eric Helenek     Title:  Managing Director  

 

[Signature Page to FuelCell Energy Underwriting Agreement]

 

38

 

Schedule A

 

General Use Free Writing Prospectuses

 

None.

 

 

 

Schedule B

 

List of officers and directors subject to Section 4

 

 

Board of Directors

 

Arthur A. Bottone

James H. England

Matthew F. Hilzinger

John A. Rolls

Natica von Althann

Christopher S. Sotos

 

Non-Director Executives

 

Michael S. Bishop

Anthony F. Rauseo

Jennifer D. Arasimowicz

 

 

 

Exhibit A

 

Form of Lock Up Agreement

 

August __, 2018

 

Oppenheimer & Co. Inc.

85 Broad Street

New York, NY 10004

 

Re:     FuelCell Energy, Inc. Offering of Series D Preferred Stock

 

Dear Sirs:

 

In order to induce Oppenheimer & Co. Inc. (“OpCo”) to enter into a certain
underwriting agreement with FuelCell Energy, Inc., a Delaware corporation (the
“Company”), with respect to the public offering (the “Offering”) of shares of
the Company’s Series D Convertible Preferred Stock, par value $0.01 per share
(the “Securities”), the undersigned hereby agrees that for a period of 60 days
following the date of this Agreement (the “lock-up period”), the undersigned
will not, without the prior written consent of OpCo, directly or indirectly,
(i) offer, sell, assign, transfer, pledge, contract to sell, or otherwise
dispose of, or announce the intention to otherwise dispose of, any shares of
common stock of the Company (the “Common Stock”) or any securities convertible
into or exercisable or exchangeable for Common Stock (including, without
limitation, shares of Common Stock or any such securities which may be deemed to
be beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares or securities, the
“Beneficially Owned Shares”)), (ii) enter into any swap, hedge or other
agreement or arrangement that transfers in whole or in part, the economic risk
of ownership of any Beneficially Owned Shares, Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock, or
(iii) engage in any short selling of any Beneficially Owned Shares, Common Stock
or securities convertible into or exercisable or exchangeable for Common Stock.

 

Notwithstanding the foregoing, the undersigned may sell or otherwise transfer
shares of Common Stock or Beneficially Owned Shares (i) as a bona fide gift or
gifts or pledge, provided that the undersigned provides prior written notice of
such gift or gifts or pledge to OpCo and the donee or donees or pledgee or
pledgees (as the case may be) thereof agree to be bound by the restrictions set
forth herein, (ii) either during the undersigned’s lifetime or on death by will
or intestacy to the undersigned’s immediate family or to a trust, the
beneficiaries of which are exclusively the undersigned and a member or members
of the undersigned’s immediate family, provided that the transferee thereof
agrees to be bound by the restrictions set forth herein, or (iii) to pay for the
tax liability arising from the vesting of restricted stock by netting a portion
of such restricted stock in accordance with the existing practices of the
Company, (iv) pursuant to any 10b5-1 trading plans in effect as of the date of
the Offering or (v) with the prior written consent of OpCo in its sole
discretion. In addition, if the undersigned is a partnership, limited liability
company, trust, corporation or similar entity, it may distribute the Common
Stock or Beneficially Owned Shares to its partners, members or stockholders;
provided, however, that in each such case, prior to any such transfer, each
transferee shall execute a duplicate form of this letter agreement or execute an
agreement, reasonably satisfactory to OpCo, pursuant to which each transferee
shall agree to receive and hold such Common Stock or Beneficially Owned Shares
subject to the provisions hereof, and there shall be no further transfer except
in accordance with the provisions hereof. For the purposes of this paragraph,
“immediate family” shall mean spouse, domestic partner, lineal descendant
(including adopted children), father, mother, brother or sister of the
transferor.

 

In addition, the undersigned hereby waives, from the date hereof until the
expiration of the lock-up period, any and all rights, if any, to request or
demand registration pursuant to the Securities Act of 1933, as amended, of any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock that are registered in the name of the undersigned
or that are Beneficially Owned Shares. In order to enable the aforesaid
covenants to be enforced, the undersigned hereby consents to the placing of
legends and/or stop-transfer orders with the transfer agent of the Common Stock
with respect to any shares of Common Stock, securities convertible into or
exercisable or exchangeable for Common Stock or Beneficially Owned Shares owned
by the undersigned.

 

  [Signatory]   By:   Name:   Title: Director/ Officer     FuelCell Energy, Inc.

 

 

 

Exhibit B

 

Form of Certificate of Designation

 

 

 

 

Annex A

 

List of Subsidiaries

 

 

 

 

Exhibit B

 

Certificate of Designation

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES D CONVERTIBLE
PREFERRED STOCK OF FUELCELL ENERGY, INC.

 

FuelCell Energy, Inc. (the “Company”), a corporation incorporated and existing
under the General Corporation Law of the State of Delaware (the “DGCL”) does
hereby certify:

 

That pursuant to the authority expressly conferred upon the Board of Directors
of the Company (the “Board”) by the Company’s Certificate of Incorporation, as
amended (the “Certificate of Incorporation”), and Section 151(g) of the DGCL,
the Board on August 26, 2018 adopted the following resolution determining it
desirable and in the best interests of the Company and its stockholders for the
Company to create a series of thirty thousand six hundred eighty (30,680) shares
of preferred stock designated as “Series D Convertible Preferred Stock”, none of
which shares have been issued:

 

RESOLVED, that pursuant to the authority vested in the Board, in accordance with
the provisions of the Certificate of Incorporation, a series of preferred stock,
par value $0.01 per share, of the Company be and hereby is created, and that the
designation and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional or other rights of the shares
of such series and the qualifications, limitations and restrictions thereof are
as follows:

 

SERIES D CONVERTIBLE PREFERRED STOCK

 

1. Designation and Number of Shares.   There shall hereby be created and
established a series of preferred stock of the Company designated as “Series D
Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of
Preferred Shares shall be thirty thousand six hundred eighty (30,680) shares.
Each Preferred Share shall have a par value of  $0.01. Capitalized terms not
defined herein shall have the meaning as set forth in Section 34 below.

 

2. Ranking.   Except (i) for the Company’s 5% Series B Cumulative Convertible
Perpetual Preferred Stock (the “Series B Preferred Stock”), which shall be
Senior Preferred Stock (as defined below) for all purposes hereunder, and shall
rank senior to the Preferred Shares in respect of the preferences as to
dividends, distributions and payments upon the liquidation, dissolution and
winding up of the Company, (ii) for the Company’s Series C Convertible Preferred
Stock (“Series C Preferred Stock”), which shall be Parity Stock (as defined
below) for all purposes hereunder, and shall rank pari passu to the Preferred
Shares in respect of the preferences as to dividends, distributions and payments
upon the liquidation, dissolution and winding up of the Company, and (iii) to
the extent that the holders of at least a majority of the outstanding Preferred
Shares (the “Required Holders”) expressly consent to the creation of Parity
Stock (as defined below) or Senior Preferred Stock (as defined below) in
accordance with Section 19, all other shares of capital stock of the Company
shall be junior in rank to all Preferred Shares with respect to the preferences
as to dividends, distributions and payments upon the liquidation, dissolution
and winding up of the Company (such junior stock is referred to herein
collectively as “Junior Stock”) and the rights of all such shares of Junior
Stock shall be subject to the rights, powers, preferences and privileges of the
Preferred Shares. Without limiting any other provision of this Certificate of
Designations, without the prior express consent of the Required Holders, voting
separately as a single class, the Company shall not hereafter authorize or issue
any additional or other shares of capital stock that is (i) of senior rank to
the Preferred Shares in respect of the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and winding up of
the Company (collectively, the “Senior Preferred Stock”), (ii) of pari passu
rank to the Preferred Shares in respect of the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and winding up of
the Company (collectively, the “Parity Stock”) or (iii) any Junior Stock having
a maturity or other date requiring redemption or repayment of such shares of
Junior Stock that is prior to the Maturity Date. In the event of the merger or
consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative rights, powers, designations, privileges
and preferences provided for herein and no such merger or consolidation shall
result inconsistent therewith.

 

3. Dividends.   In addition to Section 18 below, from and after the first date
of issuance of any Preferred Shares (the “Initial Issuance Date”), each holder
of a Preferred Share (each, a “Holder” and

 

 1 

 

 

collectively, the “Holders”) shall be entitled to receive dividends
(“Dividends”) (i) if no Triggering Event (as defined below) has occurred and is
continuing, when and as declared by the Board, from time to time, in its sole
and absolute discretion, which Dividends, if any, shall be paid by the Company
out of funds legally available therefor, payable, subject to the conditions and
other terms hereof, in cash on the Stated Value of such Preferred Share, or (ii)
if a Triggering Event has occurred and until such Triggering Event has been
cured, a Dividend of 15% per annum based on the Holder’s outstanding number of
Preferred Shares multiplied by the Stated Value (the “Default Dividend Rate”).
Such Dividends, if any, that accrue shall be paid on each Installment Date (as
defined below) occurring after the accrual of such Dividends, or such earlier
time as the Board may in its sole discretion determine.

 

4. Conversion.   Subject to the provisions of Section 4(d), each Preferred Share
shall be convertible into validly issued, fully paid and non-assessable shares
of Common Stock (as defined below), on the terms and conditions set forth in
this Section 4.

 

(a) Holder’s Conversion Right.   Subject to the provisions of Section 4(d), each
Holder shall be entitled to convert any portion of the outstanding Preferred
Shares held by such Holder into validly issued, fully paid and non-assessable
shares of Common Stock in accordance with Section 4(c) at the Conversion Rate
(as defined below). The Company shall not issue any fraction of a share of
Common Stock upon any conversion. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock to the nearest whole share. The Company shall pay any
and all actual transfer, stamp, issuance and similar taxes, costs and expenses
(including, without limitation, fees and expenses of the Transfer Agent (as
defined below)) that may be payable with respect to the issuance and delivery of
Common Stock upon conversion of any Preferred Shares; provided, however, that if
any such tax, cost or expense is due solely because the Holder requested such
shares to be issued in a name other than the Holder’s name, then the Holder will
pay such tax, cost or expense.

 

(b) Conversion Rate.   The number of shares of Common Stock issuable upon
conversion of any Preferred Share pursuant to Section 4(a) shall be determined
by dividing (x) the Conversion Amount of such Preferred Share by (y) the
Conversion Price (the “Conversion Rate”):

 

(i) “Conversion Amount” means, with respect to each Preferred Share, as of the
applicable date of determination, the sum of  (1) the Stated Value thereof plus
(2) the Additional Amount thereon and any accrued and unpaid Late Charges (as
defined below in Section 27(c)) with respect to such Stated Value and Additional
Amount as of such date of determination.

 

(ii) “Conversion Price” means, with respect to each Preferred Share, as of any
Conversion Date or other date of determination, $1.38, subject to adjustment as
provided herein.

 

(c) Mechanics of Conversion.   The conversion of each Preferred Share shall be
conducted in the following manner or in such other manner as agreed to by the
Company and the Required Holders in writing:

 

(i) Optional Conversion.   To convert a Preferred Share into shares of Common
Stock on any date (a “Conversion Date”), a Holder shall deliver (via electronic
mail), for receipt on or prior to 4:59 p.m., New York time, on such date, a copy
of an executed notice of conversion of the share(s) of Preferred Shares subject
to such conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company. If required by Section 4(c)(iii), within two
(2) Trading Days following a conversion of any such Preferred Shares as
aforesaid, such Holder shall surrender to a nationally recognized overnight
delivery service for delivery to the Company the original certificates, if any,
representing the Preferred Shares (the “Preferred Share Certificates”) so
converted as aforesaid (or an indemnification undertaking with respect to the
Preferred Shares in the case of its loss, theft or destruction as contemplated
by Section 21(b)). On or before the first (1st) Trading Day following the date
of receipt of a Conversion Notice, the Company shall transmit by electronic mail
an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of
receipt of such Conversion Notice to such Holder and the Company’s transfer
agent (the “Transfer Agent”), which confirmation shall constitute an instruction
to the Transfer Agent to process such Conversion Notice in accordance with the
terms herein. On or before the second (2nd) Trading Day following the date of
receipt of a Conversion Notice

 

 2 

 

 

(or such earlier date as required pursuant to the 1934 Act or other applicable
law, rule or regulation for the settlement of a trade on the Principal Market
initiated on the applicable Conversion Date of such shares of Common Stock
issuable pursuant to such Conversion Notice) (the “Share Delivery Deadline”),
the Company shall (1) provided that the Transfer Agent is participating in The
Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program,
credit such aggregate number of shares of Common Stock to which such Holder
shall be entitled to such Holder’s or its designee’s balance account with DTC
through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent
is not participating in the DTC Fast Automated Securities Transfer Program,
issue and deliver (via reputable overnight courier) to the address as specified
in such Conversion Notice, a certificate, registered in the name of such Holder
or its designee, for the number of shares of Common Stock to which such Holder
shall be entitled. If the number of Preferred Shares represented by the
Preferred Share Certificate(s) submitted for conversion pursuant to
Section 4(c)(iii) is greater than the number of Preferred Shares being
converted, then the Company shall, as soon as practicable and in no event later
than five (5) Trading Days after receipt of the Preferred Share Certificate(s)
and at its own expense, issue and deliver to such Holder (or its designee) a new
Preferred Share Certificate (in accordance with Section 21(d)) representing the
number of Preferred Shares not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of Preferred
Shares shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date. In connection with any conversion
of Preferred Shares by a Holder, the number of Preferred Shares converted by
such Holder shall be deducted from the Installment Amount(s) of such Holder
relating to the Installment Date(s) as set forth in the applicable Conversion
Notice.

 

(ii) Company’s Failure to Timely Convert.   If the Company shall fail, for any
reason or for no reason, on or prior to the applicable Share Delivery Deadline,
to issue to such Holder a certificate for the number of shares of Common Stock
to which such Holder is entitled and register such shares of Common Stock on the
Company’s share register or to credit such Holder’s or its designee’s balance
account with DTC for such number of shares of Common Stock to which such Holder
is entitled upon such Holder’s conversion of any Conversion Amount (as the case
may be) (a “Conversion Failure”), and if on or after such Share Delivery
Deadline (provided that such Holder places an order to purchase such shares
before the time the Company remedies such failure) such Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common Stock equal to
all or any portion of the number of shares of Common Stock, issuable upon such
conversion that such Holder so anticipated receiving from the Company, then, in
addition to all other remedies available to such Holder, the Company shall,
within two (2) Business Days after receipt of such Holder’s request and in such
Holder’s discretion, either: (I) pay cash to such Holder in an amount equal to
such Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of
such Holder) (the “Buy-In Price”), at which point the Company’s obligation to so
issue and deliver such certificate or credit such Holder’s balance account with
DTC for the number of shares of Common Stock to which such Holder is entitled
upon such Holder’s conversion hereunder (as the case may be) (and to issue such
shares of Common Stock) shall terminate, or (II) promptly honor its obligation
to so issue and deliver to such Holder a certificate or certificates
representing such shares of Common Stock or credit such Holder’s balance account
with DTC for the number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion hereunder (as the case may be) and pay
cash to such Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of  (x) such number of shares of Common Stock multiplied
by (y) the VWAP of the Common Stock on the attempted Conversion Date. For the
avoidance of doubt, to the extent that the Company makes a payment contemplated
by the foregoing sentence, the applicable portion of the Preferred Shares to
which the Conversion Failure applied shall no longer be outstanding.

 

(iii) Registration; Book-Entry.   At the time of issuance of any Preferred
Shares hereunder, the applicable Holder may, by written request (including by
electronic-mail) to the Company, elect to receive such Preferred Shares in the
form of one or more Preferred Share Certificates or in Book-Entry form. The
Company (or the Transfer Agent, as custodian for the Preferred Shares) shall
maintain a

 

 3 

 

 

register (the “Register”) for the recordation of the names and addresses of the
Holders of each Preferred Share and the Stated Value of the Preferred Shares and
whether the Preferred Shares are held by such Holder in Preferred Share
Certificates or in Book-Entry form (the “Registered Preferred Shares”). The
entries in the Register shall be conclusive and binding for all purposes absent
manifest error. The Company and each Holder of the Preferred Shares shall treat
each Person whose name is recorded in the Register as the owner of a Preferred
Share for all purposes (including, without limitation, the right to receive
payments and Dividends hereunder) notwithstanding notice to the contrary. A
Registered Preferred Share may be assigned, transferred or sold only by
registration of such assignment or sale on the Register. Upon its receipt of a
written request to assign, transfer or sell one or more Registered Preferred
Shares by such Holder thereof, the Company shall record the information
contained therein in the Register and issue one or more new Registered Preferred
Shares in the same aggregate Stated Value as the Stated Value of the surrendered
Registered Preferred Shares to the designated assignee or transferee pursuant to
Section 21, provided that if the Company does not so record an assignment,
transfer or sale (as the case may be) of such Registered Preferred Shares within
two (2) Business Days of such a request, then the Register shall be
automatically deemed updated to reflect such assignment, transfer or sale (as
the case may be). Notwithstanding anything to the contrary set forth in this
Section 4, following conversion of any Preferred Shares in accordance with the
terms hereof, the applicable Holder shall not be required to physically
surrender such Preferred Shares held in the form of a Preferred Share
Certificate to the Company unless (A) the full or remaining number of Preferred
Shares represented by the applicable Preferred Share Certificate are being
converted (in which event such certificate(s) shall be delivered to the Company
as contemplated by this Section 4(c)(iii)) or (B) such Holder has provided the
Company with prior written notice (which notice may be included in a Conversion
Notice) requesting reissuance of Preferred Shares upon physical surrender of the
applicable Preferred Share Certificate. Each Holder and the Company shall
maintain records showing the Stated Value, Dividends and Late Charges converted
and/or paid (as the case may be) and the dates of such conversions and/or
payments (as the case may be) or shall use such other method, reasonably
satisfactory to such Holder and the Company, so as not to require physical
surrender of a Preferred Share Certificate upon conversion. If the Company does
not update the Register to record such Stated Value, Dividends and Late Charges
converted and/or paid (as the case may be) and the dates of such conversions
and/or payments (as the case may be) within two (2) Business Days of such
occurrence, then the Register shall be automatically deemed updated to reflect
such occurrence. In the event of any dispute or discrepancy as to the number of
Preferred Shares to which the record holder is entitled such dispute shall be
resolved in accordance with Section 27. Notwithstanding the foregoing, if the
number of Preferred Shares set forth on the face of a Preferred Share
Certificate is greater than the number of Preferred Shares then outstanding
under such Preferred Share Certificate, the applicable Holder may not transfer
such Preferred Share Certificate into the name of any other Person (other than
an Affiliate of such Holder) unless such Holder first physically surrenders such
Preferred Share Certificate to the Company pursuant to Section 21 below (or
delivers a lost certificate affidavit to the Company, if applicable, pursuant to
Section 21(b) below), whereupon the Company will forthwith issue and deliver to
such Holder (or to such other Person as designated by such Holder to the Company
in writing) a new Preferred Share Certificate of like tenor, representing, in
the aggregate, the remaining number of Preferred Shares outstanding under such
Preferred Share Certificate. A Holder and any transferee or assignee, by
acceptance of a certificate, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of any Preferred Shares, the
number of Preferred Shares represented by such certificate may be less than the
number of Preferred Shares stated on the face thereof. Each Preferred Share
Certificate shall bear the following legend:

 

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS
OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF
SERIES D PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION
4(c)(iii) THEREOF. THE NUMBER OF SHARES OF SERIES D PREFERRED STOCK REPRESENTED
BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES D PREFERRED
STOCK

 

 4 

 

 

STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(iii) OF THE CERTIFICATE OF
DESIGNATIONS RELATING TO THE SHARES OF SERIES D PREFERRED STOCK REPRESENTED BY
THIS CERTIFICATE.

 

(iv) Pro Rata Conversion; Disputes.   In the event that the Company receives a
Conversion Notice from more than one Holder for the same Conversion Date and the
Company can convert some, but not all, of such Preferred Shares submitted for
conversion, the Company shall convert from each Holder electing to have
Preferred Shares converted on such date a pro rata amount of such Holder’s
Preferred Shares submitted for conversion on such date based on the number of
Preferred Shares submitted for conversion on such date by such Holder relative
to the aggregate number of Preferred Shares submitted for conversion on such
date. In the event of a dispute as to the number of shares of Common Stock
issuable to a Holder in connection with a conversion of Preferred Shares, the
Company shall issue to such Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 26.

 

(d) Limitation on Beneficial Ownership.

 

(i) The Company shall not effect the conversion of any of the Preferred Shares
held by a Holder, and such Holder shall not have the right to convert any of the
Preferred Shares held by such Holder pursuant to the terms and conditions of
this Certificate of Designations and any such conversion shall be null and void
and treated as if never made, to the extent that after giving effect to such
conversion, such Holder together with the other Attribution Parties collectively
would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the
shares of Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the aggregate number of
shares of Common Stock beneficially owned by such Holder and the other
Attribution Parties shall include the number of shares of Common Stock held by
such Holder and all other Attribution Parties plus the number of shares of
Common Stock issuable upon conversion of the Preferred Shares with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (A) conversion of the remaining,
nonconverted Preferred Shares beneficially owned by such Holder or any of the
other Attribution Parties and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without
limitation, any convertible notes, convertible preferred stock or warrants)
beneficially owned by such Holder or any other Attribution Party subject to a
limitation on conversion or exercise analogous to the limitation contained in
this Section 4(d)(i). For purposes of this Section 4(d)(i), beneficial ownership
shall be calculated in accordance with Section 13(d) of the 1934 Act. For
purposes of determining the number of outstanding shares of Common Stock a
Holder may acquire upon the conversion of such Preferred Shares without
exceeding the Maximum Percentage, such Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’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 SEC, as the case may be, (y) a more
recent public announcement by the Company or (z) any other written notice by the
Company or the Transfer Agent, if any, setting forth the number of shares of
Common Stock outstanding (the “Reported Outstanding Share Number”). If the
Company receives a Conversion Notice from a Holder at a time when the actual
number of outstanding shares of Common Stock is less than the Reported
Outstanding Share Number, the Company shall notify such Holder in writing of the
number of shares of Common Stock then outstanding and, to the extent that such
Conversion Notice would otherwise cause such Holder’s beneficial ownership, as
determined pursuant to this Section 4(d)(i), to exceed the Maximum Percentage,
such Holder must notify the Company of a reduced number of shares of Common
Stock to be purchased pursuant to such Conversion Notice. For any reason at any
time, upon the written or oral request of any Holder, the Company shall within
two (2) Business Days confirm orally and in writing or by electronic mail to
such 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 Company,
including such Preferred Shares by such Holder and any other Attribution Party,
since the date as of which the Reported Outstanding Share Number was reported.
In the event that the issuance of shares of Common Stock to a Holder upon
conversion of such Preferred Shares results in such Holder and the other
Attribution Parties being deemed to beneficially own, in the aggregate, more
than the Maximum

 

 5 

 

 

Percentage of the number of outstanding shares of Common Stock (as determined
under Section 13(d) of the 1934 Act), the number of shares so issued by which
such Holder’s and the other Attribution Parties’ aggregate beneficial ownership
exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and
void and shall be cancelled ab initio, and such Holder shall not have the power
to vote or to transfer the Excess Shares. For the avoidance of doubt, the
determination of whether an issuance would result in the creation of Excess
Shares shall be based upon the determination made by the Holder of its and its
Attribution Parties’ beneficial ownership based on the Reported Outstanding
Share Number provided by the Company. Upon delivery of a written notice to the
Company, any Holder may from time to time increase (with such increase not
effective until the sixty-first (61st) day after delivery of such notice) or
decrease the Maximum Percentage of such Holder to any other percentage not in
excess of 9.99% as specified in such notice; provided that (i) any such increase
in the Maximum Percentage will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company and (ii) any such increase or
decrease will apply only to such Holder and the other Attribution Parties and
not to any other Holder. For purposes of clarity, the shares of Common Stock
issuable to a Holder pursuant to the terms of this Certificate of Designations
in excess of the Maximum Percentage shall not be deemed to be beneficially owned
by such Holder for any purpose including for purposes of Section 13(d) or
Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert such Preferred
Shares pursuant to this paragraph shall have any effect on the applicability of
the provisions of this paragraph with respect to any subsequent determination of
convertibility. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 4(d)(i) to the extent necessary to correct this paragraph (or any
portion of this paragraph) which may be defective or inconsistent with the
intended beneficial ownership limitation contained in this Section 4(d)(i) or to
make changes or supplements necessary or desirable to properly give effect to
such limitation. The limitation contained in this paragraph may not be waived
and shall apply to a successor holder of such Preferred Shares.

 

(ii) Principal Market Regulation.   The Company shall not issue any shares of
Common Stock upon conversion of any Preferred Shares or otherwise pursuant to
the terms of this Certificate of Designations if the issuance of such shares of
Common Stock would exceed 18,531,213 shares of Common Stock (as adjusted for any
stock dividend, stock split, stock combination, reclassification or similar
transaction occurring after the Subscription Date) (the number of shares which
may be issued without violating such rules and regulations, the “Exchange Cap”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules of
the Principal Market for issuances of shares of Common Stock in excess of such
amount. Until such approval is obtained, no Holder shall be issued in the
aggregate, upon conversion or exercise (as the case may be) of any Preferred
Shares, shares of Common Stock in an amount greater than the product of  (i) the
Exchange Cap as of the Initial Issuance Date multiplied by (ii) the quotient of 
(1) the aggregate number of Preferred Shares issued to such Holder on the
Initial Issuance Date divided by (2) the aggregate number of Preferred Shares
issued to all Holders on the Initial Issuance Date (with respect to each Holder,
the “Exchange Cap Allocation”). In the event that any Holder shall sell or
otherwise transfer any of such Holder’s Preferred Shares, the transferee shall
be allocated a pro rata portion of such Holder’s Exchange Cap Allocation with
respect to such portion of such Preferred Shares so transferred, and the
restrictions of the prior sentence shall apply to such transferee with respect
to the portion of the Exchange Cap Allocation so allocated to such transferee.
Upon conversion in full of a holder’s Preferred Shares, the difference (if any)
between such holder’s Exchange Cap Allocation and the number of shares of Common
Stock actually issued to such holder upon such holder’s conversion in full of
such Preferred Shares shall be allocated, to the respective Exchange Cap
Allocations of the remaining Holders on a pro rata basis in proportion to the
shares of Common Stock underlying the Preferred Shares then held by each such
holder of Preferred Shares. In the event that the Company is prohibited from
issuing any shares of Common Stock pursuant to this Section 4(d)(ii) (the
“Exchange Cap Shares”) to a Holder at any time after the Stockholder Meeting
Outside Date, the Company shall pay cash to such Holder in exchange for the
redemption of such number of Preferred Shares held by the Holder that are not
convertible into such Exchange Cap Shares at a price equal to the product of 
(x) such number of Exchange Cap Shares and (y) the Closing Sale Price on the
Trading Day immediately preceding the date such Holder delivers the applicable
Conversion Notice with respect to such Exchange Cap Shares to the Company.

 

 6 

 

 

(e) Triggering Event Conversion.

 

(i) General.   Subject to Section 4(d), at any time during the period commencing
on the date of the occurrence of a Triggering Event (as defined in Section 5(a))
and ending on the later to occur of  (x) the date of the cure of such Triggering
Event and (y) ten (10) Trading Days after the date the Company delivers written
notice to such Holder of such Triggering Event, a Holder may, at such Holder’s
option, by delivery of a Conversion Notice to the Company (the date of any such
Conversion Notice, each an “Triggering Event Conversion Date”), convert all, or
any number of Preferred Shares (such Conversion Amount of the Preferred Shares
to be converted pursuant to this Section 4(e), the “Triggering Event Conversion
Amount”) into shares of Common Stock at the Triggering Event Conversion Price
(each, a “Triggering Event Conversion”).

 

(ii) Mechanics of Triggering Event Conversion.   On any Triggering Event
Conversion Date, a Holder may voluntarily convert any Triggering Event
Conversion Amount pursuant to Section 4(c) (with “Triggering Event Conversion
Price” replacing “Conversion Price” for all purposes hereunder with respect to
such Triggering Event Conversion and “Triggering Event Conversion Amount”
replacing “Conversion Amount” in clause (x) of the definition of Conversion Rate
above with respect to such Triggering Event Conversion) by designating in the
Conversion Notice delivered pursuant to this Section 4(e) of this Certificate of
Designations that such Holder is electing to use the Triggering Event Conversion
Price for such conversion. Notwithstanding anything to the contrary in this
Section 4(e), but subject to Section 4(d), until the Company delivers shares of
Common Stock representing the applicable Triggering Event Conversion Amount to
such Holder, such Triggering Event Conversion Amount may be converted by such
Holder into shares of Common Stock pursuant to Section 4(c) without regard to
this Section 4(e).

 

5. Triggering Event Redemptions.

 

(a) Triggering Event.   Each of the following events shall constitute a
“Triggering Event” and each of the events in clauses (vii), (viii) and (ix)
shall constitute a “Bankruptcy Triggering Event”:

 

(i) any of the Preferred Shares or shares of Common Stock issuable upon
conversion of the Preferred Shares are not freely tradable without restriction
by any of the Holders (subject to any restrictions imposed on any Holder due to
such Holder’s Affiliate status with respect to the Company);

 

(ii) the suspension from trading or failure of the Common Stock to be trading or
listed (as applicable) on an Eligible Market for a period of five
(5) consecutive Trading Days;

 

(iii) other than with respect to any Authorized Share Failure (as defined in
Section 11(b)), the Company’s notice, written or oral, to any Holder, including,
without limitation, by way of public announcement or through any of its agents,
at any time, of its intention not to comply, as required, with a request for
conversion of any Preferred Shares into shares of Common Stock that is requested
in accordance with the provisions of this Certificate of Designations, other
than pursuant to Section 4(d) hereof;

 

(iv) following the tenth (10th) consecutive day that a Holder’s Authorized Share
Allocation (as defined in Section 11(a) below) is less than 150% of the number
of shares of Common Stock that such Holder would be entitled to receive upon a
conversion, in full, of all of the Preferred Shares then held by such Holder
(without regard to any limitations on conversion set forth in this Certificate
of Designations), except, solely with respect to the first occurrence of an
Authorized Share Failure hereunder, to the extent the Company is complying with
the terms set forth in Section 11(b) below;

 

(v) the Company’s failure to pay to any Holder any amount when and as due under
this Certificate of Designations (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder), (whether or not
permitted pursuant to the DGCL), except, in each such case only if such failure
remains uncured for a period of at least five (5) Trading Days;

 

(vi) the Company, on two or more occasions, either (A) fails to cure a
Conversion Failure by delivery of the required number of shares of Common Stock
within five (5) Trading Days after the applicable Conversion Date or (B) fails
to remove any restrictive legend on any certificate at a time when such
restrictive legend is no longer required under applicable federal or state
securities laws, and such failure remains uncured for at least five (5) Trading
Days;

 

 7 

 

 

(vii) bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors shall be instituted by or against the
Company or any Significant Subsidiary and, if instituted against the Company or
any Significant Subsidiary by a third party, shall not be dismissed within sixty
(60) days of their initiation;

 

(viii) the commencement by the Company or any Significant Subsidiary of a
voluntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any Significant Subsidiary in an involuntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal,
state or foreign law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
Significant Subsidiary or of any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or the execution of a
composition of debts, or the occurrence of any other similar federal, state or
foreign proceeding, or the admission by it in writing of its inability to pay
its debts generally as they become due, the taking of corporate action by the
Company or any Significant Subsidiary in furtherance of any such action or the
taking of any action by any Person to commence a Uniform Commercial Code
foreclosure sale or any other similar action under federal, state or foreign law
with respect to a material portion of the Company’s or any Significant
Subsidiary’s assets;

 

(ix) the entry by a court of  (i) a decree, order, judgment or other similar
document in respect of the Company or any Significant Subsidiary of a voluntary
or involuntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or (ii) a decree,
order, judgment or other similar document adjudging the Company or any
Significant Subsidiary as bankrupt or insolvent, or approving as properly filed
a petition seeking liquidation, reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary under
any applicable federal, state or foreign law or (iii) a decree, order, judgment
or other similar document appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
Significant Subsidiary or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree, order, judgment or other similar document or any such other
decree, order, judgment or other similar document unstayed and in effect for a
period of thirty (30) consecutive days;

 

(x) a final judgment or judgments for the payment of money aggregating in excess
of  $750,000 are rendered against the Company and/or any of its Subsidiaries and
which judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged, settled or stayed pending appeal, or are not discharged within sixty
(60) days after the expiration of such stay; provided, however, any judgment
which is covered by insurance or an indemnity from a credit worthy party shall
not be included in calculating the $750,000 amount set forth above so long as
the Company provides each Holder a written statement from such insurer or
indemnity provider (which written statement shall be reasonably satisfactory to
the Required Holders) to the effect that such judgment is covered by insurance
or an indemnity and the Company or such Subsidiary (as the case may be) will
receive the proceeds of such insurance or indemnity within thirty (30) days of
the issuance of such judgment;

 

(xi) the Company and/or any Subsidiary, individually or in the aggregate, either
(i) fails to pay, when due, or within any applicable grace period, any payment
with respect to any Indebtedness in excess of $750,000 due to any third party
(other than, with respect to unsecured Indebtedness only, payments contested by
the Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for
the payment thereof in accordance with GAAP) or is otherwise in default, breach
or violation of any agreement for monies owed or owing in an amount in excess
of  $750,000, which breach or violation permits the other party thereto to
declare a default or otherwise redeem or accelerate amounts due thereunder, or
(ii) suffer to

 

 8 

 

 

exist any other circumstance or event that would, with or without the passage of
time or the giving of notice, result in a default or event of default under any
agreement binding the Company or any Subsidiary, which default or event of
default would or is reasonably expected to have a Material Adverse Effect;

 

(xii) other than as specifically set forth in another clause of this
Section 5(a), the Company or any Subsidiary breaches any covenant or other term
of this Certificate of Designations in any material respect (other than
covenants subject to material adverse effect or materiality, which may not be
breached in any respect), except, in the case of a breach of a covenant or other
term that is curable, only if such breach remains uncured for a period of five
(5) consecutive Trading Days;

 

(xiii) a false or inaccurate certification (including a false or inaccurate
deemed certification) by the Company that either (A) the Equity Conditions are
satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether
any Triggering Event has occurred;

 

(xiv) any breach or failure in any respect by the Company to comply with any
provision of Section 15 of this Certificate of Designations, except, in the case
of a breach of a covenant or other term or condition that is curable, only if
such breach remains uncured for a period of five (5) consecutive Trading Days;
and

 

(xv) any provision of this Certificate of Designations shall at any time for any
reason (other than pursuant to the express terms hereof) cease to be valid and
binding on or enforceable against the parties thereto, or the validity or
enforceability thereof shall be contested, directly or indirectly, by the
Company or any Subsidiary, or a proceeding shall be commenced by the Company or
any Subsidiary seeking to establish the invalidity or unenforceability thereof.

 

(b) Notice of a Triggering Event; Redemption Right.   Upon the occurrence of a
Triggering Event with respect to the Preferred Shares, the Company shall within
two (2) Business Days deliver written notice thereof via electronic mail and
overnight courier (with next day delivery specified) (an “Triggering Event
Notice”) to each Holder. At any time after the earlier of a Holder’s receipt of
a Triggering Event Notice and such Holder becoming aware of a Triggering Event
(such earlier date, the “Triggering Event Right Commencement Date”) and ending
(such ending date, the “Triggering Event Right Expiration Date”, and each such
period, an “Triggering Event Redemption Right Period”) on the twentieth
(20th) Trading Day after the later of  (x) the date such Triggering Event is
cured and (y) such Holder’s receipt of a Triggering Event Notice that includes
(I) a reasonable description of the applicable Triggering Event, (II) a
certification as to whether, in the opinion of the Company, such Triggering
Event is capable of being cured and, if applicable, a reasonable description of
any existing plans of the Company to cure such Triggering Event and (III) a
certification as to the date the Triggering Event occurred and, if cured on or
prior to the date of such Triggering Event Notice, the applicable Triggering
Event Right Expiration Date, such Holder may require the Company to redeem
(regardless of whether such Triggering Event has been cured on or prior to the
Triggering Event Right Expiration Date), subject to Section 5(c), all or any of
the Preferred Shares by delivering written notice thereof  (the “Triggering
Event Redemption Notice”) to the Company, which Triggering Event Redemption
Notice shall indicate the number of the Preferred Shares such Holder is electing
to redeem. Each of the Preferred Shares subject to redemption by the Company
pursuant to this Section 5(b) shall be redeemed by the Company at a price equal
to the greater of  (i) the product of  (A) the Conversion Amount to be redeemed
multiplied by (B) the Redemption Premium and (ii) the product of  (X) the
Conversion Rate with respect to the Conversion Amount in effect at such time as
such Holder delivers a Triggering Event Redemption Notice multiplied by (Y) the
greatest Closing Sale Price of the Common Stock on any Trading Day during the
period commencing on the date immediately preceding such Triggering Event and
ending on the date the Company makes the entire payment required to be made
under this Section 5(b) (the “Triggering Event Redemption Price”). Redemptions
required by this Section 5(b) shall be made in accordance with the provisions of
Section 12. To the extent redemptions required by this Section 5(b) are deemed
or determined by a court of competent jurisdiction to be prepayments of the
Preferred Shares by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything to the contrary in this
Section 5(b), but subject to Section 4(d), until the Triggering Event Redemption
Price (together with any Late Charges thereon) is paid in full, the Conversion
Amount submitted for

 

 9 

 

 

redemption under this Section 5(b) (together with any Late Charges thereon) may
be converted, in whole or in part, by such Holder into Common Stock pursuant to
the terms of this Certificate of Designations. In the event of a partial
redemption of the Preferred Shares held by a Holder pursuant hereto, the number
of Preferred Shares of such Holder redeemed shall be deducted from the
Installment Amount(s) of such Holder relating to the applicable Installment
Date(s) as set forth in the Triggering Event Redemption Notice. In the event of
the Company’s redemption of any of the Preferred Shares under this Section 5(b),
a Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for such Holder.
Accordingly, any redemption premium due under this Section 5(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty.

 

(c) Mandatory Redemption upon Bankruptcy Triggering Event.   Notwithstanding
anything to the contrary herein, and notwithstanding any conversion that is then
required or in process, upon any Bankruptcy Triggering Event occurring prior to
or following the Maturity Date, the Company shall immediately redeem, in cash,
each of the Preferred Shares then outstanding at a redemption price equal to the
applicable Triggering Event Redemption Price (calculated as if such Holder shall
have delivered the Triggering Event Redemption Notice immediately prior to the
occurrence of such Bankruptcy Triggering Event), without the requirement for any
notice or demand or other action by any Holder or any other Person, provided
that a Holder may, in its sole discretion, waive such right to receive payment
upon a Bankruptcy Triggering Event, in whole or in part, and any such waiver
shall not affect any other rights of such Holder or any other Holder hereunder,
including any other rights in respect of such Bankruptcy Triggering Event, any
right to conversion, and any right to payment of such Triggering Event
Redemption Price to another Holder or any other Redemption Price, as applicable.

 

6. Rights Upon Fundamental Transactions.

 

(a) Assumption.   The Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of the
obligations of the Company under this Certificate of Designations in accordance
with the provisions of this Section 6(a) pursuant to written agreements in form
and substance reasonably satisfactory to the Required Holders, including
agreements to deliver to each Holder in exchange for such Preferred Shares a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Certificate of Designations, including,
without limitation, having a stated value and dividend rate equal to the Stated
Value and Default Dividend Rate and having similar ranking to the Preferred
Shares, and reasonably satisfactory to the Required Holders. Upon the occurrence
of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Designations referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Certificate of Designations with the same effect as if such
Successor Entity had been named as the Company herein and therein. In addition
to the foregoing, upon consummation of a Fundamental Transaction, the Successor
Entity shall deliver to each Holder confirmation that there shall be issued upon
conversion or redemption of the Preferred Shares at any time after the
consummation of such Fundamental Transaction, in lieu of the shares of Common
Stock (or other securities, cash, assets or other property (except such items
still issuable under Sections 7(b) and 18, which shall continue to be receivable
thereafter)) issuable upon the conversion or redemption of the Preferred Shares
prior to such Fundamental Transaction, such shares of common stock (or their
equivalent) of the Successor Entity (including its Parent Entity) which each
Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had all the Preferred Shares held by each Holder been
converted immediately prior to such Fundamental Transaction (without regard to
any limitations on the conversion of the Preferred Shares contained in this
Certificate of Designations), as adjusted in accordance with the provisions of
this Certificate of Designations. Notwithstanding the foregoing, any Holder may
elect, at its sole option, by delivery of written notice to the Company to waive
this Section 6(a) to permit the Fundamental Transaction without the assumption
of the Preferred Shares. The provisions of this Section 6 shall apply similarly
and equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of the Preferred
Shares.

 

 10 

 

 

(b) Change of Control Redemption Right.   No sooner than twenty (20) Trading
Days nor later than ten (10) Trading Days prior to the consummation of a Change
of Control (the “Change of Control Date”), but not prior to the public
announcement of such Change of Control, the Company shall deliver written notice
thereof via electronic mail and overnight courier (next day delivery selected)
to each Holder (a “Change of Control Notice”). At any time during the period
beginning after a Holder’s receipt of a Change of Control Notice or such Holder
becoming aware of a Change of Control if a Change of Control Notice is not
delivered to such Holder in accordance with the immediately preceding sentence
(as applicable) and ending on the later of twenty (20) Trading Days after (A)
consummation of such Change of Control or (B) the date of receipt of such Change
of Control Notice, such Holder may require the Company to redeem all or any
portion of such Holder’s Preferred Shares by delivering written notice thereof 
(“Change of Control Redemption Notice”) to the Company, which Change of Control
Redemption Notice shall indicate the number of Preferred Shares such Holder is
electing to have the Company redeem. Each Preferred Share subject to redemption
pursuant to this Section 6(b) shall be redeemed by the Company in cash at a
price equal to the greatest of  (i) the product of  (x) the Redemption Premium
multiplied by (y) the Conversion Amount being redeemed, (ii) the product of
(x) the Conversion Amount being redeemed multiplied by (y) the quotient
determined by dividing (I) the greatest Closing Sale Price of the shares of
Common Stock during the period beginning on the date immediately preceding the
earlier to occur of  (1) the consummation of the applicable Change of Control
and (2) the public announcement of such Change of Control and ending on the date
such Holder delivers the Change of Control Redemption Notice by (II) the
Conversion Price then in effect and (iii) the product of  (x) the Conversion
Amount being redeemed multiplied by (y) the quotient of  (A) the aggregate cash
consideration and the aggregate cash value of any non-cash consideration per
share of Common Stock to be paid to such holders of the shares of Common Stock
upon consummation of such Change of Control (any such non-cash consideration
constituting publicly-traded securities shall be valued at the highest of the
Closing Sale Price of such securities as of the Trading Day immediately prior to
the consummation of such Change of Control, the Closing Sale Price of such
securities on the Trading Day immediately following the public announcement of
such proposed Change of Control and the Closing Sale Price of such securities on
the Trading Day immediately prior to the public announcement of such proposed
Change of Control) divided by (B) the Conversion Price then in effect (the
“Change of Control Redemption Price”). Redemptions required by this Section 6(b)
shall have priority to payments to all other stockholders of the Company in
connection with such Change of Control. To the extent redemptions required by
this Section 6(b) are deemed or determined by a court of competent jurisdiction
to be prepayments of the Preferred Shares by the Company, such redemptions shall
be deemed to be voluntary prepayments. Notwithstanding anything to the contrary
in this Section 6(b), but subject to Section 4(d), until the applicable Change
of Control Redemption Price (together with any Late Charges thereon) is paid in
full to the applicable Holder, the Preferred Shares submitted by such Holder for
redemption under this Section 6(b) may be converted, in whole or in part, by
such Holder into Common Stock pursuant to Section 4 or in the event the
Conversion Date is after the consummation of such Change of Control, stock or
equity interests of the Successor Entity substantially equivalent to the
Company’s shares of Common Stock pursuant to Section 4. In the event of a
partial redemption of the Preferred Shares held by a Holder pursuant hereto, the
number of Preferred Shares of such Holder redeemed shall be deducted from the
Installment Amount(s) of such Holder relating to the applicable Installment
Date(s) as set forth in the Change of Control Redemption Notice. In the event of
the Company’s redemption of any of the Preferred Shares under this Section 6(b),
such Holder’s damages would be uncertain and difficult to estimate because of
the parties’ inability to predict future interest rates and the uncertainty of
the availability of a suitable substitute investment opportunity for a Holder.
Accordingly, any redemption premium due under this Section 6(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty. The Company
shall make payment of the applicable Change of Control Redemption Price
concurrently with the consummation of such Change of Control if a Change of
Control Redemption Notice is received prior to the consummation of such Change
of Control and within two (2) Trading Days after the Company’s receipt of such
notice otherwise (the “Change of Control Redemption Date”). Redemptions required
by this Section 6 shall be made in accordance with the provisions of Section 12.

 

 11 

 

 

7. Right of Participation; Rights Upon Issuance of Purchase Rights and Other
Corporate Events.

 

(a) Right of Participation.

 

(i) From the date hereof until first (1st) anniversary of the Initial Issuance
Date, the Company will not (A) directly or indirectly, file any registration
statement with the SEC with respect to any Subsequent Placement (as defined
below) and shall not file any prospectus supplement with respect to any
Subsequent Placement or (B) directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of  (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or its
Subsidiaries’ equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a “Subsequent Placement”) unless the Company shall have first
complied with this Section 7(a).

 

(ii) The Company shall deliver to each Holder an irrevocable written notice (the
“Offer Notice”) of any proposed or intended issuance or sale (the “Offer”) of
the securities being offered (the “Offered Securities”) in a Subsequent
Placement, which Offer Notice shall (A) identify and describe the Offered
Securities, (B) describe the anticipated price and other material terms upon
which they are to be issued or sold, and the number or amount of the Offered
Securities to be issued or sold, (C) identify the Persons (if known) to which or
with which the Offered Securities are to be offered, issued or sold and (D)
offer to issue and sell to such Holders at least thirty-five percent (35%) of
the Offered Securities, allocated among such Holders (a) based on such Holder’s
pro rata ownership of the total number of Preferred Shares outstanding on the
Subscription Date (the “Basic Amount”) and (b) with respect to each Holder that
elects to purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Holders as such Holder
shall indicate it will purchase or acquire should the other Holders subscribe
for less than their Basic Amounts (the “Undersubscription Amount”), which
process shall be repeated until the Holders shall have an opportunity to
subscribe for any remaining Undersubscription Amount; provided that (i) the
Company shall promptly notify each Holder of any changes to the anticipated
price and other material terms of the Offered Securities after the Offer Notice
is sent and (ii) the Company shall provide each Holder reasonable notice (which
shall not be less than four (4) hours) of the final price (or formula therefor)
of the Offered Securities before the Holders are required to provide the Company
any notice of their election to accept such Offer pursuant to Section 7(a)(iii)
below.

 

(iii) To accept an Offer, in whole or in part, such Holder must deliver a
written notice to the Company prior to the end of the tenth (10th) Business Day
after such Holder’s receipt of the Offer Notice (the “Offer Period”), setting
forth the portion of such Holder’s Basic Amount that such Holder elects to
purchase and, if such Holder shall elect to purchase all of its Basic Amount,
the Undersubscription Amount, if any, that such Holder elects to purchase (in
either case, the “Notice of Acceptance”). For the avoidance of doubt, in the
event a Holder fails to timely deliver a Notice of Acceptance, such Holder shall
be deemed to have declined to participate in such Subsequent Placement. If the
Basic Amounts elected to be subscribed for by all Holders are less than the
total of all of the Basic Amounts, then each Holder who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has elected to be subscribed for; provided, however, that if the
Undersubscription Amounts elected to be subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts subscribed for
(the “Available Undersubscription Amount”), each Holder who has elected to be
subscribed for any Undersubscription Amount shall be entitled to purchase only
that portion of the Available Undersubscription Amount as the Basic Amount of
such Holder bears to the total Basic Amounts of all Holder that have elected to
be subscribed for Undersubscription Amounts, subject to rounding by the Company
to the extent its deems reasonably necessary. Notwithstanding anything to the
contrary contained herein, if the Company desires to modify or amend the terms
and conditions of the Offer in any material respect, prior to the expiration of
the Offer Period, the Company may deliver to the Holders a new Offer Notice and
the Offer Period shall expire on the second (2nd) Business Day after such
Holder’s receipt of such new Offer Notice.

 

 12 

 

 

(iv) The Company shall have five (5) Business Days from the expiration of the
Offer Period above (i) to offer, issue or sell all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Holders
(the “Refused Securities”) pursuant to a definitive agreement (the “Subsequent
Placement Agreement”), but only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, if any and (b) either (x) the consummation,
or the expected consummation, of the transactions contemplated by such
Subsequent Placement Agreement or (y) if a Subsequent Placement Agreement is
executed, the termination of such Subsequent Placement Agreement, which shall be
filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any material documents contemplated therein filed as
exhibits thereto.

 

(v) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 7(a)(iv) above), then each Holder may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Holder elected to purchase
pursuant to Section 7(a)(iii) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the Company
actually proposes to issue or sell (including Offered Securities to be issued or
sold to Holders pursuant to Section 7(a)(iv) above prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Holder so elects to reduce the number or
amount of Offered Securities specified in its Notice of Acceptance, the Company
may not issue or sell more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Holders in accordance with Section 7(a)(ii) above.

 

(vi) Upon the closing of the issuance or sale of all or less than all of the
Refused Securities, the Holders shall acquire from the Company, and the Company
shall issue to the Holders, the number or amount of Offered Securities specified
in the Notices of Acceptance, as reduced pursuant to Section 7(a)(iv) above if
the Holders have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Holders of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the Holders
of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Holders and their respective counsel;
provided that, for the avoidance of doubt, this paragraph shall not create any
obligation on the Company to amend or modify, or seek to amend or modify, any of
the terms or provisions of the Subsequent Placement Agreement, or otherwise
prohibit the Company from consummating the respective Subsequent Placement of
Refused Securities in accordance with the applicable Subsequent Placement
Agreement.

 

(vii) Any Offered Securities not acquired by the Holders or other Persons in
accordance with Section 7(a)(iv) above may not be issued or sold until they are
again offered to the Holders under the procedures specified in this
Section 7(a).

 

(viii) The Company and the Holders agree that if any Holder elects to
participate in the Offer, (x) neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the “Subsequent Placement Documents”) shall include any term or
provisions whereby any Holder shall be required to agree to any restrictions in
trading as to any securities of the Company owned by such Holder prior to such
Subsequent Placement and (y) the Holders shall be entitled to the same
registration rights provided to other investors in the Subsequent Placement.

 

(ix) Notwithstanding anything to the contrary in this Section 7(a) and unless
otherwise agreed to by the Holders, the Company shall either confirm in writing
to the Holders that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that the Holders will not be in
possession of material non-public information, by the fifteenth (15th) Business
Day following delivery of the Offer Notice. If by the fifteenth (15th) Business
Day following delivery of the Offer Notice no

 

 13 

 

 

public disclosure regarding a transaction with respect to the Offered Securities
has been made, and no notice regarding the abandonment of such transaction has
been received by the Holders, such transaction shall be deemed to have been
abandoned and the Holders shall not be deemed to be in possession of any
material, non-public information with respect to the Company. Should the Company
decide to pursue such transaction with respect to the Offered Securities, the
Company shall provide each Holder with another Offer Notice and each Holder will
again have the right of participation set forth in this Section 7(a). The
Company shall not be permitted to deliver more than one such Offer Notice to the
Holders in any 60 day period (other than the Offer Notices contemplated by the
last sentence of Section 7(a)(iii) of this Certificate of Designations).
Notwithstanding anything to the contrary herein, in no event shall delivery of
any notice in accordance with the requirements of this Section 7(a) constitute
or be deemed to constitute a breach of the Company’s obligation not to provide
material non-public information regarding the Company to any Holder or any other
Person; provided the Company then complies with the applicable requirement to
publicly disclose such material, nonpublic information pursuant to this
Section 7(a)(ix).

 

(x) This Section 7(a) shall not apply in connection with the issuance or deemed
issuance of any Common Stock by the Company: (A) under any employee benefit plan
which has been approved by the Board, pursuant to which the Company’s securities
may be issued to any employee, officer or, director or consultant for services
provided to the Company; (B) with respect to the Preferred Shares pursuant to
the terms of this Certificate of Designations; (C) upon conversion, exercise or
exchange of any Options or Convertible Securities which are outstanding on the
day immediately preceding the Subscription Date, provided that such issuance of
Common Stock upon exercise of such Options or Convertible Securities is made
pursuant to the terms of such Options or Convertible Securities in effect on the
date immediately preceding the Subscription Date and such Options or Convertible
Securities are not amended, modified or changed on or after the Subscription
Date to increase the number of such securities or to decrease the exercise
price, exchange price or conversion price of such securities (other than in
connection with stock splits or combinations) or to extend the term of such
securities; or (D) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that any such issuance shall only be to a Person which is,
itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities for
the purpose of raising capital or to an entity whose primary business is
investing in securities.

 

(b) Purchase Rights.   In addition to any adjustments pursuant to Section 8
below, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to all of the record holders of any class of Common
Stock (the “Purchase Rights”), then each Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of all the Preferred
Shares (without taking into account any limitations or restrictions on the
convertibility of the Preferred Shares) held by such Holder immediately prior to
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that such
Holder’s right to participate in any such Purchase Right would result in such
Holder and the other Attribution Parties exceeding the Maximum Percentage, then
such Holder shall not be entitled to participate in such Purchase Right to such
extent (and shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Purchase Right (and beneficial ownership) to
such extent) and such Purchase Right to such extent shall be held in abeyance
for such Holder until the earlier of  (i) such time or times, if ever, as its
right thereto would not result in such Holder and the other Attribution Parties
exceeding the Maximum Percentage) and (ii) the expiration date, the termination
date, the maturity date or other similar provision of such Purchase Rights, at
which time or times such Holder shall be granted such right (and any Purchase
Right granted, issued or sold on such initial Purchase Right or on any
subsequent Purchase Right to be held similarly in abeyance) to the same extent
as if there had been no such limitation.

 

 14 

 

 

(c) Other Corporate Events.   In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provision to
ensure that each Holder will thereafter have the right to receive upon a
conversion of all the Preferred Shares held by such Holder (i) in addition to
the shares of Common Stock receivable upon such conversion, such securities or
other assets to which such Holder would have been entitled with respect to such
shares of Common Stock had such shares of Common Stock been held by such Holder
upon the consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of the Preferred Shares
contained in this Certificate of Designations) or (ii) in lieu of the shares of
Common Stock otherwise receivable upon such conversion, such securities or other
assets received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as such Holder would have
been entitled to receive had the Preferred Shares held by such Holder initially
been issued with conversion rights for the form of such consideration (as
opposed to shares of Common Stock) at a conversion rate for such consideration
commensurate with the Conversion Rate. Provision made pursuant the proceeding
sentence shall be in a form and substance satisfactory to the Holder. The
provisions of this Section 7 shall apply similarly and equally to successive
Corporate Events and shall be applied without regard to any limitations on the
conversion or redemption of the Preferred Shares contained in this Certificate
of Designations.

 

8. Rights Upon Issuance of Other Securities.

 

(a) Adjustment of Conversion Price upon Subdivision or Combination of Common
Stock. Without limiting any provision of Section 7 or Section 18, if the Company
at any time on or after the Subscription Date subdivides (by any stock split,
stock dividend, stock combination, recapitalization or other similar
transaction) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. Without limiting any provision
of Section 7 or Section 18, if the Company at any time on or after the
Subscription Date combines (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 8(a) shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 8(a) occurs
during the period that a Conversion Price is calculated hereunder, then the
calculation of such Conversion Price shall be adjusted appropriately to reflect
such event.

 

(b) Holder’s Right of Adjusted Conversion Price.   In addition to and not in
limitation of the other provisions of this Section 8(b), at any time any
Preferred Shares remain outstanding, if the Company in any manner issues or
sells or enters into any agreement to issue or sell, any Common Stock, Options
or Convertible Securities (any such securities, “Variable Price Securities”)
after the Subscription Date that are issuable pursuant to such agreement or
convertible into or exchangeable or exercisable for shares of Common Stock
pursuant to such Options or Convertible Securities, as applicable, at a price
which varies or may vary with the market price of the shares of Common Stock,
including by way of one or more reset(s) to a fixed price, but exclusive of such
formulations reflecting customary anti-dilution provisions (such as share
splits, share combinations, share dividends and similar transactions) (each of
the formulations for such variable price being herein referred to as, the
“Variable Price”), the Company shall provide written notice thereof via
electronic mail and overnight courier (next day delivery selected) to each
Holder on the date of such agreement and/or the issuance of such shares of
Common Stock, Convertible Securities or Options, as applicable; provided,
however, that if the applicable Variable Price Securities are shares of Common
Stock sold pursuant to the ATM Agreement (as defined below), and (i) if the
difference between the Variable Price of such shares of Common Stock sold
pursuant to the ATM Agreement (the “ATM Shares”) and the lower of  (A) last
Variable Price communicated to the Holders or (B) the Conversion Price (such
lower price, the “Lowest Known Price”) is less than 8%, then the Company shall
provide written notice to each Holder on the last Business Day of each month in
which such ATM Shares are sold, and (ii) if the difference between the Variable
Price of such ATM Shares and the Lowest Known Price is equal to or greater than
8%, then the Company shall provide

 

 15 

 

 

written notice to each Holder on the date of sale of such ATM Shares. From and
after the date the Company enters into such agreement or issues any such
Variable Price Securities, each Holder shall have the right, but not the
obligation, in its sole discretion to substitute the Variable Price for the
Conversion Price upon conversion of the Preferred Shares by designating in the
Conversion Notice delivered upon any conversion of Preferred Shares that solely
for purposes of such conversion such Holder is relying on the Variable Price
rather than the Conversion Price then in effect; provided, however, that if the
Conversion Notice does not reference a Variable Price and the lowest Variable
Price is less than the Conversion Price, then such lowest Variable Price shall
be automatically substituted for the Conversion Price. A Holder’s election to
rely on a Variable Price for a particular conversion of Preferred Shares shall
not obligate such Holder to rely on a Variable Price for any future conversions
of Preferred Shares. For clarity, any shares of Common Stock sold following the
Subscription Date pursuant to the Company’s existing At Market Issuance Sales
Agreement (the “ATM Agreement”), dated June 13, 2018, by and between the Company
and B. Riley FBR, Inc. and Oppenheimer & Co. Inc., or any similar or replacement
agreement, shall constitute Variable Price Securities with a Variable Price
equal to the lowest price per share at which a share of Common Stock is sold
pursuant to the ATM Agreement. For clarity, if the Company in any manner issues
or sells or enters into any agreement to issue or sell, any Common Stock,
Options or Convertible Securities at a fixed price (and in the case of Options
or Convertible Securities, the exercise price or conversion price is also set at
a fixed price), which may include customary adjustments for share splits, share
combinations, share dividends and similar transactions, any such securities
shall not be deemed Variable Price Securities for any purpose hereunder.

 

(c) Calculations.   All calculations under this Section 8 shall be made by
rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The sales price of any Variable Price Security (including, for clarity, shares
of Common Stock sold pursuant to the ATM Agreement) shall be equal to the gross
sales price before deducting any sales commissions or broker fees. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

 

(d) Voluntary Adjustment by Company.   The Company may at any time any Preferred
Shares remain outstanding reduce the then current Conversion Price to any amount
and for any period of time deemed appropriate by the Board.

 

9. Installment Conversion or Installment Redemption.

 

(a) General.   On each applicable Installment Date, provided there has been no
Equity Conditions Failure, the Company shall pay to each Holder the applicable
Installment Amount due on such date by converting such Installment Amount in
accordance with this Section 9 (an “Installment Conversion”); provided, however,
that the Company may, at its option following notice to each Holder as set forth
below, pay the Installment Amount by redeeming such Installment Amount in cash
(an “Installment Redemption”) or by any combination of an Installment Conversion
and an Installment Redemption so long as all of the outstanding applicable
Installment Amount due on any Installment Date shall be converted and/or
redeemed by the Company on the applicable Installment Date, subject to the
provisions of this Section 9. On or prior to the date which is the eleventh
(11th) Trading Day prior to each Installment Date, but not earlier than the
fifteenth (15th) Trading Day prior to the applicable Installment Date (each, an
“Installment Notice Due Date”), the Company shall deliver written notice (each,
an “Installment Notice” and the date all Holders receive such notice is referred
to as to the “Installment Notice Date”), to each Holder and such Installment
Notice shall (i) either (A) confirm that the applicable Installment Amount of
such Holder shall be converted in whole pursuant to an Installment Conversion or
(B) (1) state that the Company elects to redeem for cash, or is required to
redeem for cash in accordance with the provisions of this Certificate of
Designations, in whole or in part, the applicable Installment Amount pursuant to
an Installment Redemption and (2) specify the portion of such Installment Amount
which the Company elects or is required to redeem pursuant to an Installment
Redemption (such amount to be redeemed in cash, the “Installment Redemption
Amount”) and the portion of the applicable Installment Amount, if any, with
respect to which the Company will, and is permitted to, effect an Installment
Conversion (such amount of the applicable Installment Amount so specified to be
so converted pursuant to this Section 9 is referred to herein as the
“Installment Conversion Amount”), which amounts when added together, must equal
the entire applicable Installment Amount

 

 16 

 

 

and (ii) if the applicable Installment Amount is to be paid, in whole or in
part, pursuant to an Installment Conversion, certify that there is not then an
Equity Conditions Failure as of the applicable Installment Notice Date. Each
Installment Notice shall be irrevocable. If the Company does not timely deliver
an Installment Notice in accordance with this Section 9 with respect to a
particular Installment Date, then the Company shall be deemed to have delivered
an irrevocable Installment Notice confirming an Installment Conversion of the
entire Installment Amount payable on such Installment Date and shall be deemed
to have certified that there is not then an Equity Conditions Failure in
connection with such Installment Conversion. The applicable Installment
Conversion Amount (whether set forth in the applicable Installment Notice or by
operation of this Section 9) shall be converted in accordance with Section 9(b)
and the applicable Installment Redemption Amount shall be redeemed in accordance
with Section 9(c).

 

(b) Mechanics of Installment Conversion.   Subject to Section 4(d), if the
Company delivers an Installment Notice or is deemed to have delivered an
Installment Notice certifying that such Installment Amount is being paid, in
whole or in part, in an Installment Conversion in accordance with Section 9(a),
then the remainder of this Section 9(b) shall apply. The applicable Installment
Conversion Amount, if any, shall be converted on the applicable Installment Date
at the applicable Installment Conversion Price and the Company shall, on such
Installment Date, deliver to each Holder’s account with DTC such shares of
Common Stock issued upon such conversion (subject to the reduction contemplated
by the immediately following sentence and, if applicable, the penultimate
sentence of this Section 9(b)), provided that the Equity Conditions are then
satisfied (or waived in writing by such Holder) on such Installment Date and an
Installment Conversion is not otherwise prohibited under any other provision of
the Certificate of Designations. If the Company confirmed (or is deemed to have
confirmed by operation of Section 9(a)) the conversion of the applicable
Installment Conversion Amount, in whole or in part, and there was no Equity
Conditions Failure as of the applicable Installment Notice Date (or is deemed to
have certified that the Equity Conditions in connection with any such conversion
have been satisfied by operation of Section 9(a)) but an Equity Conditions
Failure occurred between the applicable Installment Notice Date and any time
through the applicable Installment Date (the “Interim Installment Period”), the
Company shall provide each Holder a subsequent notice to that effect. If there
is an Equity Conditions Failure (which is not waived in writing by such Holder)
during such Interim Installment Period, then, at the option of such Holder
designated in writing to the Company, such Holder may require the Company to do
any one or more of the following (but without duplication): (i) the Company
shall redeem all or any part designated by such Holder of the unconverted
Installment Conversion Amount (such designated amount is referred to as the
“Designated Redemption Amount”) and the Company shall pay to such Holder within
three (3) days of such Installment Date, by wire transfer of immediately
available funds, an amount in cash equal to 108% of such Designated Redemption
Amount, and/or (ii) the Installment Conversion shall be null and void with
respect to all or any part designated by such Holder of the unconverted
Installment Conversion Amount and such Holder shall be entitled to all the
rights of a holder of the Preferred Shares with respect to such designated part
of the Installment Conversion Amount; provided, however, the Conversion Price
for such Designated Redemption Amount shall thereafter be adjusted to equal the
Installment Conversion Price (determined as if the date of such designation were
an Installment Date) and conversions required by this Section 9(b) shall be made
in accordance with the provisions of Section 4(c). In the event that the sole
cause of an Equity Conditions Failure during the applicable Equity Conditions
Measuring Period was due to the Company’s inability to deliver to such Holder
Common Stock due to Section 4(d)(i), which constitutes an Equity Conditions
Failure pursuant to clause (iii) of the definition of  “Equity Conditions”,
then, the Company may, at its option, elect to either (x) pay (i) in cash the
portion of the Installment Amount the payment of which would otherwise result in
an Equity Conditions Failure due to the Company’s inability to deliver to such
Holder shares of Common Stock due to Section 4(d)(i) (irrespective of any prior
election or notice to pay such amount by converting all or some of the
applicable Installment Amount into Common Stock) pursuant to an Installment
Redemption as if it had elected in the applicable Installment Notice to pay the
applicable Installment Amount pursuant to an Installment Redemption and (ii) the
remainder of such Installment Amount in an Installment Conversion in accordance
with this Section 9(b) or (y) by (i) deferring the portion of such Installment
Payment the payment of which would otherwise result in an Equity Conditions
Failure due to the Company’s inability to deliver to such Holder shares of
Common Stock due to Section 4(d)(i) to the immediately subsequent Installment,
if any, and (ii) paying the

 

 17 

 

 

remainder of such Installment Amount in an Installment Conversion in accordance
with this Section 9(b) and the Company shall deliver a written notice to the
Holders setting forth its election pursuant to this proviso at least one
(1) Trading Day prior to the applicable Installment Date. For the avoidance of
doubt, subject to Section 9(f), the Holder may waive the Equity Conditions
Failure and receive the Installment Conversion Amount through the conversion of
the Installment Amount in an Installment Conversion. If the Company fails to
redeem any Designated Redemption Amount by the third (3rd) day following the
applicable Installment Date by payment of such amount by such date for any
reason (including, without limitation, to the extent such payment is prohibited
pursuant to the DGCL), then such Holder shall have the rights set forth in
Section 12(a) as if the Company failed to pay the applicable Installment
Redemption Price (as defined below) and all other rights under this Certificate
of Designations (including, without limitation, such failure constituting a
Triggering Event described in Section 5(a)(v)). Notwithstanding anything to the
contrary in this Section 9(b), but subject to Section 4(d), until the Company
delivers Common Stock representing the Installment Conversion Amount to such
Holder, the Installment Conversion Amount may be converted by such Holder into
Common Stock pursuant to Section 4. In the event that a Holder elects to convert
the Installment Conversion Amount prior to the applicable Installment Date as
set forth in the immediately preceding sentence, the Installment Conversion
Amount so converted shall be deducted from the Installment Amount(s) of such
Holder relating to the applicable Installment Date(s) as set forth in the
applicable Conversion Notice. The Company shall pay any and all actual transfer,
stamp, issuance and similar taxes that may be payable with respect to the
issuance and delivery of any shares of Common Stock in any Installment
Conversion hereunder; provided, however, that if any such tax is due solely
because the Holder requested such shares to be issued in a name other than the
Holder’s name, then the Holder will pay such tax.

 

(c) Mechanics of Installment Redemption.   If the Company elects or is required
to effect an Installment Redemption, in whole or in part, in accordance with
Section 9(a), then the Installment Redemption Amount, if any, shall be redeemed
by the Company in cash on the applicable Installment Date by wire transfer to
each Holder of immediately available funds in an amount equal to 108% of the
applicable Installment Redemption Amount (the “Installment Redemption Price”).
If the Company fails to redeem such Installment Redemption Amount on such
Installment Date by payment of the Installment Redemption Price for any reason
(including, without limitation, to the extent such payment is prohibited
pursuant to the DGCL), then, at the option of such Holder designated in writing
to the Company (any such designation shall be a “Conversion Notice” for purposes
of this Certificate of Designations), such Holder may require the Company to
convert all or any part of the Installment Redemption Amount at the Installment
Conversion Price (determined as if the date of such designation were an
Installment Date). Notwithstanding anything to the contrary in this
Section 9(c), but subject to Section 4(d), until the Installment Redemption
Price (together with any Late Charges thereon) is paid in full, the Installment
Redemption Amount (together with any Late Charges thereon) may be converted, in
whole or in part, by a Holder into Common Stock pursuant to Section 4. In the
event a Holder elects to convert all or any portion of the Installment
Redemption Amount prior to the applicable Installment Date as set forth in the
immediately preceding sentence, the Installment Redemption Amount so converted
shall be deducted from the Installment Amounts relating to the applicable
Installment Date(s) as set forth in the applicable Conversion Notice.
Redemptions required by this Section 9(c) shall be made in accordance with the
provisions of Section 12.

 

(d) Deferred Installment Amount.   Notwithstanding any provision of this
Section 9(d) to the contrary, each Holder may, at its option and in its sole
discretion, deliver a written notice to the Company no later than the second
(2nd) Trading Day immediately prior to the applicable Installment Date electing
to have the payment of all or any portion of an Installment Amount of such
Holder payable on such Installment Date deferred (such amount deferred, the
“Deferral Amount”, and such deferral, each a “Deferral”) until any subsequent
Installment Date selected by such Holder, in its sole discretion, in which case,
the Deferral Amount shall be added to, and become part of, such subsequent
Installment Amount. Any notice delivered by such Holder pursuant to this
Section 9(d) shall set forth (i) the Deferral Amount requested by such Holder
and (ii) the date on which such Holder requests that such Deferral Amount shall
now be payable. Notwithstanding anything herein to the contrary, in no event
shall a Holder be entitled to elect deferral pursuant to this Section 9(d) if
such deferral would defer an Installment Amount beyond the Maturity Date.

 

 18 

 

 

(e) Acceleration of Installment Amounts.   Notwithstanding any provision of this
Section 9 to the contrary, but subject to Section 4(d), with respect to any
given Installment Date (the “Current Installment Date”), during the period
commencing on the Installment Notice Due Date immediately prior to such Current
Installment Date and ending on the Trading Day immediately prior to the next
Installment Date (each, an “Installment Period”), each Holder may elect, at its
option and in its sole discretion, at one or more times in such Installment
Period, to convert other Preferred Shares (each, an “Acceleration”, and such
aggregate number of Preferred Shares in an Acceleration, each, an “Acceleration
Amount”), in whole or in part, at the Installment Conversion Price of such
Current Installment Date in accordance with the conversion procedures set forth
in Section 4 hereunder, mutatis mutandis. Notwithstanding the foregoing, with
respect to any given Installment Period, the Holder may not elect to effect any
Acceleration during such Installment Period if  (i) the Conversion Amount of the
aggregate number of Preferred Shares subject to Acceleration in such Installment
Period exceeds in the aggregate 300% of the Installment Amount (not including
any Deferral Amounts or Acceleration Amounts) for such Current Installment Date
(which, for the avoidance of doubt, assuming the Company elects an Installment
Conversion for the full Installment Amount, could result in an Installment
Conversion and Accelerations that, collectively, represent 400% of the
Installment Amount (not including any Deferral Amounts or Acceleration
Amounts)), or (ii) the Conversion Amount of the aggregate number of Preferred
Shares subject to prior Accelerations exceeds in the aggregate twelve (12) times
the Installment Amount (not including any Deferral Amounts or Acceleration
Amounts) for such Current Installment Date.

 

(f) Waiver of Equity Conditions Failure.   Notwithstanding anything herein to
the contrary, in no event shall a Holder be entitled to waive an Equity
Conditions Failure due to the failure of the Equity Conditions set forth in
clauses (iii), (iv) and/or (ix)(C) of such definition.

 

10. Noncircumvention.   The Company hereby covenants and agrees that the Company
will not, by amendment of its certificate of incorporation, bylaws or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Certificate of Designations, and will at all times in good faith carry
out all the provisions of this Certificate of Designations and take all action
as may be required to protect the rights of the Holders hereunder. Without
limiting the generality of the foregoing or any other provision of this
Certificate of Designations, the Company (a) shall not increase the par value of
any shares of Common Stock receivable upon the conversion of any Preferred
Shares above the Conversion Price then in effect, (b) shall take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable shares of Common Stock upon the
conversion of Preferred Shares and (c) shall, so long as any Preferred Shares
are outstanding, take all action reasonably necessary to reserve and keep
available out of its authorized and unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares at the
Conversion Price then in effect, the Required Reserve Amount (as defined in
Section 11(a)). Notwithstanding anything herein to the contrary, if after the
date that is one hundred twenty (120) calendar days after the Initial Issuance
Date, each Holder is not permitted to convert such Holder’s Preferred Shares in
full for any reason (other than pursuant to restrictions set forth in
Section 4(d)(i) hereof), the Company shall use its reasonable best efforts to
promptly remedy such failure, including, without limitation, seeking to obtain
such consents or approvals as necessary to effect such conversion into shares of
Common Stock.

 

11. Authorized Shares.

 

(a) Reservation.   So long as any Preferred Shares remain outstanding, the
Company shall at all times reserve at least 150% of the number of shares of
Common Stock as shall from time to time be necessary to effect the conversion of
the Preferred Shares that then remain outstanding (without regard to any
limitations on conversions), including without limitation, pursuant to
Installment Conversions, Triggering Event Conversion, if any, and Accelerations
(the “Required Reserve Amount”). The Required Reserve Amount (including, without
limitation, each increase in the number of shares so reserved) shall be
allocated pro rata among the Holders based on the number of the Preferred Shares
held by each Holder on the Initial Issuance Date or increase in the number of
reserved shares, as the case may be (the “Authorized Share Allocation”). In the
event that a Holder shall sell or otherwise transfer any of such Holder’s
Preferred Shares, each transferee shall be allocated a pro rata portion of such
Holder’s

 

 19 

 

 

Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Preferred Shares shall be allocated to
the remaining Holders, pro rata based on the number of the Preferred Shares then
held by the Holders.

 

(b) Insufficient Authorized Shares.   If, notwithstanding Section 11(a) and not
in limitation thereof, while any of the Preferred Shares remain outstanding the
Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion
of the Preferred Shares at least a number of shares of Common Stock equal to the
Required Reserve Amount (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Preferred Shares then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in no event later
than seventy-five (75) days after the occurrence of such Authorized Share
Failure, the Company shall either (x) obtain the written consent of its
stockholders for the approval of an increase in the number of authorized shares
of Common Stock and provide each stockholder with an information statement with
respect thereto or (y) seek to obtain stockholder approval at a meeting of its
stockholders for an increase in the number of authorized shares of Common Stock
and, in each case, file an amendment to the Company’s Certificate of
Incorporation making effective the necessary increase in the number of
authorized shares of Common Stock within such seventy-five (75) day period. In
connection with such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its
board of directors to recommend to the stockholders that they approve such
proposal. Notwithstanding the foregoing, if during any such time of an
Authorized Share Failure, the Company is able to obtain the written consent of a
majority of the shares of its issued and outstanding Common Stock to approve the
increase in the number of authorized shares of Common Stock, the Company may
satisfy this obligation by obtaining such consent, submitting for filing with
the SEC an Information Statement on Schedule 14C and filing an amendment to the
Company’s Certificate of Incorporation making effective the necessary increase
in the number of authorized shares of Common Stock. In the event that the
Company is prohibited from issuing shares of Common Stock to a Holder upon any
conversion due to the failure by the Company to have sufficient shares of Common
Stock available out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the “Authorized Failure Shares”),
in lieu of delivering such Authorized Failure Shares to such Holder, the Company
shall pay cash within five (5) Trading Days in exchange for the redemption of
such portion of the Conversion Amount convertible into such Authorized Failure
Shares at a price equal to the sum of  (i) the product of  (x) such number of
Authorized Failure Shares and (y) the highest sale price of the Common Stock on
the attempted Conversion Date; and (ii) to the extent such Holder purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of Authorized Failure Shares, any
reasonable and documented brokerage commissions and other out-of-pocket
expenses, if any, of such Holder incurred in connection therewith. For the
avoidance of doubt, to the extent that the Company makes a payment contemplated
by the foregoing sentence, the applicable portion of the Preferred Shares to
which the Authorized Failure Shares applied shall no longer be outstanding.

 

12. Redemptions.

 

(a) General.   If a Holder has submitted a Triggering Event Redemption Notice in
accordance with Section 5(b), the Company shall deliver the applicable
Triggering Event Redemption Price to such Holder in cash within two (2) Business
Days after the Company’s receipt of such Holder’s Triggering Event Redemption
Notice. If a Holder has submitted a Change of Control Redemption Notice in
accordance with Section 6(b), the Company shall deliver the applicable Change of
Control Redemption Price to such Holder in cash concurrently with the
consummation of such Change of Control if such notice is received prior to the
consummation of such Change of Control and within five (5) Business Days after
the Company’s receipt of such notice otherwise. The Company shall deliver the
applicable Installment Redemption Price to each Holder in cash on the applicable
Installment Date. If a Holder has submitted a Maturity Redemption Notice in
accordance with Section 13 below, the Company shall deliver the applicable
Maturity Redemption Price to such Holder on the applicable Maturity Redemption
Date.

 

 20 

 

 

Notwithstanding anything herein to the contrary, in connection with any
redemption hereunder at a time a Holder is entitled to receive a cash payment
under any other provision of this Certificate of Designations, at the option of
such Holder delivered in writing to the Company, the applicable Redemption Price
hereunder shall be increased by the amount of such cash payment owed to such
Holder under such other provision of this Certificate of Designations and, upon
payment in full or conversion in accordance herewith, shall satisfy the
Company’s payment obligation under such other provision of this Certificate of
Designations. In the event of a redemption of less than all of the Preferred
Shares, the Company shall promptly cause to be issued and delivered to such
Holder a new Preferred Share Certificate (in accordance with Section 21) (or
evidence of the creation of a new Book-Entry) representing the number of
Preferred Shares which have not been redeemed. In the event that the Company
does not pay the applicable Redemption Price to a Holder within the time period
required for any reason (including, without limitation, to the extent such
payment is prohibited pursuant to the DGCL), at any time thereafter and until
the Company pays such unpaid Redemption Price in full, such Holder shall have
the option, in lieu of redemption, to require the Company to promptly return to
such Holder all or any of the Preferred Shares that were submitted for
redemption and for which the applicable Redemption Price (together with any Late
Charges thereon) has not been paid. Upon the Company’s receipt of such notice,
(x) the applicable Redemption Notice shall be null and void with respect to such
Preferred Shares, (y) the Company shall promptly and in any event within five
(5) Trading Days return the applicable Preferred Share Certificate, or issue a
new Preferred Share Certificate (in accordance with Section 21(d)), to such
Holder, (unless the Preferred Shares are held in Book-Entry form, in which case
the Company shall deliver evidence to such Holder that a Book-Entry for such
Preferred Shares then exists) and in each case the Additional Amount of such
Preferred Shares shall be increased by an amount equal to the difference between
(1) the applicable Redemption Price (as the case may be, and as adjusted
pursuant to this Section 12, if applicable) minus (2) the Stated Value portion
of the Conversion Amount submitted for redemption and (z) the Conversion Price
of such Preferred Shares shall be automatically adjusted with respect to each
conversion effected thereafter by such Holder to the lowest of  (A) the
Conversion Price as in effect on the date on which the applicable Redemption
Notice is voided, (B) 85% of the lowest Closing Bid Price of the Common Stock
during the period beginning on and including the date on which the applicable
Redemption Notice is delivered to the Company and ending on and including the
date on which the applicable Redemption Notice is voided, and (C) 85% of the
quotient of  (I) the sum of the five (5) lowest VWAPs of the Common Stock during
the twenty (20) consecutive Trading Day period ending and including the Trading
Day immediately preceding the applicable Conversion Date divided by (II) five
(5) (it being understood and agreed that all such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period). For the avoidance of doubt, if
the Conversion Price is subject to adjustment pursuant to the immediately
preceding clause (z), the Conversion Price shall not also be subject to
adjustment pursuant to Section 4(e). A Holder’s delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Preferred Shares
subject to such notice.

 

(b) Redemption by Multiple Holders.   Upon the Company’s receipt of a Redemption
Notice from any Holder for redemption or repayment as a result of an event or
occurrence substantially similar to the events or occurrences described in
Section 5(b) or Section 6(b), the Company shall promptly, but no later than one
(1) Business Day of its receipt thereof, forward to each other Holder by
electronic mail a copy of such notice. If the Company receives one or more
Redemption Notices, during the seven (7) Business Day period beginning on and
including the date which is three (3) Business Days prior to the Company’s
receipt of the initial Redemption Notice and ending on and including the date
which is three (3) Business Days after the Company’s receipt of the initial
Redemption Notice and the Company is unable to redeem all amounts designated in
such initial Redemption Notice and such other Redemption Notices received during
such seven (7) Business Day period, then the Company shall redeem a pro rata
amount from each Holder based on the Stated Value of the Preferred Shares
submitted for redemption pursuant to such Redemption Notices received by the
Company during such seven (7) Business Day period.

 

 21 

 

 

13. Holder Optional Redemption after Maturity Date.   At any time from and after
the tenth (10th) Business Day prior to the Maturity Date, any Holder may by
delivery of written notice thereof to the Company require the Company to redeem
(a “Maturity Redemption”) all or any number of Preferred Shares then held by
such Holder. The Company shall then deliver a written notice (the “Maturity
Redemption Notice”) to such Holder within two (2) Trading Days of receipt
thereof  (the date the Company delivers such notice, a “Maturity Redemption
Notice Date”) electing to redeem such remaining Preferred Shares either (i) by
paying cash at a purchase price equal to 108% of the Conversion Amount of such
Preferred Shares or (ii) provided that no Equity Conditions Failure occurs from
the Maturity Redemption Notice Date through the Maturity Redemption Date (as
defined below), by paying a number of Common Stock calculated by dividing the
Conversion Amount of such remaining Preferred Shares by the Installment
Conversion Price determined as if the Maturity Redemption Date was an
Installment Date (the “Maturity Redemption Price”). If the Company elects to
redeem such remaining Preferred Shares in cash, such cash shall be paid on the
same day as the delivery of the Maturity Redemption Notice (such date, in such
event, being the “Maturity Redemption Date”). If the Company elects instead to
redeem such remaining Preferred Shares in shares of Common Stock in accordance
with clause (ii) of the second sentence of this Section 13, the Maturity
Redemption Notice shall state the date the Company is required to pay to such
Holder such Maturity Redemption Price (such date, in such case, being the
Maturity Redemption Date), which date shall be on the twelfth (12th) Trading Day
following the Maturity Redemption Notice Date. Redemptions required by this
Section 13 shall be made in accordance with the provisions of Section 12.

 

14. Voting Rights.   Holders shall have no voting rights, except on matters
required by law (including without limitation, the DGCL) or by this Certificate
of Designations to be submitted to a class vote of the holders of the Preferred
Shares. To the extent that under the DGCL the vote of the holders of the
Preferred Shares, voting separately as a class or series, as applicable, is
required to authorize a given action of the Company, the affirmative vote or
consent of the Required Holders of the shares of the Preferred Shares, voting
together in the aggregate and not in separate series unless required under the
DGCL, represented at a duly held meeting at which a quorum is presented or by
written consent of the Required Holders (except as otherwise may be required
under the DGCL), voting together in the aggregate and not in separate series
unless required under the DGCL, shall constitute the approval of such action by
both the class or the series, as applicable. Subject to Section 4(d), to the
extent that under the DGCL holders of the Preferred Shares are entitled to vote
on a matter with holders of shares of Common Stock, voting together as one
class, each Preferred Share shall entitle the holder thereof to cast that number
of votes per share as is equal to the number of shares of Common Stock into
which it is then convertible (subject to the ownership limitations specified in
Section 4(d) hereof) on the record date for determining the stockholders of the
Company eligible to vote on such matters as the date as of which the Conversion
Price is calculated. Holders of the Preferred Shares shall be entitled to
written notice of all stockholder meetings or written consents (and copies of
proxy materials and other information sent to stockholders) with respect to
which they would be entitled to vote, which notice would be provided pursuant to
the Company’s bylaws and the DGCL.

 

15. Covenants.

 

(a) Restriction on Transfer of Assets.   The Company shall not, and the Company
shall cause each of its Subsidiaries to not, directly or indirectly, sell,
lease, license, assign, transfer, spin-off, split-off, close, convey or
otherwise dispose of any assets or rights of the Company or any Subsidiary owned
or hereafter acquired whether in a single transaction or a series of related
transactions, other than (i) sales, leases, licenses, assignments, transfers,
conveyances and other dispositions of such assets or rights by the Company and
its Subsidiaries in the ordinary course of business consistent with its past
practice, (ii) sales of inventory and product in the ordinary course of business
or (iii) sales, leases, licenses, assignments, transfers, conveyances and other
dispositions of such assets or rights by the Company and/or its wholly-owned
Subsidiaries to the Company and/or any of its wholly-owned Subsidiaries.

 

(b) Change in Nature of Business.   The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, engage in any
material line of business substantially different from those lines of business
conducted by or publicly contemplated to be conducted by the Company and each of
its Subsidiaries on the Subscription Date or any business substantially related
or incidental thereto. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, modify its or their
corporate structure or purpose.

 

 22 

 

 

(c) Preservation of Existence, Etc.   The Company shall maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, its existence,
rights and privileges, and become or remain, and cause each of its Subsidiaries
to become or remain, duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except as could
not reasonably be expected to result in a Material Adverse Effect.

 

(d) Maintenance of Properties, Etc.   The Company shall maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, all of its
properties which are necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted, and
comply, and cause each of its Subsidiaries to comply, at all times with the
provisions of all leases to which it is a party as lessee or under which it
occupies property, except as could not reasonably be expected to result in a
Material Adverse Effect.

 

(e) Maintenance of Intellectual Property.   The Company will, and will cause
each of its Subsidiaries to, take all action reasonably necessary or advisable
to maintain all of the Intellectual Property Rights of the Company and/or any of
its Subsidiaries that are necessary or material to the conduct of its business
in full force and effect, except as could not reasonably be expected to result
in a Material Adverse Effect.

 

(f) Maintenance of Insurance.   The Company shall maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated, except as could not reasonably be expected to result in a
Material Adverse Effect.

 

(g) Transactions with Affiliates.   The Company shall not, nor shall it permit
any of its Subsidiaries to, enter into, renew, extend or be a party to, any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any
kind or the rendering of services of any kind) with any Affiliate, except in the
ordinary course of business in a manner and to an extent consistent with past
practice or otherwise necessary or desirable for the prudent operation of its
business, in each case, for fair consideration and on terms no less favorable to
it or its Subsidiaries than would be obtainable in a comparable arm’s length
transaction with a Person that is not an Affiliate thereof.

 

(h) Restricted Issuances.

 

(i) The Company shall not, directly or indirectly, without the prior written
consent of the Required Holders of the Preferred Shares then outstanding, (A)
issue any Preferred Shares (other than as contemplated by this Certificate of
Designations) or (B) issue any other securities that would cause a breach or
default under this Certificate of Designations.

 

(ii) For so long as any Preferred Shares are outstanding, except with the prior
approval of the Required Holders (whether at a duly called meeting or by written
consent), the Company shall not, and shall not permit or suffer its Subsidiaries
to, incur Indebtedness or enter into any other agreement, contract or
understanding, if such Indebtedness, agreement, contract or understanding
prohibits the Company from making any cash redemptions of the Preferred Shares
or cash payments on or in respect of the Preferred Shares; provided that no such
approval shall be required for incurring (a) trade payables in the ordinary
course of business consistent with past practice, or (b) Indebtedness incurred
by special purpose Subsidiaries created by the Company for the purpose of
financing individual projects undertaken by the Company for the direct benefit
of specific customers of the Company, including without limitation FuelCell
Energy Finance, LLC and any subsidiaries thereof; provided the Company provides
three (3) Business Days’ notice to the Holders prior to incurring such
Indebtedness (such Indebtedness described in this proviso, “Permitted
Indebtedness”). Notwithstanding anything in this Certificate of Designations to
the contrary, the Company and its Subsidiaries shall be permitted to incur
Permitted Indebtedness.

 

 23 

 

 

16. Stockholder Approval.

 

(a) The Company shall provide to each stockholder entitled to vote at a special
meeting or the next annual meeting of stockholders of the Company (as
applicable, the “Stockholder Meeting”), which shall be held as soon as
reasonably possible following the mailing of the proxy statement to the
stockholders of the Company in respect thereof  (the “Approval Proxy
Statement”), a copy of the Approval Proxy Statement, at the expense of the
Company, soliciting each such stockholder’s affirmative vote at the Stockholder
Meeting for approval of a proposal providing for issuance of the maximum number
of shares of Common Stock issuable upon conversion of the Preferred Shares, in
each case in compliance with the rules and regulations of the Principal Market,
the Certificate of Incorporation of the Company, the Bylaws of the Company and
applicable law (collectively, the “Stockholder Approval”). In connection with
the Stockholder Meeting, and in no event later than February 15, 2019, the
Company shall, in consultation with the Holders, prepare and file with the SEC,
the preliminary Approval Proxy Statement and related proxy materials in
compliance with Section 14 of the 1934 Act. As reasonably promptly as
practicable after comments, if any, are received from the SEC thereon and after
the furnishing by the Company and the Holders of all information required to be
contained therein, the Company shall, in consultation with the Holders, prepare
and the Company shall file any required amendments to the Approval Proxy
Statement with the SEC. The Company shall notify the Holders reasonably promptly
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Approval Proxy
Statement or for additional information and shall consult with the Holders
regarding, and supply the Holders with copies of, all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Approval Proxy Statement. Prior to
filing or mailing the initial Approval Proxy Statement or any proposed amendment
of or supplement to the Approval Proxy Statement, the Company shall provide the
Holders a reasonable opportunity to review and comment on such document and
shall incorporate therein any reasonable comments of the Holders thereto. The
Company shall use its best efforts to have the Approval Proxy Statement cleared
by the SEC and shall thereafter mail to the stockholders of the Company as
reasonably promptly as possible the Approval Proxy Statement and all other proxy
materials for the Stockholder Meeting.

 

(b) The Company hereby covenants and agrees that (a) the Approval Proxy
Statement will, when filed, comply as to form in all material respects with the
applicable requirements of the 1934 Act and (b) none of the information included
or incorporated by reference in the Approval Proxy Statement will, at the date
it is first mailed to the stockholders of the Company or at the time of the
Stockholder Meeting or at the time of any amendment or supplement thereof,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.

 

(c) The Company shall take, in accordance with applicable law and its
Certificate of Incorporation and Bylaws, all action reasonably necessary to
convene the Stockholder Meeting no later than April 30, 2019 and to submit at
the Stockholder Meeting for approval by the requisite vote of the stockholders
of the Company the matters subject to Stockholder Approval. In connection with
the Stockholder Meeting and any adjournment or postponement thereof, (i) the
Board shall recommend that its stockholders vote in favor of all matters
submitted thereto at such meeting and (ii) neither the Board nor any committee
thereof shall withdraw or modify, or propose or resolve to withdraw or modify in
a manner adverse to the Holders, such recommendation. The Company shall take all
lawful action to solicit from the stockholders of the Company proxies in favor
of the Stockholder Approval and take all other action reasonably necessary or
advisable to secure the vote or consent of the stockholders that are required by
the rules of Principal Market and applicable law, including, if necessary or
appropriate or if requested by the Holders, adjourning the Stockholder Meeting
to solicit additional proxies. The Company will enforce any and all voting
agreements in respect of the matters subject to the Stockholder Meeting.

 

(d) In the event the Company fails to receive the Stockholder Approval at the
time such proposal is considered by the Company’s stockholders, the Company
shall use its reasonable best efforts to seek such Stockholder Approval at a
subsequent meeting of the Company’s stockholders as soon as reasonably
practicable, but no later than 90 days following the meeting at which the
Company’s stockholders failed to provide the Stockholder Approval. The Company
shall continue to seek Stockholder Approval at

 

 24 

 

 

meetings of the Company’s stockholders until such Stockholder Approval is
obtained with each new meeting to be held as soon as reasonably practicable but
no later than 90 days following the date of the prior meeting at which such
proposal was considered by the Company’s stockholders.

 

(e) Notwithstanding Section 33 to the contrary, in no event shall the Company be
required to publicly disclose any material, nonpublic information provided to
the Holders pursuant to this Section 16 prior to such time, if ever, it is
required to do so under applicable securities laws; provided, however, that the
Company’s rights under this Section 16(e) shall not serve to cure any facts or
circumstances that would otherwise result in an Equity Conditions Failure.

 

17. Liquidation, Dissolution, Winding-Up.   In the event of a Liquidation Event,
the Holders shall be entitled to receive in cash out of the assets of the
Company, whether from capital or from earnings available for distribution to its
stockholders (the “Liquidation Funds”), after any amount that is required to be
paid to Senior Preferred Stock, if any, and before any amount shall be paid to
the holders of any of shares of Junior Stock, but pari passu with any Parity
Stock then outstanding, an amount per Preferred Share equal to the greater of 
(i) the Conversion Amount thereof on the date of such payment and (ii) the
amount per share such Holder would receive if such Holder converted such
Preferred Shares into Common Stock immediately prior to the date of such
payment, provided that if the Liquidation Funds are insufficient to pay the full
amount due to the Holders and holders of shares of Parity Stock, then each
Holder and each holder of Parity Stock shall receive a percentage of the
Liquidation Funds equal to the full amount of Liquidation Funds payable to such
Holder and such holder of Parity Stock as a liquidation preference, in
accordance with their respective certificate of designations (or equivalent), as
a percentage of the full amount of Liquidation Funds payable to all Holders and
all holders of shares of Parity Stock. To the extent necessary, the Company
shall cause such actions to be taken by each of its Subsidiaries so as to
enable, to the maximum extent permitted by law, the proceeds of a Liquidation
Event to be distributed to the Holders in accordance with this Section 17. All
the preferential amounts to be paid to the Holders under this Section 17 shall
be paid or set apart for payment before the payment or setting apart for payment
of any amount for, or the distribution of any Liquidation Funds of the Company
to the holders of shares of Junior Stock in connection with a Liquidation Event
as to which this Section 17 applies.

 

18. Distribution of Assets.   In addition to any adjustments pursuant to
Section 8, if the Company shall declare or make any dividend or other
distributions of its assets (or rights to acquire its assets) to any or all
holders of shares of Common Stock, by way of return of capital or otherwise
(including without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (the “Distributions”), then each Holder, as holders of
Preferred Shares, will be entitled to such Distributions as if such Holder had
held the number of shares of Common Stock acquirable upon complete conversion of
the Preferred Shares (without taking into account any limitations or
restrictions on the convertibility of the Preferred Shares) immediately prior to
the date on which a record is taken for such Distribution or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for such Distributions (provided, however, that to the extent that
such Holder’s right to participate in any such Distribution would result in such
Holder and the other Attribution Parties exceeding the Maximum Percentage, then
such Holder shall not be entitled to participate in such Distribution to such
extent (and shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial ownership) to such
extent) and the portion of such Distribution shall be held in abeyance for such
Holder until such time or times as its right thereto would not result in such
Holder and the other Attribution Parties exceeding the Maximum Percentage, at
which time or times, if any, such Holder shall be granted such rights (and any
rights under this Section 18 on such initial rights or on any subsequent such
rights to be held similarly in abeyance) to the same extent as if there had been
no such limitation).

 

19. Vote to Change the Terms of or Issue Preferred Shares.   In addition to any
other rights provided by law, except where the vote or written consent of the
holders of a greater number of shares is required by law or by another provision
of the Certificate of Incorporation, without first obtaining the affirmative
vote at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders, voting together as a single class, the Company
shall not: (a) amend or repeal any provision of, or add any provision to, its
Certificate of Incorporation or bylaws, or file any certificate of designations
or articles of

 

 25 

 

 

amendment of any series of shares of preferred stock, if such action would
adversely alter or change the preferences, rights, privileges or powers, or
restrictions provided for the benefit, of the Preferred Shares hereunder,
regardless of whether any such action shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
(b) increase or decrease (other than by conversion) the authorized number of
Preferred Shares; (c) without limiting any provision of Section 2, create or
authorize (by reclassification or otherwise) any new class or series of Senior
Preferred Stock or Parity Stock; (d) purchase, repurchase or redeem any shares
of Junior Stock (other than pursuant to the terms of the Company’s equity
incentive plans and options and other equity awards granted under such plans
(that have in good faith been approved by the Board)); (e) without limiting any
provision of Section 3, pay dividends or make any other distribution on any
shares of any Junior Stock; or (f) without limiting any provision of Section 10,
whether or not prohibited by the terms of the Preferred Shares, circumvent a
right of the Preferred Shares hereunder.

 

20. Transfer of Preferred Shares.   A Holder may transfer some or all of its
Preferred Shares without the consent of the Company. No Preferred Shares may be
sold or transferred other than to a U.S. person as described in section
7701(a)(30) of the Internal Revenue Code of 1986, as amended.

 

21. Reissuance of Preferred Share Certificates and Book Entries.

 

(a) Transfer.   If any Preferred Shares are to be transferred, the applicable
Holder shall surrender the applicable Preferred Share Certificate to the Company
(or, if the Preferred Shares are held in Book-Entry form, a written instruction
letter to the Company), whereupon the Company will forthwith issue and deliver
upon the order of such Holder a new Preferred Share Certificate (in accordance
with Section 21(d)) (or evidence of the transfer of such Book-Entry), registered
as such Holder may request, representing the outstanding number of Preferred
Shares being transferred by such Holder and, if less than the entire outstanding
number of Preferred Shares is being transferred, a new Preferred Share
Certificate (in accordance with Section 21(d)) to such Holder representing the
outstanding number of Preferred Shares not being transferred (or evidence of
such remaining Preferred Shares in a Book-Entry for such Holder). Such Holder
and any assignee, by acceptance of the Preferred Share Certificate or evidence
of Book-Entry issuance, as applicable, acknowledge and agree that, by reason of
the provisions of Section 4(c)(iii) following conversion or redemption of any of
the Preferred Shares, the outstanding number of Preferred Shares represented by
the Preferred Shares may be less than the number of Preferred Shares stated on
the face of the Preferred Shares.

 

(b) Lost, Stolen or Mutilated Preferred Share Certificate.   Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of a Preferred Share Certificate (as to which a
written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any
indemnification undertaking by the applicable Holder to the Company in customary
and reasonable form and, in the case of mutilation, upon surrender and
cancellation of such Preferred Share Certificate, the Company shall execute and
deliver to such Holder a new Preferred Share Certificate (in accordance with
Section 21(d)) representing the applicable outstanding number of Preferred
Shares.

 

(c) Preferred Share Certificate and Book-Entries Exchangeable for Different
Denominations and Forms.   Each Preferred Share Certificate is exchangeable,
upon the surrender hereof by the applicable Holder at the principal office of
the Company, for a new Preferred Share Certificate or Preferred Share
Certificate(s) or new Book-Entry (in accordance with Section 21(d))
representing, in the aggregate, the outstanding number of the Preferred Shares
in the original Preferred Share Certificate, and each such new Preferred Share
Certificate and/or new Book-Entry, as applicable, will represent such portion of
such outstanding number of Preferred Shares from the original Preferred Share
Certificate as is designated in writing by such Holder at the time of such
surrender. Each Book-Entry may be exchanged into one or more new Preferred Share
Certificates or split by the applicable Holder by delivery of a written notice
to the Company into two or more new Book-Entries (in accordance with
Section 21(d)) representing, in the aggregate, the outstanding number of the
Preferred Shares in the original Book-Entry, and each such new Book-Entry and/or
new Preferred Share Certificate, as applicable, will represent such portion of
such outstanding number of Preferred Shares from the original Book-Entry as is
designated in writing by such Holder at the time of such surrender.

 

 26 

 

 

(d) Issuance of New Preferred Share Certificate or Book-Entry.   Whenever the
Company is required to issue a new Preferred Share Certificate or a new
Book-Entry pursuant to the terms of this Certificate of Designations, such new
Preferred Share Certificate or new Book-Entry (i) shall represent, as indicated
on the face of such Preferred Share Certificate or in such Book-Entry, as
applicable, the number of Preferred Shares remaining outstanding (or in the case
of a new Preferred Share Certificate or new Book-Entry being issued pursuant to
Section 21(a) or Section 21(c), the number of Preferred Shares designated by
such Holder) which, when added to the number of Preferred Shares represented by
the other new Preferred Share Certificates or other new Book-Entry, as
applicable, issued in connection with such issuance, does not exceed the number
of Preferred Shares remaining outstanding under the original Preferred Share
Certificate or original Book-Entry, as applicable, immediately prior to such
issuance of new Preferred Share Certificate or new Book-Entry, as applicable,
and (ii) shall have an issuance date, as indicated on the face of such new
Preferred Share Certificate or in such new Book-Entry, as applicable, which is
the same as the issuance date of the original Preferred Share Certificate or in
such original Book-Entry, as applicable.

 

22. Remedies, Other Obligations, Breaches and Injunctive Relief.   The remedies
provided in this Certificate of Designations shall be cumulative and in addition
to all other remedies available at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall
limit any Holder’s right to pursue actual for any failure by the Company to
comply with the terms of this Certificate of Designations. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by a Holder and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holders
and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach,
each Holder shall be entitled, in addition to all other available remedies, to
seek an injunction restraining any such breach or any such threatened breach,
without the necessity of showing economic loss and without any bond or other
security being required. The Company shall provide all information and
documentation to a Holder that is reasonably requested by such Holder to enable
such Holder to confirm the Company’s compliance with the terms and conditions of
this Certificate of Designations.

 

23. Payment of Collection, Enforcement and Other Costs.   If  (a) any Preferred
Shares are placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or a Holder otherwise
takes action to collect amounts due under this Certificate of Designations with
respect to the Preferred Shares or to enforce the provisions of this Certificate
of Designations or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and
involving a claim under this Certificate of Designations, then the Company shall
pay the reasonable and documented costs incurred by such Holder for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation,
reasonable and documented attorneys’ fees and disbursements.

 

24. Construction; Headings.   This Certificate of Designations shall be deemed
to be jointly drafted by the Company and the Holders and shall not be construed
against any such Person as the drafter hereof. The headings of this Certificate
of Designations are for convenience of reference and shall not form part of, or
affect the interpretation of, this Certificate of Designations. Unless the
context clearly indicates otherwise, each pronoun herein shall be deemed to
include the masculine, feminine, neuter, singular and plural forms thereof. The
terms “including,” “includes,” “include” and words of like import shall be
construed broadly as if followed by the words “without limitation.” The terms
“herein,” “hereunder,” “hereof” and words of like import refer to this entire
Certificate of Designations instead of just the provision in which they are
found. Unless expressly indicated otherwise, all section references are to
sections of this Certificate of Designations.

 

25. Failure or Indulgence Not Waiver.   No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder within the
applicable time periods provided herein shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party. Notwithstanding the foregoing,
nothing contained in this Section 25 shall permit any waiver of any provision of
Section 4(d).

 

 27 

 

 

26. Dispute Resolution.

 

(a) In the case of a dispute relating to a Closing Bid Price, a Closing Sale
Price, a Conversion Price, an Installment Conversion Price, a Triggering Event
Conversion Price, a VWAP or a fair market value or the arithmetic calculation of
a Conversion Rate, or the applicable Redemption Price (as the case may be)
(including, without limitation, a dispute relating to the determination of any
of the foregoing), the Company or the applicable Holder (as the case may be)
shall submit the dispute to the other party via electronic mail (A) if by the
Company, within two (2) Business Days after the occurrence of the circumstances
giving rise to such dispute or (B) if by such Holder at any time after such
Holder learned of the circumstances giving rise to such dispute. If such Holder
and the Company are unable to promptly resolve such dispute relating to such
Closing Bid Price, such Closing Sale Price, such Conversion Price, such
Installment Conversion Price, such Triggering Event Conversion Price, such VWAP
or such fair market value, or the arithmetic calculation of such Conversion Rate
or such applicable Redemption Price (as the case may be), at any time after the
third (3rd) Business Day following such initial notice by the Company or such
Holder (as the case may be) of such dispute to the Company or such Holder (as
the case may be), then such Holder may, at its sole option, select an
independent, reputable investment bank to resolve such dispute, which investment
bank shall be approved by the Company (such approval not to be unreasonably
delayed, withheld or conditioned).

 

(b) Such Holder and the Company shall each deliver to such investment bank (A) a
copy of the initial dispute submission so delivered in accordance with the first
sentence of this Section 26 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which such Holder selected such investment bank (the “Dispute Submission
Deadline”) (the documents referred to in the immediately preceding clauses (A)
and (B) are collectively referred to herein as the “Required Dispute
Documentation”) (it being understood and agreed that if either such Holder or
the Company fails to so deliver all of the Required Dispute Documentation by the
Dispute Submission Deadline, then the party who fails to so submit all of the
Required Dispute Documentation shall no longer be entitled to (and hereby waives
its right to) deliver or submit any written documentation or other support to
such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission Deadline).
Unless otherwise agreed to in writing by both the Company and such Holder or
otherwise requested by such investment bank, neither the Company nor such Holder
shall be entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute (other than the
Required Dispute Documentation).

 

(c) The Company and such Holder shall cause such investment bank to determine
the resolution of such dispute and notify the Company and such Holder in writing
of such resolution no later than ten (10) Business Days immediately following
the Dispute Submission Deadline. Absent bad faith by such Holder, the fees and
expenses of such investment bank shall be borne solely by the Company, and such
investment bank’s resolution of such dispute shall be final and binding upon all
parties absent manifest error.

 

 28 

 

 

27. Notices; Currency; Payments.

 

(a) Notices.   The Company shall provide each Holder with prompt written notice
of all actions taken pursuant to the terms of this Certificate of Designations,
including in reasonable detail a description of such action and the reason
therefor. Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party)
or by electronic mail (provided that the sending party does not receive an
automated rejection notice); or (iii) one Business Day after deposit with an
overnight courier service, in each case properly addressed to the party to
receive the same as follows:

 

(i) if to the Company, to:

 

FuelCell Energy, Inc.

3 Great Pasture Road

Danbury, CT 06810

Attention: Michael Bishop & Jennifer D. Arasimowicz, Esq.

Email: mbishop@fce.com

jarasimowicz@fce.com

 

with a copy to:

 

Foley & Lardner LLP

111 Huntington Avenue, Suite 2500

Boston, MA 02199

Attention: Paul Broude, Esq.

Email: pbroude@foley.com

Facsimile: (617) 342-4001

 

(ii) if to a Holder, in accordance with the address, facsimile number and/or
e-mail address of such Holder set forth on the books and records of the Company;
or to such other address, facsimile number and/or e-mail address and/or to the
attention of such Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change.

 

Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine or e-mail containing the time, date,
recipient facsimile number and an image of the first page of such transmission
or (C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively. The
Company shall provide each Holder with prompt written notice of all actions
taken pursuant to this Certificate of Designations, including in reasonable
detail a description of such action and the reason therefore. Without limiting
the generality of the foregoing, the Company shall give written notice to each
Holder (i) promptly upon any adjustment of the Conversion Price, setting forth
in reasonable detail, and certifying, the calculation of such adjustment and
(ii) at least fifteen (15) days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any grant, issuances, or sales of any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to such Holder.

 

(b) Currency.   All dollar amounts referred to in this Certificate of
Designations are in United States Dollars (“U.S. Dollars”), and all amounts
owing under this Certificate of Designations shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted into the
U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “Exchange Rate” means, in relation to any amount of currency to
be converted into U.S. Dollars

 

 29 

 

 

pursuant to this Certificate of Designations, the U.S. Dollar exchange rate as
published in the Wall Street Journal on the relevant date of calculation (it
being understood and agreed that where an amount is calculated with reference
to, or over, a period of time, the date of calculation shall be the final date
of such period of time).

 

(c) Payments.   Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Certificate of Designations, unless otherwise expressly
set forth herein, such payment shall be made in lawful money of the United
States of America by wire transfer of immediately available funds pursuant to
wire transfer instructions that Holder shall provide to the Company in writing
from time to time with no less than two (2) Business Days prior written notice.
Whenever any amount expressed to be due by the terms of this Certificate of
Designations is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business Day. Any amount
due under this Certificate of Designations which is not paid within five
(5) Business Days of when due shall result in a late charge being incurred and
payable by the Company in an amount equal to interest on such amount at the rate
of fifteen percent (15%) per annum from the date such amount was due until the
same is paid in full (“Late Charge”).

 

28. Waiver of Notice.   To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Certificate of Designations.

 

29. Governing Law.   This Certificate of Designations shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Certificate of Designations
shall be governed by, the internal laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of Delaware. The Company
and each Holder hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Nothing contained
herein shall be deemed or operate to preclude any Holder from bringing suit or
taking other legal action against the Company in any other jurisdiction to
collect on the Company’s obligations to such Holder, or to enforce a judgment or
other court ruling in favor of such Holder. THE COMPANY AND EACH HOLDER HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS CERTIFICATE OF DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

30. Severability.   If any provision of this Certificate of Designations is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Certificate of Designations so long as this
Certificate of Designations as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

31. Maximum Payments.   Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum

 

 30 

 

 

permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the applicable Holder and thus refunded
to the Company.

 

32. Stockholder Matters; Amendment.

 

(a) Stockholder Matters.   Any stockholder action, approval or consent required,
desired or otherwise sought by the Company pursuant to the DGCL, the Certificate
of Incorporation, this Certificate of Designations or otherwise with respect to
the issuance of Preferred Shares may be effected by written consent of the
Company’s stockholders or at a duly called meeting of the Company’s
stockholders, all in accordance with the applicable rules and regulations of the
DGCL. This provision is intended to comply with the applicable sections of the
DGCL permitting stockholder action, approval and consent affected by written
consent in lieu of a meeting.

 

(b) Amendment.   This Certificate of Designations or any provision hereof may be
amended by obtaining the affirmative vote at a meeting duly called for such
purpose, or written consent without a meeting in accordance with the DGCL, of
the Required Holders, voting separate as a single class, and with such other
stockholder approval, if any, as may then be required pursuant to the DGCL and
the Certificate of Incorporation.

 

33. Disclosure.   Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Certificate of Designations, unless the
Company has in good faith determined that the matters relating to such notice do
not constitute material, non-public information relating to the Company or any
of its Subsidiaries, the Company shall within two (2) Business Days after any
such receipt or delivery publicly disclose such material, non-public information
on a Current Report on Form 8-K or otherwise, unless any provision of this
Certificate of Designations provides otherwise with respect to the public
disclosure of a particular notice, then such public disclosure shall be in
accordance with the terms and conditions of such provision. In the event that
the Company believes that a notice contains material, non-public information
relating to the Company or any of its Subsidiaries, the Company so shall
indicate to such Holder contemporaneously with delivery of such notice, and in
the absence of any such indication, such Holder shall be allowed to presume that
all matters relating to such notice do not constitute material, non-public
information relating to the Company or any of its Subsidiaries.

 

34. Certain Defined Terms.   For purposes of this Certificate of Designations,
the following terms shall have the following meanings:

 

(a) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

 

(b) “Additional Amount” means, as of the applicable date of determination, with
respect to each Preferred Share, all declared and unpaid Dividends on such
Preferred Share.

 

(c) “Affiliate” or “Affiliated” means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person, it being understood for purposes of this
definition that “control” of a Person means the power directly or indirectly
either to vote 10% or more of the stock having ordinary voting power for the
election of directors of such Person or direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.

 

(d) “Attribution Parties” means, collectively, the following Persons and
entities: (i) any investment vehicle, including, any funds, feeder funds or
managed accounts, currently, or from time to time after the Initial Issuance
Date, directly or indirectly managed or advised by a Holder’s investment manager
or any of its Affiliates or principals, (ii) any direct or indirect Affiliates
of such Holder or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with such Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Company’s Common
Stock would or could be aggregated with such Holder’s and the other Attribution
Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively such Holder and all other
Attribution Parties to the Maximum Percentage.

 

(e) “Bloomberg” means Bloomberg, L.P.

 

 31 

 

 

(f) “Book-Entry” means each entry on the Register evidencing one or more
Preferred Shares held by a Holder in lieu of a Preferred Share Certificate
issuable hereunder.

 

(g) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 

(h) “Change of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Stock in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, are, in all material respects, the
holders of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities) after
such reorganization, recapitalization or reclassification, (ii) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company, (iii) a merger in connection with a bona fide
acquisition by the Company of any Person in which such merger does not
contemplate a change to the identity of a majority of the board of directors of
the Company, or (iv) as a result of the transactions contemplated by this
Certificate of Designations.

 

(i) “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the case may be)
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of
such security on such date shall be the fair market value as mutually determined
by the Company and the Required Holder. If the Company and the Required Holders
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 26. All
such determinations shall be appropriately adjusted for any stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions
during such period.

 

(j) “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

(k) “Common Stock Equivalents” means, collectively, Options and Convertible
Securities.

 

(l) “Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

(m) “Convertible Securities” means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

 32 

 

 

(n) “Current Subsidiary” means any Person in which the Company on the
Subscription Date, directly or indirectly, (i) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (ii)
controls or operates all or any part of the business, operations or
administration of such Person, and all of the foregoing, collectively, “Current
Subsidiaries”.

 

(o) “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the
Nasdaq Global Select Market, the Nasdaq Capital Market or the Principal Market.

 

(p) “Equity Conditions” means, with respect to an given date of determination:
(i) on each day during the applicable Equity Conditions Measuring Period, the
Common Stock is listed or designated for quotation (as applicable) on an
Eligible Market and shall not have been suspended from trading on an Eligible
Market (other than suspensions of not more than two (2) days and occurring prior
to the applicable date of determination due to business announcements by the
Company); (ii) during the applicable Equity Conditions Measuring Period, the
Company shall have delivered all shares of Common Stock issuable upon conversion
of the Preferred Shares on a timely basis as set forth in Section 4 hereof;
(iii) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 4(d)(i)
hereof; (iv) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (v) on each day during the
applicable Equity Conditions Measuring Period, no public announcement of a
pending, proposed or intended Fundamental Transaction shall have occurred which
has not been abandoned, terminated or consummated; (vi) on each day during the
applicable Equity Conditions Measuring Period, such Holder shall not be in
possession of any material, non-public information regarding the Company
provided to it by the Company, any of its Subsidiaries or any of their
respective Affiliates, employees, officers, representatives, agents or the like;
(vii) on each day during the applicable Equity Conditions Measuring Period, the
Company otherwise shall not have breached any covenant or other term of this
Certificate of Designations in any material respect (other than covenants
subject to material adverse effect or materiality, which may not be breached in
any respect), including, without limitation, the Company shall not have failed
to timely make any payment pursuant to this Certificate of Designations; (viii)
on at least seven (7) Trading Days during the applicable Equity Conditions
Measuring Period, including each of the final three (3) Trading Days during such
Equity Conditions Measuring Period, there shall not have occurred any Volume
Failure or Price Failure; (ix) on each day during the applicable Equity
Conditions Measuring Period, on the applicable date of determination (A) no
Authorized Share Failure shall exist or be continuing and 100% of the maximum
number of shares of Common Stock then issuable upon conversion of the Preferred
Shares (without regard to any limitations on conversion) are available under the
certificate of incorporation of the Company and reserved by the Company to be
issued pursuant to this Certificate of Designations, (B) all shares of Common
Stock to be issued in connection with the event requiring this determination may
be issued in full without resulting in an Authorized Share Failure and (C) all
shares of Common Stock to be issued in connection with the event requiring this
determination are duly authorized and may be issued in full; (x) on each day
during the applicable Equity Conditions Measuring Period, there shall not have
occurred and there shall not exist a Triggering Event or an event that with the
passage of time or giving of notice would constitute a Triggering Event; and
(xi) the shares of Common Stock issuable pursuant to the event requiring the
satisfaction of the Equity Conditions are eligible for trading without
restriction on an Eligible Market.

 

(q) “Equity Conditions Failure” means that as of the applicable date of
determination the Equity Conditions have not been satisfied (or waived in
writing by the applicable Holder).

 

(r) “Equity Conditions Measuring Period” means the period beginning twelve (12)
Trading Days immediately prior to the applicable date of determination and
ending on and including the applicable date of determination.

 

(s) “Fundamental Transaction” means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets

 

 33 

 

 

of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02
of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one
or more Subject Entities to make, or allow the Company to be subject to or have
its Common Stock be subject to or party to one or more Subject Entities making,
a purchase, tender or exchange offer that is accepted by the holders of at least
either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the
outstanding shares of Common Stock calculated as if any shares of Common Stock
held by all Subject Entities making or party to, or Affiliated with any Subject
Entities making or party to, such purchase, tender or exchange offer were not
outstanding; or (z) such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity making or
party to, such purchase, tender or exchange offer, become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50%
of the outstanding shares of Common Stock, or (iv) consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with one
or more Subject Entities whereby all such Subject Entities, individually or in
the aggregate, acquire, either (x) at least 50% of the outstanding shares of
Common Stock, (y) at least 50% of the outstanding shares of Common Stock
calculated as if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or party to,
such stock purchase agreement or other business combination were not
outstanding; or (z) such number of shares of Common Stock such that the Subject
Entities become collectively the beneficial owners (as defined in Rule 13d-3
under the 1934 Act) of at least 50% of the outstanding shares of Common Stock,
or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the
Company shall, directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, allow any Subject
Entity individually or the Subject Entities in the aggregate to be or become the
“beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, whether through acquisition, purchase, assignment, conveyance,
tender, tender offer, exchange, reduction in outstanding shares of Common Stock,
merger, consolidation, business combination, reorganization, recapitalization,
spin-off, scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either (x) at least
50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock, (y) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock not held by all such Subject
Entities as of the date of this Certificate of Designations calculated as if any
shares of Common Stock held by all such Subject Entities were not outstanding,
or (z) a percentage of the aggregate ordinary voting power represented by issued
and outstanding shares of Common Stock or other equity securities of the Company
sufficient to allow such Subject Entities to effect a statutory short form
merger or other transaction requiring other shareholders of the Company to
surrender their shares of Common Stock without approval of the shareholders of
the Company or (C) directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, the issuance of or
the entering into any other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in which case
this definition shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this definition to the extent necessary to
correct this definition or any portion of this definition which may be defective
or inconsistent with the intended treatment of such instrument or transaction.

 

(t) “GAAP” means United States generally accepted accounting principles,
consistently applied.

 

(u) “Group” means a “group” as that term is used in Section 13(d) of the 1934
Act and as defined in Rule 13d-5 thereunder.

 

(v) “Holder Pro Rata Amount” means, with respect to any Holder, a fraction
(i) the numerator of which is the number of Preferred Shares issued to such
Holder on the Initial Issuance Date and (ii) the denominator of which is the
number of Preferred Shares issued to all Holders on the Initial Issuance Date.

 

(w) “Indebtedness” means of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including,
without limitation, “capital leases” in accordance with GAAP for the periods
covered thereby (other than trade payables entered into in the ordinary course
of business consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and

 

 34 

 

 

other similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with United States generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, deed of trust, lien,
pledge, charge, security interest or other encumbrance of any nature whatsoever
in or upon any property or assets (including accounts and contract rights) with
respect to any asset or property owned by any Person, even though the Person
which owns such assets or property has not assumed or become liable for the
payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above.

 

(x) “Installment Amount” means, as of the applicable date of determination, with
respect to a particular Holder, (A) the Stated Value of a number of Preferred
Shares equal to (i) the product of (1) $989,677.42 multiplied by (2) such
Holder’s Pro Rata Amount (rounded to the nearest whole number) or (ii) all
Preferred Shares then held by such Holder only if such number of Preferred
Shares then held by such Holder is less than the amount determined under the
immediately preceding clause (i), (B) any Deferral Amount deferred pursuant to
Section 9(d) to such applicable Installment Date and included in such
Installment Amount in accordance therewith, and (C) any Acceleration Amount
accelerated pursuant to Section 9(e) for such Current Installment Date and
included in such Installment Amount in accordance therewith.

 

(y) “Installment Conversion Price” means, with respect to a particular date of
determination, the lesser of  (i) the Conversion Price then in effect, and (ii)
87.5% of the Installment Market Price then in effect. All such determinations to
be appropriately adjusted for any stock split, stock dividend, stock combination
or other similar transaction during any such measuring period.

 

(z) “Installment Date” means each of the first (1st) and sixteenth (16th)
calendar day of each month commencing on (and including) December 1, 2018 and
ending on (and including) the Maturity Date; provided that if a given
Installment Date is not a Trading Day, such Installment Date shall be the next
Trading Day.

 

(aa) “Installment Market Price” means the lesser of  (i) the VWAP on the Trading
Day immediately prior to the applicable Installment Date and (ii) the quotient
of  (A) the sum of the two (2) lowest daily VWAPs of the Common Stock during the
ten (10) consecutive Trading Day period ending and including the Trading Day
immediately prior to the applicable Installment Date, divided by (B) two (2).

 

(bb) “Intellectual Property Rights” means, with respect to the Company and its
Subsidiaries, all of their rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names, original works
of authorship, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor.

 

(cc) “Liquidation Event” means, whether in a single transaction or series of
transactions, the voluntary or involuntary liquidation, dissolution or winding
up of the Company or such Subsidiaries the assets of which constitute all or
substantially all of the assets of the business of the Company and its
Subsidiaries, taken as a whole.

 

(dd) “Material Adverse Effect” means one or more material adverse effect(s).
individually or in the aggregate, on the business, properties, assets,
liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby, or on the authority or
ability of the Company to perform its obligations under this Certificate of
Designations.

 

 35 

 

 

(ee) “Maturity Date” shall mean March 1, 2020; provided, however, the Maturity
Date may be extended at the option of a Holder (i) in the event that, and for so
long as, a Triggering Event shall have occurred and be continuing or (ii)
through the date that is twenty (20) Business Days after the consummation of a
Fundamental Transaction in the event that a Fundamental Transaction is publicly
announced or a Change of Control Notice is delivered prior to the Maturity Date;
provided, however, that if a Holder elects to convert some or all of its
Preferred Shares pursuant to Section 4 hereof, and the Conversion Amount would
be limited pursuant to Section 4(d) hereunder, the Maturity Date shall
automatically be extended until such time as such provision shall not limit the
conversion of such Preferred Shares.

 

(ff) “New Subsidiary” means, as of any date of determination, any Person in
which the Company after the Subscription Date, directly or indirectly, (i) owns
or acquires any of the outstanding capital stock or holds any equity or similar
interest of such Person or (ii) controls or operates all or any part of the
business, operations or administration of such Person, and all of the foregoing,
collectively, “New Subsidiaries.”

 

(gg) “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

 

(hh) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, if any, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Change of Control.

 

(ii) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

 

(jj) “Price Failure” means, with respect to each Trading Day of the applicable
Equity Conditions Measuring Period, the VWAP of the Common Stock fails to be
$0.50 (as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions occurring after the Subscription
Date) or more. All such determinations to be appropriately adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other
similar transactions during any such measuring period.

 

(kk) “Principal Market” means the Nasdaq Global Market.

 

(ll) “Redemption Notices” means, collectively, the Triggering Events Redemption
Notices, the Maturity Redemption Notice, the Installment Notices with respect to
any Installment Redemption and the Change of Control Redemption Notices, and
each of the foregoing, individually, a “Redemption Notice.”

 

(mm) “Redemption Premium” means 125%.

 

(nn) “Redemption Prices” means, collectively, Triggering Event Redemption
Prices, the Change of Control Redemption Prices, the Maturity Redemption Price
and the Installment Redemption Prices, and each of the foregoing, individually,
a “Redemption Price.”

 

(oo) “SEC” means the Securities and Exchange Commission or the successor
thereto.

 

(pp) “Significant Subsidiary” shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X.

 

(qq) “Stated Value” shall mean $1,000 per share, subject to adjustment for stock
splits, stock dividends, recapitalizations, reorganizations, reclassifications,
combinations, subdivisions or other similar events occurring after the Initial
Issuance Date with respect to the Preferred Shares.

 

(rr) “Stockholder Meeting Outside Date” means April 30, 2019.

 

(ss) “Subscription Date” means August 27, 2018.

 

(tt) “Subject Entity” means any Person, Persons or Group or any Affiliate of any
such Person, Persons or Group.

 

 36 

 

 

(uu) “Subsidiaries” means, as of any date of determination, collectively, all
Current Subsidiaries and all New Subsidiaries, and each of the foregoing,
individually, a “Subsidiary.”

 

(vv) “Successor Entity” means the Person (or, if so elected by the Required
Holders, the Parent Entity) formed by, resulting from or surviving any Change of
Control or the Person (or, if so elected by the Required Holders, the Parent
Entity) with which such Change of Control shall have been entered into.

 

(ww) “Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, any day on which the
Common Stock is traded on the Principal Market, or, if the Principal Market is
not the principal trading market for the Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then
traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
entire final hour of trading on such exchange or market (or if such exchange or
market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York time)
unless such day is otherwise designated as a Trading Day in writing by the
Holder or (y) with respect to all determinations other than price or trading
volume determinations relating to the Common Stock, any day on which the
Principal Market or other then applicable Eligible Market is open for trading of
securities.

 

(xx) “Triggering Event Conversion Price” means, with respect to any Triggering
Event Conversion that price which shall be the lower of  (i) the applicable
Conversion Price as in effect on the Trading Day immediately preceding the time
of the delivery or deemed delivery of the applicable Conversion Notice, and (ii)
85% of the lowest VWAP of the Common Stock on any Trading Day during the five
(5) consecutive Trading Day period ending and including the Trading Day
immediately preceding the delivery or deemed delivery of the applicable
Conversion Notice (as adjusted for any share dividend, share split, share
combination, reclassification or similar transaction that proportionately
decreases or increases the Common Stock during such period).

 

(yy) “Volume Failure” means, with respect to each Trading Day of the applicable
Equity Conditions Measuring Period, the aggregate daily dollar trading volume
(as reported on Bloomberg) of the Common Stock fails to be $150,000 or more.

 

(zz) “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its
“Volume at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such
security on such date on any of the foregoing bases, the VWAP of such security
on such date shall be the fair market value as mutually determined by the
Company and the Required Holders. If the Company and the Required Holders are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in Section 26. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination, recapitalization or other similar transaction during
such period.

 

* * * * *

 

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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations of
Series D Convertible Preferred Stock of FuelCell Energy, Inc. to be signed by
its Senior Vice President & Chief Financial Officer on this 29th day of August,
2018.

 

  FUELCELL ENERGY, INC.         By: /s/ Michael S. Bishop     Name: Michael S.
Bishop     Title:   Senior Vice President & Chief Financial Officer

 

 38 

 

  

EXHIBIT I

 

FUELCELL ENERGY, INC.

CONVERSION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of
the Series D Convertible Preferred Stock of FuelCell Energy, Inc. (the
“Certificate of Designations”). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series D Convertible Preferred Stock, $0.01 par value per share
(the “Preferred Shares”), of FuelCell Energy, Inc., a Delaware corporation (the
“Company”), indicated below into shares of common stock, $0.0001 value per share
(the “Common Stock”), of the Company, as of the date specified below.

 

Date of Conversion:           Aggregate number of Preferred Shares to be
converted           Aggregate Stated Value of such Preferred Shares to be
converted:           Aggregate accrued and unpaid Dividends and accrued and
unpaid Late Charges with respect to such Preferred Shares and such Aggregate
Dividends to be converted:           AGGREGATE CONVERSION AMOUNT TO BE
CONVERTED:     

 

This Conversion Notice shall constitute a representation by the Holder
submitting this Conversion Notice that after giving effect to the conversion
provided for in this Conversion Notice, the Holder (together with its
Attribution Parties) will not have beneficial ownership (together with the
beneficial ownership of such Person’s Attribution Parties) of a number of shares
of Common Stock which exceeds the Maximum Percentage of the total outstanding
shares of Common Stock of the Company as determined based on the Reported
Outstanding Share Number provided by the Company and otherwise pursuant to the
provisions of Section 4(d)(i) of the Certificate of Designations. By submitting
this Conversion Notice to the Company, the Holder agrees and acknowledges that
the Company shall be entitled rely on the foregoing representation.

 

Please confirm the following information:

 

Conversion Price:           Number of shares of Common Stock to be issued:      
    Installment Amount(s) to be reduced (and corresponding Installment Date(s))
and amount of reduction:    

 

☐If this Conversion Notice is being delivered with respect to an Triggering
Event Conversion, check here if Holder is electing to use the following
Triggering Event Conversion Price:____________

 

☐If this Conversion Notice is being delivered with respect to an Acceleration,
check here if Holder is electing to use the following Installment Conversion
Price:____________

 

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Please issue the Common Stock into which the applicable Preferred Shares are
being converted to Holder, or for its benefit, as follows:

 

☐Check here if requesting delivery as a certificate to the following name and to
the following address:

 

Issue to:                

 

☐Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:

 

DTC Participant:         DTC Number:           Account Number:    

 

Date:_____________ , ___ ,  ________

 

    Name of Registered Holder   

 

By :       Name :     Title :  

  

Tax ID:              Facsimile:     

 

E-mail Address:

 

 40 

 

  

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs
American Stock Transfer & Trust Company to issue the above indicated number of
shares of Common Stock.

 

  FUELCELL ENERGY, INC.         By: Name:    

Title:

 

 

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