Exhibit 10.1

 

SECURITIES EXCHANGE AGREEMENT

 

This Securities Exchange Agreement (this “Agreement”) is made as of December 18,
2015 (the “Effective Date”) by and between Vericel Corporation, a Michigan
corporation (the “Company”), and Stonepine Capital, LP, a Delaware limited
partnership (the “Holder”).

 

RECITALS

 

WHEREAS, the Holder wishes to exchange that number of shares of the Company’s
common stock, no par value per share (the “Common Stock”) as set forth next to
each Holder’s name on Schedule I hereto; and

 

WHEREAS, the Company wishes to issue to the Holder, pursuant to the exemption
from registration provided by Section 3(a)(9) (“Section 3(a)(9)”) under the
Securities Act of 1933, as amended (the “Securities Act”), that number of shares
of the Company’s Series A Convertible Preferred Stock, no par value per share
(the “Preferred Stock”) as set forth next to the Holder’s name on Schedule I
hereto, in exchange for the Common Stock (the “Exchange”) and to cancel the
Common Stock upon the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in order to implement the foregoing and in consideration of the
mutual agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Company and the Holder agree as follows:

 

1.     Exchange; Delivery. Holder hereby assigns and transfers the Common Stock
to the Company in exchange for the issuance by the Company, effective as of the
Effective Date and in full satisfaction of the Company’s obligations to the
Holder with respect to the Common Stock, of that number of shares of Preferred
Stock as set forth next to the Holder’s name on Schedule I hereto (the “Shares”)
to the Holder.  On the third business day after the Effective Date (the “Closing
Date”), the Company shall deliver the Shares to the Holder, and Holder shall
deliver the Common Stock to the Company, either via DTC to an account specified
in writing by the Company prior to such Exchange or in certificated form.  The
terms and conditions of the Series A Preferred Stock shall be in substantially
the form of the Certificate of Designation of Preferences, Rights and
Limitations attached hereto as Exhibit A (the “Certificate of Designation”).

 

2.     Representations and Warranties of the Company.  The Company hereby
represents and warrants to the Holder that as of the Effective Date:

 

2.1          Due Authorization.  The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly authorized and validly executed and
delivered by the Company.  Apart from the filing of the Certificate of
Designation with the Michigan Department of Licensing and Regulatory Affairs,
which action will occur on or before the Closing Date, no other corporate action
on the part of the Company, its board of directors or its stockholders is
necessary to

 

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authorize the execution and delivery by the Company of this Agreement or the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the issuance and delivery of the Shares.

 

2.2          Valid Issuance; Reservation of Shares; Preemptive Rights.  The
Shares are duly authorized and, when issued and exchanged in accordance with the
terms hereof, will be duly and validly issued, free and clear of any liens,
claims or encumbrances (“Liens”) imposed by or through the Company.

 

2.3          Non-Contravention.  The execution and delivery of this Agreement,
the issuance of the Shares and the consummation of the transactions contemplated
hereby and thereby will not, following the filing of the Certificate of
Designation with the Michigan Department of Licensing and Regulatory Affairs,
(a) conflict with or constitute a material violation of or default under or give
rise to any right of termination, material amendment, cancellation or
acceleration or loss of any material rights under: (i) any material contracts to
which the Company is a party; or (ii) the certificate of incorporation or the
bylaws of the Company; or (b) to the Company’s knowledge, violate any order or
decree applicable to the Company, or by which it or any of its operations are
bound, and no such violation or default currently exists.

 

2.4          Exemption from Registration. Neither the Company nor any of its
affiliates nor any person acting on behalf of or for the benefit of any of the
forgoing, has paid or given, or agreed to pay or give, directly or indirectly,
any commission or other remuneration (within the meaning of Section 3(a)(9) and
the rules and regulations promulgated thereunder) for soliciting the Exchange.
Assuming the representations and warranties of the Holder contained herein are
true and complete, the Exchange will qualify for the registration exemption
contained in Section 3(a)(9).

 

3.     Representations, Warranties and Covenants of the Holder. The Holder
hereby represents and warrants to the Company and agrees as follows:

 

3.1          Due Authorization.  The Holder has all requisite corporate or other
entity power and authority to execute, deliver and perform its obligations under
this Agreement, and this Agreement has been duly authorized and validly executed
and delivered by the Holder and no other corporate or other action on the part
of the Holder is necessary to authorize the execution and delivery by the Holder
of this Agreement.

 

3.2          Ownership.  The Holder is the sole beneficial owner of the shares
of Common Stock as set forth next to the Holder’s name on Schedule I hereto,
free and clear of all Liens, and upon execution of this Agreement, the Company
will take title to the Common Stock, free and clear of all Liens. There are no
actions, suits or proceedings against the Holder affecting the title of any of
the Common Stock or the right of the Holder to execute, deliver and perform this
Agreement. The Holder is not a party to or bound by, and the Shares being
exchanged by the Holder pursuant to this Agreement are not subject to, any
agreement, understanding or other arrangement (i) granting any option, warrant
or right of first refusal with respect to the Shares to any person,
(ii) restricting the Holder’s right to surrender and exchange

 

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the Shares as contemplated by this Agreement or (iii) restricting any other of
the Holder’s rights with respect to the Shares.

 

3.3          Non-Contravention.  The execution and delivery of this Agreement by
the Holder and the consummation of the transactions contemplated hereby will
not, following the filing of the Certificate of Designation with the Michigan
Department of Licensing and Regulatory Affairs, (a) conflict with or constitute
a material violation of or default under or give rise to any right of
termination, material amendment, cancellation or acceleration or loss of any
material rights under: (i) any material contracts to which the Holder is a
party; or (ii) the certificate of incorporation or the bylaws of the Holder or
any similar organizational document of the Holder; or (b) to the Holder’s
knowledge, violate any order or decree applicable to the Holder, or by which it
or any of its operations are bound, and no such violation or default currently
exists.

 

3.4          Securities Law Exemptions.  Neither the Holder nor any of its
affiliates nor any person acting on behalf of or for the benefit of any of the
forgoing, has paid or given, or agreed to pay or give, directly or indirectly,
any commission or other remuneration (within the meaning of Section 3(a)(9) of
the Securities Act and the rules and regulations promulgated thereunder) for
soliciting the Exchange.  Both the Exchange and the subsequent conversion of the
Preferred Stock into Common Stock have been approved as an exempt transaction
with the Company pursuant to Rule 16b-3 under the Exchange Act.

 

4.     Amendment and Waiver.  No provision of this Agreement may be amended or
modified except upon the written consent of the Company and the Holder, and no
provision hereof may be waived other than by a written instrument signed by the
party against whom enforcement of any such waiver is sought.

 

5.     Miscellaneous.

 

5.1          Headings; Construction.  The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement. The language used in this Agreement
is and will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against any
party.

 

5.2          Severability.  In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

 

5.3          Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware, without giving
effect to the principles of conflicts of law. The parties agree that any action
brought by either party under or in relation to this Agreement, including
without limitation to interpret or enforce any provision of this Agreement,
shall be brought in, and each party agrees to and does hereby submit to the
jurisdiction and venue of, any state or federal court located in Delaware.

 

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5.4          Entire Agreement.  This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the Exchange, and
no party shall be liable or bound to any other in any manner by any oral or
written representations, warranties, covenants and agreements except as
specifically set forth herein.  Each party expressly represents and warrants
that it is not relying on any oral or written representations, warranties,
covenants or agreements outside of this Agreement.

 

5.5          Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.

 

5.6          Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.

 

5.7          Fees and Expenses.  Each party shall bear their respective fees and
expenses incurred in connection with negotiating this Agreement and effecting
the Exchange (the “Exchange Expenses”), provided that the Holder shall reimburse
the Company for up to $20,000.00 in total documented Exchange Expenses.

 

5.8        Further Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

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IN WITNESS WHEREOF, the parties hereto have executed this SECURITIES EXCHANGE
AGREEMENT as of the date set forth in the first paragraph hereof.

 

 

 

COMPANY:

 

 

 

VERICEL CORPORATION

 

 

 

 

 

By:

/s/ Dominick Colangelo

 

Name: Dominick Colangelo

 

Title: President and Chief Executive Officer

 

[Signature Page to Securities Exchange Agreement]

 

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IN WITNESS WHEREOF, the parties hereto have executed this SECURITIES EXCHANGE
AGREEMENT as of the date set forth in the first paragraph hereof.

 

 

 

HOLDER:

 

 

 

STONEPINE CAPITAL, LP

 

 

 

 

 

By:

/s/ Timothy P. Lynch

 

Name: Timothy P. Lynch

 

Title: Managing Member of Stonepine Capital Management, LLC, the GP of Stonepine
Capital, LP

 

[Signature Page to Securities Exchange Agreement]

 

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SCHEDULE I

 

Holder

 

Shares of Common Stock to be
Exchanged

 

Shares of Series A Convertible
Preferred Stock to be Issued

 

Stonepine Capital, LP

 

1,250,000

 

1,250

 

 

* * *

 

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EXHIBIT A

 

FORM OF CERTIFICATE OF DESIGNATION

 

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VERICEL CORPORATION

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES A CONVERTIBLE PREFERRED STOCK

 

PURSUANT TO THE MICHIGAN BUSINESS CORPORATION ACT

 

VERICEL CORPORATION, a Michigan corporation (the “Corporation”), in accordance
with the provisions of the Michigan Business Corporation Act (the “MBCA”) does
hereby certify that, in accordance with Section 302 of the MBCA and the
authority conferred on its Board of Directors (the “Board”) by the Restated
Articles of Incorporation of the Corporation, as amended (the “Articles of
Incorporation”), the following resolution was duly adopted by the Board on
December 17, 2015:

 

RESOLVED, pursuant to authority expressly set forth in the Articles of
Incorporation, the issuance of a series of Preferred Stock designated as the
Series A Convertible Preferred Stock, no par value, of the Corporation is hereby
authorized and the designation, number of shares, powers, preferences, rights,
qualifications, limitations and restrictions thereof (in addition to any
provisions set forth in the Articles of Incorporation that are applicable to the
Preferred Stock of all classes and series) are hereby fixed, and the Certificate
of Designation of Preferences, Rights and Limitations of Series A Convertible
Preferred Stock (the “Certificate of Designation”) is hereby approved as
follows:

 

SERIES A CONVERTIBLE PREFERRED STOCK

 

Section 1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:

 

“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act of 1933. With respect to a Holder, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as such Holder will be deemed to be an Affiliate of such
Holder.

 

“Alternate Consideration” shall have the meaning set forth in Section 7(b).

 

“Beneficial Ownership Limitation” shall have the meaning set forth in
Section 6(c).

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Buy-In” shall have the meaning set forth in Section 6(d)(iii).

 

“Closing Sale Price” means, for any security as of any date, the last closing
trade price for such security prior to 4:00 p.m., New York City time, on the
principal securities exchange or trading market where such security is listed or
traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting
service mutually acceptable to and hereafter designated by Holders of a majority
of the then-outstanding Series A Preferred Stock and the Corporation), or if the
foregoing do not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, L.P., or, if no last trade price is reported for such
security by Bloomberg, L.P., the average of the bid prices of any market makers
for such security as reported on the OTC Pink Market by OTC Markets Group, Inc.
If the Closing Sale Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Closing Sale Price of such security on
such date shall be the fair market value as determined in good faith by the
Board.

 

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“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Corporation’s common stock, no par value, and stock of
any other class of securities into which such securities may hereafter be
reclassified.

 

“Conversion Date” shall have the meaning set forth in Section 6(a).

 

“Conversion Price” shall mean $1.92, as adjusted pursuant to paragraph 7 hereof.

 

“Conversion Ratio” shall have the meaning set forth in Section 6(b).

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Series A Preferred Stock in accordance with the
terms hereof.

 

“Daily Failure Amount” means the product of (x) .005 multiplied by (y) the
Closing Sale Price of the Common Stock on the applicable Share Delivery Date.

 

“Distributions” shall have the meaning set forth in Section 5(a).

 

“DTC” shall have the meaning set forth in Section 6(a).

 

“DWAC Delivery” shall have the meaning set forth in Section 6(a).

 

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

 

“Fundamental Transaction” shall have the meaning set forth in Section 7(b).

 

“Holder” means any holder of Series A Preferred Stock.

 

“Issuance Date” means December 23, 2015.

 

“Junior Securities” shall have the meaning set forth in Section 5(a).

 

“MBCA” shall mean the Michigan Business Corporation Act.

 

“Notice of Conversion” shall have the meaning set forth in Section 6(a).

 

“Parity Securities” shall have the meaning set forth in Section 5(a).

 

“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Senior Securities” shall have the meaning set forth in Section 5(a).

 

“Series A Preferred Stock” shall have the meaning set forth in Section 2(a).

 

“Series A Preferred Stock Register” shall have the meaning set forth in
Section 2(b).

 

“Share Delivery Date” shall have the meaning set forth in Section 6(d)(i).

 

“Stated Value” shall mean $1,920.00 per share.

 

“Trading Day” means a day on which the Common Stock is traded for any period on
a principal securities

 

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exchange or if the Common Stock is not traded on a principal securities
exchange, on a day that the Common Stock is traded on another securities market
on which the Common Stock is then being traded.

 

Section 2. Designation, Amount and Par Value; Assignment.

 

(a)             The series of preferred stock designated by this Certificate of
Designation shall be designated as the Corporation’s Series A Convertible
Preferred Stock (the “Series A Preferred Stock”) and the number of shares so
designated shall be 1,250. Each share of Series A Preferred Stock shall have no
par value.

 

(b)             The Corporation shall register shares of the Series A Preferred
Stock, upon records to be maintained by the Corporation for that purpose (the
“Series A Preferred Stock Register”), in the name of the Holders thereof from
time to time. The Corporation may deem and treat the registered Holder of shares
of Series A Preferred Stock as the absolute owner thereof for the purpose of any
conversion thereof and for all other purposes. Shares of Series A Preferred
Stock may be issued solely in book-entry form or, if requested by any Holder,
such Holder’s shares may be issued in certificated form.  The Corporation shall
register the transfer of any shares of Series A Preferred Stock in the Series A
Preferred Stock Register, upon surrender of the certificates (if applicable)
evidencing such shares to be transferred, duly endorsed by the Holder thereof,
to the Corporation at its address specified herein. Upon any such registration
or transfer, a new certificate evidencing the shares of Series A Preferred Stock
so transferred shall be issued to the transferee and a new certificate
evidencing the remaining portion of the shares not so transferred, if any, shall
be issued to the transferring Holder, in each case, within three Business Days.
The provisions of this Certificate of Designation are intended to be for the
benefit of all Holders from time to time and shall be enforceable by any such
Holder.

 

Section 3.         Dividends. Holders shall be entitled to receive, and the
Corporation shall pay, dividends on shares of the Series A Preferred Stock (on
an as-if-converted-to-Common-Stock basis, without regard to the Beneficial
Ownership Limitation) equal to and in the same form, and in the same manner, as
dividends (other than dividends on shares of the Common Stock payable in the
form of Common Stock) actually paid on shares of the Common Stock when, as and
if such dividends (other than dividends payable in the form of Common Stock) are
paid on shares of the Common Stock. Other than as set forth in the previous
sentence, no other dividends shall be paid on shares of Series A Preferred
Stock, and the Corporation shall pay no dividends (other than dividends payable
in the form of Common Stock) on shares of the Common Stock unless it
simultaneously complies with the previous sentence.

 

Section 4.         Voting Rights. Except as otherwise provided herein or as
otherwise required by the MBCA, the Series A Preferred Stock shall have no
voting rights. However, as long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote of the
Holders of a majority of the then outstanding shares of the Series A Preferred
Stock, (i) alter or change adversely the powers, preferences or rights given to
the Series A Preferred Stock or alter or amend this Certificate of Designation,
amend or repeal any provision of, or add any provision to, the Articles of
Incorporation or bylaws of the Corporation, or file any articles of amendment,
certificate of designations, preferences, limitations and relative rights of any
series of preferred stock, if such action would adversely alter or change the
preferences, rights, privileges or powers of, or restrictions provided for the
benefit of the Series A Preferred Stock in a manner materially different than
the effect on the Common Stock, regardless of whether any of the foregoing
actions shall be by means of amendment to the Articles of Incorporation or by
merger, consolidation or otherwise, (ii) issue further shares of Series A
Preferred Stock or increase or decrease (other than by conversion) the number of
authorized shares of Series A Preferred Stock, or (iii) enter into any agreement
with respect to any of the foregoing.

 

Section 5. Rank; Liquidation.

 

(a)             The Series A Preferred Stock shall rank: (i) senior to all of
the Common Stock; (ii) senior to any class or series of capital stock of the
Corporation hereafter created specifically ranking by its terms junior to any
Series A Preferred Stock (“Junior Securities”); (iii) on parity with all shares
of the Corporation’s Series A Convertible Preferred Stock; (iv) on parity with
any class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms on parity with the Series A Preferred Stock
(together with the Corporation’s Series A Convertible Preferred Stock, the
“Parity Securities”); (v) junior to Series B-1 Non-Voting Convertible Preferred
Stock (the “Series B-1 Preferred Stock”); (vi) junior to Series B-2 Voting
Convertible Preferred Stock (the “Series B-2 Preferred Stock” and, together with
the Series B-1 Preferred Stock, the “Series B Preferred Stock”)); and (vii)

 

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junior to any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms senior to any Series A Preferred Stock
(“Senior Securities”), in each case, as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntarily
or involuntarily (all such distributions being referred to collectively as
“Distributions”).

 

(b)             Subject to the prior and superior rights of the holders of
Series B Preferred Stock and any other Senior Securities of the Corporation,
upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, each holder of shares of Series A Preferred Stock
shall be entitled to: (i) receive, in preference to any distributions of any of
the assets or surplus funds of the Corporation to the holders of the Common
Stock and Junior Securities and pari passu with any distribution to the holders
of Parity Securities, any dividends declared but unpaid on such shares, before
any payments shall be made or any assets distributed to holders of any class of
Common Stock or Junior Securities, and (ii) participate pari passu with the
holders of Common Stock (on an as-converted basis, without regard to the
Beneficial Ownership Limitation) in the remaining distribution of the net assets
of the Corporation available for distribution.  If, upon any such liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
shall be insufficient to pay the holders of shares of the Series A Preferred
Stock the amount required under clause (i) of the preceding sentence, then all
remaining assets of the Corporation shall be distributed ratably to holders of
the shares of the Series A Preferred Stock and Parity Securities.

 

Section 6. Conversion.

 

(a)             Conversions at Option of Holder. Each share of Series A
Preferred Stock shall be convertible, at any time and from time to time from and
after the Issuance Date, at the option of the Holder thereof, into a number of
shares of Common Stock equal to the Conversion Ratio. Holders shall effect
conversions by providing the Corporation with the form of conversion notice
attached hereto as Annex A (a “Notice of Conversion”), duly completed and
executed. Other than a conversion following a Fundamental Transaction or
following a notice provided for under Section 7(d)(ii) hereof, the Notice of
Conversion must specify at least a number of shares of Series A Preferred Stock
to be converted equal to the lesser of (x) 100 shares (such number subject to
appropriate adjustment following the occurrence of an event specified in
Section 7(a) hereof) and (y) the number of shares of Series A Preferred Stock
then held by the Holder. Provided the Corporation’s transfer agent is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer program, the Notice of Conversion may specify, at the Holder’s
election, whether the applicable Conversion Shares shall be credited to the
account of the Holder’s prime broker with DTC through its Deposit Withdrawal
Agent Commission system (a “DWAC Delivery”). The “Conversion Date”, or the date
on which a conversion shall be deemed effective, shall be defined as the Trading
Day that the Notice of Conversion, completed and executed, is sent by facsimile
to, and received during regular business hours by, the Corporation; provided
that the original certificate(s) (if any) representing such shares of Series A
Preferred Stock being converted, duly endorsed, and the accompanying Notice of
Conversion, are received by the Corporation within two (2) Trading Days
thereafter. In all other cases, the Conversion Date shall be defined as the
Trading Day on which the original shares of Series A Preferred Stock being
converted, duly endorsed, and the accompanying Notice of Conversion, are
received by the Corporation. The calculations set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical error.

 

(b)             Conversion Ratio. The “Conversion Ratio” for each share of
Series A Preferred Stock shall be equal to the Stated Value divided by the
Conversion Price.

 

(c)              Beneficial Ownership Limitation. Notwithstanding anything
herein to the contrary, the Corporation shall not effect any conversion of the
Series A Preferred Stock, and a Holder shall not have the right to convert any
portion of the Series A Preferred Stock, to the extent that, after giving effect
to an attempted conversion set forth on an applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any other Person whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) or Section 16 of the Exchange Act and the applicable
regulations of the Commission, including any “group” of which the Holder is a
member (the foregoing, “Attribution Parties”)) would beneficially own a number
of shares of Common Stock in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by

 

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such Holder and its Attribution Parties shall include the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock subject to
the Notice of Conversion with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which are issuable upon
(A) conversion of the remaining, unconverted Series A Preferred Stock
beneficially owned by such Holder or any of its Attribution Parties, and
(B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Corporation (including any warrants) beneficially owned
by such Holder or any of its Attribution Parties that are subject to a
limitation on conversion or exercise similar to the limitation contained herein.
For purposes of this Section 6(c), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the applicable regulations
of the Commission. In addition, for purposes hereof, “group” has the meaning set
forth in Section 13(d) of the Exchange Act and the applicable regulations of the
Commission. For purposes of this Section 6(c), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of the
following: (A) the Corporation’s most recent periodic or annual filing with the
Commission, as the case may be, (B) a more recent public announcement by the
Corporation that is filed with the Commission, or (C) a more recent notice by
the Corporation or the Corporation’s transfer agent to the Holder setting forth
the number of shares of Common Stock then outstanding. Upon the written request
of a Holder (which may be by email), the Corporation shall, within three
(3) Trading Days thereof, confirm in writing to such Holder (which may be via
email) 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 any actual conversion or exercise of securities of the Corporation,
including shares of Series A Preferred Stock, by such Holder or its Attribution
Parties since the date as of which such number of outstanding shares of Common
Stock was last publicly reported or confirmed to the Holder. The “Beneficial
Ownership Limitation” shall initially be 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock pursuant to such Notice of Conversion (to the extent
permitted pursuant to this Section 6(c)). The Corporation shall be entitled to
rely on representations made to it by the Holder in any Notice of Conversion
regarding its Beneficial Ownership Limitation.  Notwithstanding the foregoing,
by written notice to the Corporation, which will not be effective until the
sixty-first (61st) day after such notice is delivered to the Corporation, the
Holder may reset the Beneficial Ownership Limitation percentage to a higher or
lower percentage, not to exceed 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock pursuant to such Notice of Conversion; provided, however, that the
Holder may reset the Beneficial Ownership Limitation to a higher percentage not
to exceed 14.99% if the Corporation has delivered to the Holder a Redemption
Notice (defined below), unless the Holder has irrevocably waived such right
under this proviso through a written notice delivered to the Corporation,
whereupon the Holder shall not have the right to increase the Beneficial
Ownership Limitation above 9.99% unless and until a subsequent Redemption Notice
is delivered (at which time, the Holder shall again have the ability to elect to
increase the Beneficial Ownership Limitation or irrevocably waive such right). 
Upon such a change by a Holder of the Beneficial Ownership Limitation, the
Beneficial Ownership Limitation may not be further amended by such Holder
without first providing the minimum notice required by this Section 6(c). 
Notwithstanding the foregoing, at any time following notice of a Fundamental
Transaction, the Holder may waive and/or change the Beneficial Ownership
Limitation effective immediately upon written notice to the Corporation and may
reinstitute a Beneficial Ownership Limitation at any time thereafter effective
immediately upon written notice to the Corporation.

 

(d)             Mechanics of Conversion.

 

(i)                                  Delivery of Certificate or Electronic
Issuance Upon Conversion. Not later than three (3) Trading Days after the
applicable Conversion Date, or if the Holder requests the issuance of physical
certificate(s), two (2) Trading Days after receipt by the Corporation of the
original certificate(s) representing such shares of Series A Preferred Stock
being converted, duly endorsed, and the accompanying Notice of Conversion (the
“Share Delivery Date”), the Corporation shall (a) deliver, or cause to be
delivered, to the converting Holder a physical certificate or certificates
representing the number of Conversion Shares being acquired upon the conversion
of shares of Series A Preferred Stock, or (b) in the case of a DWAC Delivery (if
so requested by the Holder), electronically transfer such Conversion Shares by
crediting the account of the Holder’s prime broker with DTC through its DWAC
system. If in the case of any Notice of Conversion such certificate or
certificates are not delivered to or as directed by or, in the case of a DWAC
Delivery, such shares are not electronically delivered to or as directed by, the
applicable Holder by the Share Delivery Date, the applicable Holder shall be
entitled to elect to rescind such Conversion Notice by written notice to the
Corporation at any time on or before its receipt of such certificate or
certificates for Conversion Shares or electronic receipt of such shares, as
applicable, in which event the Corporation shall promptly return to such Holder
any original Series A Preferred Stock certificate delivered to the Corporation
and such Holder shall promptly return to the Corporation any Common Stock
certificates or otherwise direct the return of any shares of Common Stock
delivered to the Holder through the DWAC system, representing the shares of
Series A Preferred Stock unsuccessfully tendered for conversion to the
Corporation.

 

5

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(ii)              Obligation Absolute. Subject to Section 6(c) hereof and
subject to Holder’s right to rescind a Conversion Notice pursuant to
Section 6(d)(i) above, the Corporation’s obligation to issue and deliver the
Conversion Shares upon conversion of Series A Preferred Stock in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by a Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by such Holder or any other
Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the
Corporation to such Holder in connection with the issuance of such Conversion
Shares. Subject to Section 6(c) hereof and subject to Holder’s right to rescind
a Conversion Notice pursuant to Section 6(d)(i) above, in the event a Holder
shall elect to convert any or all of its Series A Preferred Stock, the
Corporation may not refuse conversion based on any claim that such Holder or
anyone associated or affiliated with such Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and/or enjoining conversion of all or
part of the Series A Preferred Stock of such Holder shall have been sought and
obtained by the Corporation, and the Corporation posts a surety bond for the
benefit of such Holder in the amount of 150% of the value of the Conversion
Shares into which would be converted the Series A Preferred Stock which is
subject to such injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains judgment. In
the absence of such injunction, the Corporation shall, subject to
Section 6(c) hereof and subject to Holder’s right to rescind a Conversion Notice
pursuant to Section 6(d)(i) above, issue Conversion Shares upon a properly
noticed conversion. If the Corporation fails to deliver to a Holder such
certificate or certificates, or electronically deliver (or cause its transfer
agent to electronically deliver) such shares in the case of a DWAC Delivery,
pursuant to Section 6(d)(i) on or prior to the fifth (5th) Trading Day after the
Share Delivery Date applicable to such conversion (other than a failure caused
by incorrect or incomplete information provided by Holder to the Corporation),
then, unless the Holder has rescinded the applicable Conversion Notice pursuant
to Section 6(d)(i) above, the Corporation shall pay (as liquidated damages and
not as a penalty) to such Holder an amount payable, at the Corporation’s option,
either (a) in cash or (b) to the extent that it would not cause the Holder or
its Attribution Parties to exceed the Beneficial Ownership Limitation, in shares
of Common Stock that are valued for these purposes at the Closing Sale Price on
the date of such calculation, in each case equal to the product of (x) the
number of Conversion Shares required to have been issued by the Corporation on
such Share Delivery Date, (y) an amount equal to the Daily Failure Amount and
(z) the number of Trading Days actually lapsed after such fifth (5th) Trading
Day after the Share Delivery Date during which such certificates have not been
delivered, or, in the case of a DWAC Delivery, such shares have not been
electronically delivered; provided, however, the Holder shall only receive up to
such amount of shares of Common Stock such that Holder and its Attribution
Parties and any other persons or entities whose beneficial ownership of Common
Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the
Exchange Act (including shares held by any “group” of which the Holder is a
member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) shall
not collectively beneficially own greater than the Beneficial Ownership
Limitation. Nothing herein shall limit a Holder’s right to pursue actual damages
for the Corporation’s failure to deliver Conversion Shares within the period
specified herein and such Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief; provided that Holder
shall not receive duplicate damages for the Corporation’s failure to deliver
Conversion Shares within the period specified herein. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.

 

(iii)           Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. If the Corporation fails to deliver to a Holder
the applicable certificate or certificates or to effect a DWAC Delivery, as
applicable, by the Share Delivery Date pursuant to Section 6(d)(i) (other than a
failure caused by incorrect or incomplete information provided by Holder to the
Corporation), and if after such Share Delivery Date such Holder is required by
its brokerage firm to purchase (in an open market transaction or otherwise), or
the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion Shares which
such Holder was entitled to receive upon the conversion relating to such Share
Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such
Holder (in addition to any other remedies available to or elected by such
Holder) the amount by which (x) such Holder’s total purchase price (including
any brokerage commissions) for the shares of Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of

 

6

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shares of Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the shares of Series A Preferred Stock equal to the number of
shares of Series A Preferred Stock submitted for conversion or deliver to such
Holder the number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements under
Section 6(d)(i). For example, if a Holder purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of shares of Series A Preferred Stock with respect to which
the actual sale price (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Corporation shall be required to pay such Holder $1,000.
The Holder shall provide the Corporation written notice, within three
(3) Trading Days after the occurrence of a Buy-In, indicating the amounts
payable to such Holder in respect of such Buy-In together with applicable
confirmations and other evidence reasonably requested by the Corporation.
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Corporation’s failure to timely deliver certificates representing shares of
Common Stock upon conversion of the shares of Series A Preferred Stock as
required pursuant to the terms hereof; provided, however, that the Holder shall
not be entitled to both (i) require the reissuance of the shares of Series A
Preferred Stock submitted for conversion for which such conversion was not
timely honored and (ii) receive the number of shares of Common Stock that would
have been issued if the Corporation had timely complied with its delivery
requirements under Section 6(d)(i).

 

(iv)          Reservation of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance
upon conversion of the Series A Preferred Stock, free from preemptive rights or
any other actual contingent purchase rights of Persons other than the Holders of
the Series A Preferred Stock, not less than such aggregate number of shares of
the Common Stock as shall be issuable (taking into account the adjustments of
Section 7) upon the conversion of all outstanding shares of Series A Preferred
Stock. The Corporation covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly authorized, validly issued, fully paid
and non-assessable.

 

(v)             Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon the conversion of the
Series A Preferred Stock. As to any fraction of a share which a Holder would
otherwise be entitled to receive upon such conversion, the Corporation shall pay
a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Conversion Price.

 

(vi)          Transfer Taxes. The issuance of certificates for shares of the
Common Stock upon conversion of the Series A Preferred Stock shall be made
without charge to any Holder for any documentary stamp or similar taxes that may
be payable in respect of the issue or delivery of such certificates, provided
that the Corporation shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the registered
Holder(s) of such shares of Series A Preferred Stock and the Corporation shall
not be required to issue or deliver such certificates unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Corporation
the amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.

 

(e)              Status as Shareholder. Upon each Conversion Date: (i) the
shares of Series A Preferred Stock being converted shall be deemed converted
into shares of Common Stock; and (ii) the Holder’s rights as a holder of such
converted shares of Series A Preferred Stock shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Corporation to comply with the terms
of this Certificate of Designation. In all cases, the holder shall retain all of
its rights and remedies for the Corporation’s failure to convert Series A
Preferred Stock.

 

Section 7.         Certain Adjustments.

 

(a)             Stock Dividends and Stock Splits. If the Corporation, at any
time while this Series A Preferred Stock is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions payable in shares of
Common

 

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Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Corporation upon conversion of this Series A Preferred
Stock) with respect to the then outstanding shares of Common Stock;
(B) subdivides outstanding shares of Common Stock into a larger number of
shares; or (C) combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the
Corporation) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event (excluding any treasury shares of the Corporation).
Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.

 

(b)             Fundamental Transaction. If, at any time while this Series A
Preferred Stock is outstanding, (A) the Corporation effects any merger or
consolidation of the Corporation with or into another Person or any stock sale
to, or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off, share exchange or scheme of
arrangement) with or into another Person (other than such a transaction in which
the Corporation is the surviving or continuing entity and its Common Stock is
not exchanged for or converted into other securities, cash or property), (B) the
Corporation effects any sale of all or substantially all of its assets in one
transaction or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Corporation or another Person) is completed
pursuant to which more than 50% of the Common Stock not held by the Corporation
or such Person is exchanged for or converted into other securities, cash or
property, or (D) the Corporation effects any reclassification of the Common
Stock or any compulsory share exchange pursuant (other than as a result of a
dividend, subdivision or combination covered by Section 7(a) above) to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (in any such case, a “Fundamental Transaction”), then, upon any
subsequent conversion of this Series A Preferred Stock the Holders shall have
the right to receive, in lieu of the right to receive Conversion Shares, for
each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share of
Common Stock (the “Alternate Consideration”). For purposes of any such
subsequent conversion, the determination of the Conversion Ratio shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Corporation shall adjust the
Conversion Ratio in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holders shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this Series A
Preferred Stock following such Fundamental Transaction. To the extent necessary
to effectuate the foregoing provisions, any successor to the Corporation or
surviving entity in such Fundamental Transaction shall file a new Certificate of
Designation with the same terms and conditions and issue to the Holders new
preferred stock consistent with the foregoing provisions and evidencing the
Holders’ right to convert such preferred stock into Alternate Consideration. The
terms of any agreement to which the Corporation is a party and pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this
Section 7(b) and insuring that this Series A Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. The Corporation shall cause to be
delivered to each Holder, at its last address as it shall appear upon the stock
books of the Corporation, written notice of any Fundamental Transaction at least
20 calendar days prior to the date on which such Fundamental Transaction is
expected to become effective or close.

 

(c)              Calculations. All calculations under this Section 7 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 7, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Corporation) issued
and outstanding.

 

(d)             Notice to the Holders.

 

(i)                 Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any provision of this Section 7, the Corporation
shall promptly deliver to each Holder a notice setting forth the Conversion
Ratio after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

 

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(ii)              Other Notices. If (A) the Corporation shall declare a dividend
(or any other distribution in whatever form) on the Common Stock, (B) the
Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any shareholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Corporation is a party, any sale or transfer of all or substantially
all of the assets of the Corporation, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property, or
(E) the Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then, in each case,
the Corporation shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Series A Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the
stock books of the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.

 

Section 8. Redemption.

 

(a)             General.  On or after June 23, 2018, unless prohibited by the
MBCA laws governing distributions to shareholders and subject to
Section 10(b) of the Securities Exchange Act of 1934, as amended (and Rule 10b-5
promulgated thereunder), the Corporation may elect, in its sole discretion, to
redeem all or a portion of the then outstanding shares of Series A Preferred
Stock at a price equal to the product of (A) the Conversion Ratio and (B) the
Market Price (determined in the manner set forth below) of a single share of
Common Stock as of the date of the Corporation’s Redemption Notice (as defined
below) (the “Redemption Price”), so long as the Redemption Price would be
greater than the Conversion Price. For purposes of this Section 8, the “Market
Price” of a single share of Common Stock shall be determined as follows: if the
Common Stock is listed on a principal securities exchange or another nationally
recognized trading system, the Market Price per share of Common Stock shall be
deemed to be the greater of (A) the 20 consecutive Trading Day average closing
price per share of the Common Stock ending on the Trading Day immediately prior
to the date of determination and (B) the closing price of the Common Stock on
the Trading Day immediately prior to the date of determination; and if the
Common Stock is not listed on a principal securities exchange or another
nationally recognized trading system, the Market Price per share of Common Stock
shall be deemed to be the amount most recently determined by the Board to
represent the fair market value per share of the Common Stock (including without
limitation a determination for purposes of granting Common Stock options or
issuing Common Stock under any plan, agreement or arrangement with employees of
the Corporation). The date of the Corporation’s payment of the Redemption Price
shall be referred to as a “Redemption Date.”

 

(b)             Redemption Notice.  The Corporation shall send written notice of
its intention to redeem the Series A Preferred Stock (the “Redemption Notice”)
to each holder of record of Series A Preferred Stock not less than 90 days prior
to the Redemption Date (or such shorter time as may be mutually agreed upon in
writing by the Corporation and the Holder).  Each Redemption Notice shall state:
(i) the number of shares of Series A Preferred Stock held by the holder that the
Corporation shall redeem on the Redemption Date specified in the Redemption
Notice; (ii) the Redemption Date and the Redemption Price; and (iii) the date
upon which the holder’s right to convert such shares terminates (as determined
in accordance with Section 8(d) below); and (iv) for holders of shares in
certificated form, that the holder is to surrender to the Corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares of Series A Preferred Stock to be redeemed.

 

(c)              Surrender of Certificates; Payment.  On or before the
Redemption Date, each holder of shares of Series A Preferred Stock to be
redeemed on such Redemption Date, unless such holder has exercised his, her or
its right to convert such shares as provided in Section 6, shall, if a holder of
shares in certificated form, surrender the certificate or

 

9

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certificates representing such shares (or, if such registered holder alleges
that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Corporation to indemnify
the Corporation against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of such certificate) to the
Corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof.  In the event less than all of the shares of Series A Preferred
Stock represented by a certificate are redeemed, a new certificate, instrument,
or book entry representing the unredeemed shares of Series A Preferred Stock
shall promptly be issued to such holder.

 

(d)    Rights Subsequent to Redemption.  If the Redemption Notice shall have
been duly given, and if on the Redemption Date the Redemption Price payable upon
redemption of the shares of Series A Preferred Stock to be redeemed on such
Redemption Date is paid or tendered for payment or deposited with an independent
payment agent so as to be available therefor in a timely manner, then
notwithstanding that any certificates evidencing any of the shares of Series A
Preferred Stock so called for redemption shall not have been surrendered,
dividends with respect to such shares of Series A Preferred Stock shall cease to
accrue after such Redemption Date and all rights with respect to such shares,
including the conversion rights set forth in Section 6, shall forthwith after
the Redemption Date terminate, except only the right of the holders to receive
the Redemption Price without interest upon surrender of any such certificate or
certificates therefor.

 

Section 9. Miscellaneous.

 

(a)    Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, via
email, or sent by a nationally recognized overnight courier service, addressed
to the Corporation, at 64 Sidney Street, Cambridge, MA, 02139, Attn: Gerard
Michel, or such other facsimile number, email address, or mailing address as the
Corporation may specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile, email, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile number,
email address or mailing address of such Holder appearing on the books of the
Corporation, or if no such facsimile number, email address, or mailing address
appears on the books of the Corporation, at the principal place of business of
such Holder. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of: (i) the date of transmission, if
such notice or communication is delivered via facsimile or email prior to 5:30
p.m. (New York City time) on any date, (ii) the date immediately following the
date of transmission, if such notice or communication is delivered via facsimile
or email between 5:30 p.m. and 11:59 p.m. (New York City time) on any date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.

 

(b)    Lost or Mutilated Series A Preferred Stock Certificate. If a Holder’s
Series A Preferred Stock certificate shall be mutilated, lost, stolen or
destroyed, the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate, or in lieu of
or in substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Series A Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership thereof, reasonably
satisfactory to the Corporation and, in each case, customary and reasonable
indemnity, if requested. Applicants for a new certificate under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Corporation
may prescribe.

 

(c)     Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a waiver by any
other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more
occasions shall not be considered a waiver or deprive that party (or any other
Holder) of the right thereafter to insist upon strict adherence to that term or
any other term of this Certificate of Designation. Any waiver by the Corporation
or a Holder must be in writing. Notwithstanding any provision in this
Certificate of Designation to the contrary, any provision contained herein and
any right of the Holders of Series A Preferred Stock granted hereunder may be
waived as to all shares of Series A Preferred Stock (and the Holders thereof)
upon the written consent of the Holders of not less

 

10

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than a majority of the shares of Series A Preferred Stock then outstanding,
unless a higher percentage is required by the MBCA, in which case the written
consent of the Holders of not less than such higher percentage shall be
required.

 

(d)    Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable law.

 

(e)     Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.

 

(f)     Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to
limit or affect any of the provisions hereof.

 

(g)     Status of Converted Series A Preferred Stock. If any shares of Series A
Preferred Stock shall be converted or redeemed by the Corporation, such shares
shall resume the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series A Preferred Stock.

 

********************

 

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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation
this      day of December 2015.

 

 

 

 

Dominick C. Colangelo, Chief Executive Officer

 

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ANNEX A

 

NOTICE OF CONVERSION

 

(TO BE EXECUTED BY THE REGISTERED HOLDER
IN ORDER TO CONVERT SHARES OF SERIES A PREFERRED STOCK)

 

The undersigned Holder hereby irrevocably elects to convert the number of shares
of Series A Preferred Stock indicated below, represented by stock certificate
No(s).   (the “Preferred Stock Certificates”), into shares of common stock, no
par value (the “Common Stock”), of Vericel Corporation, a Michigan corporation
(the “Corporation”), as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Capitalized terms utilized
but not defined herein shall have the meaning ascribed to such terms in that
certain Certificate of Designation of Preferences, Rights and Limitations of
Series A Convertible Preferred Stock (the “Certificate of Designation”) filed by
the Corporation with the Michigan Department of Licensing and Regulatory Affairs
on December    , 2015.

 

As of the date hereof, the number of shares of Common Stock beneficially owned
by the undersigned Holder (together with such Holder’s Affiliates, and any other
Person whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) or Section 16 of the Exchange Act and the
applicable regulations of the Commission, including any “group” of which the
Holder is a member (the foregoing, “Attribution Parties”)), including the number
of shares of Common Stock issuable upon conversion of the Series A Preferred
Stock subject to this Notice of Conversion, but excluding the number of shares
of Common Stock which are issuable upon (A) conversion of the remaining,
unconverted Series A Preferred Stock beneficially owned by such Holder or any of
its Attribution Parties, and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation (including any
warrants) beneficially owned by such Holder or any of its Attribution Parties
that are subject to a limitation on conversion or exercise similar to the
limitation contained in Section 6(c) of the Certificate of Designation, is    %.
For purposes hereof, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the applicable regulations of the
Commission. In addition, for purposes hereof, “group” has the meaning set forth
in Section 13(d) of the Exchange Act and the applicable regulations of the
Commission.

 

Conversion calculations:

 

Date to Effect Conversion:

 

 

 

Number of shares of Series A Preferred Stock owned prior to Conversion:

 

 

 

Number of shares of Series A Preferred Stock to be Converted:

 

 

 

Number of shares of Common Stock to be Issued:

 

 

 

Address for delivery of physical certificates:

 

 

 

or

 

 

 

for DWAC Delivery:

 

 

 

DWAC Instructions:

 

 

13

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Broker no:

 

 

 

Account no:

 

 

 

 

 

 

 

HOLDER

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

14

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