[ex_001.jpg] 

 

 

 

 

Continued AMENDED TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK

 

Preferred Stock that are issued on or around February 13, 2017.

 

B. Additional Sections to Section 3 (Dividends) of the Filed Certificate.
Sections 3(X-a), (X-b), and (X-c), respectively, and shall relate only to those
52,500 shares of the Series A Convertible Preferred Stock that were issued on or
around July 7, 2017.

 

(X-a) From and after July 7, 2017 (the “Initial Issuance Date”), each holder of
a Preferred Share (each, a “Holder” and collectively, the “Holders”) shall be
entitled to receive dividends (the “Dividends”), which Dividends shall be paid
by the Company out of funds legally available therefor, payable, subject to the
conditions and other terms hereof, in shares of Common Stock or cash on the
Stated Value (as defined below) of such Preferred Share at the Dividend Rate (as
defined below), which shall be cumulative and shall continue to accrue whether
or not declared and whether or not in any fiscal year there shall be net profits
or surplus available for the payment of dividends in such fiscal year. Dividends
on the Preferred Shares shall commence accumulating on the Initial Issuance Date
and shall be computed on the basis of a 365-day year and actual days elapsed.
Dividends shall be payable on the following dates (each, a “Dividend Date”): (1)
the first (1st) Dividend Date being October 5, 2017; and (ii) and each
subsequent Dividend Date shall be solely in connection with and concurrently
with Installment Redemption Payments. Notwithstanding anything to the contrary
contained herein, unless otherwise agreed to by the Company and the Holders, the
Company shall pay Cash Dividends (as defined below) to the Holders on the first
(1st) Dividend Date.

 

(X-b) Dividends shall be payable on each Dividend Date, to the Holders of record
of the Preferred Shares on the applicable Dividend Date, in shares of Common
Stock (the “Dividend Shares”) so long as there has been no Equity Conditions
Failure and so long as the delivery of Dividend Shares would not violate the
provisions of Section 4; provided, however, that the Company may, at its option,
pay Dividends on any Dividend Date in cash (the “Cash Dividends”) or in a
combination of Cash Dividends and, so long as there has been no Equity
Conditions Failure, Dividend Shares. The Company shall deliver a written notice
(each, a “Dividend Election Notice”) to each Holder two (2) Trading Days prior
to each Dividend Date (the date such notice is delivered to all of the Holders,
the “Dividend Notice Date”), which notice (1) notifies the then-record Holders
that the Company has elected to pay the accrued Dividends as Cash Dividends,
Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and,
in any event, specifies the amount of the to-be-paid Dividends, if any, as Cash
Dividends and the amount of the to-be-paid Dividends, if any, as Dividend Shares
and (2) certifies that there has been no Equity Conditions Failure as of such
time, if the Company has elected to pay any portion of the to-be-paid Dividends
as Dividend Shares. Notwithstanding anything herein to the contrary, if no
Equity Conditions Failure has occurred as of the Dividend Notice Date but an
Equity Conditions Failure occurs at any time prior to the date on which a
to-be-paid Dividend Shares are to be issued, (A) the Company shall provide each
Holder with a subsequent notice to that effect and (B) unless such Holder waives
the Equity Conditions Failure, such to-be-paid Dividends shall be paid as Cash
Dividends. Dividends that are to be paid to each Holder in Dividend Shares shall
be paid in a number of fully paid and non-assessable shares (rounded to the
nearest whole share, with 0.50 or more of a share being rounded up to the
nearest whole share and 0.49 or less of a share being rounded down to the
nearest whole share) of Common Stock equal to the quotient of (1) the amount of
Dividends payable to such Holder on such Dividend Date less any Cash Dividends
paid and (2) the lesser of (i) the Redemption Price in effect on the applicable
Dividend Date, and (ii) the VWAP on the Trading Day immediately preceding the
Dividend Date.

 

 

 

 

(X-c) When any Dividend Shares are to be paid to any Holder, the Company shall
(i) (A) provided that (x) the Company’s transfer agent (the “Transfer Agent”) is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer Program and (y) either a Registration Statement for the resale by the
applicable Holder of the Dividend Shares or such Dividend Shares to be so issued
are otherwise eligible for resale pursuant to Rule 144 (as defined in the
Securities Purchase Agreement), credit such aggregate number of Dividend Shares
to which such Holder shall be entitled to such Holder’s or its designee’s
balance account with DTC through its Deposit and Withdrawal at Custodian system,
or (B) if either of the immediately preceding clauses (x) or (y) is not
satisfied, issue and deliver on the applicable Dividend Date, to the address set
forth in the register maintained by the Company for such purpose pursuant to the
Securities Purchase Agreement or to such address as specified by such Holder in
writing to the Company at least two (2) Business Days prior to the applicable
Dividend Date, a certificate, registered in the name of such Holder or its
designee, for the number of Dividend Shares to which such Holder shall be
entitled and (ii) with respect to each such payment of a Dividend, pay to such
Holder, in cash by wire transfer of immediately available funds, the amount of
any Cash Dividend. The Company shall pay any and all taxes that may be payable
with respect to the issuance and delivery of Dividend Shares.

 

C. Additional Sections to Section 3 (Dividends) of the Filed Certificate.
Sections 3(Y-a), (Y-b), and (Y-c), respectively, and shall relate only to the
first 131,250 shares of the Series A Convertible Preferred Stock that are sold
and issued subsequently to the date of this Amendment No 1.

 

(Y-a) From and after July 28, 2017 (the “Initial Issuance Date”), each holder of
a Preferred Share (each, a “Holder” and collectively, the “Holders”) shall be
entitled to receive dividends (the “Dividends”), which Dividends shall be paid
by the Company out of funds legally available therefor, payable, subject to the
conditions and other terms hereof, in shares of Common Stock or cash on the
Stated Value (as defined below) of such Preferred Share at the Dividend Rate (as
defined below), which shall be cumulative and shall continue to accrue whether
or not declared and whether or not in any fiscal year there shall be net profits
or surplus available for the payment of dividends in such fiscal year. Dividends
on the Preferred Shares shall commence accumulating on the Initial Issuance Date
and shall be computed on the basis of a 365-day year and actual days elapsed.
Dividends shall be payable on the following dates (each, a “Dividend Date”): (1)
the first (1st) Dividend Date being October 5, 2017; and (ii) and each
subsequent Dividend Date shall be solely in connection with and concurrently
with Installment Redemption Payments. Notwithstanding anything to the contrary
contained herein, unless otherwise agreed to by the Company and the Holders, the
Company shall pay Cash Dividends (as defined below) to the Holders on the first
(1st) Dividend Date.

 

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(Y-b) Dividends shall be payable on each Dividend Date, to the Holders of record
of the Preferred Shares on the applicable Dividend Date, in shares of Common
Stock (the “Dividend Shares”) so long as there has been no Equity Conditions
Failure and so long as the delivery of Dividend Shares would not violate the
provisions of Section 4; provided, however, that the Company may, at its option,
pay Dividends on any Dividend Date in cash (the “Cash Dividends”) or in a
combination of Cash Dividends and, so long as there has been no Equity
Conditions Failure, Dividend Shares. The Company shall deliver a written notice
(each, a “Dividend Election Notice”) to each Holder two (2) Trading Days prior
to each Dividend Date (the date such notice is delivered to all of the Holders,
the “Dividend Notice Date”), which notice (1) notifies the then-record Holders
that the Company has elected to pay the accrued Dividends as Cash Dividends,
Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and,
in any event, specifies the amount of the to-be-paid Dividends, if any, as Cash
Dividends and the amount of the to-be-paid Dividends, if any, as Dividend Shares
and (2) certifies that there has been no Equity Conditions Failure as of such
time, if the Company has elected to pay any portion of the to-be-paid Dividends
as Dividend Shares. Notwithstanding anything herein to the contrary, if no
Equity Conditions Failure has occurred as of the Dividend Notice Date but an
Equity Conditions Failure occurs at any time prior to the date on which a
to-be-paid Dividend Shares are to be issued, (A) the Company shall provide each
Holder with a subsequent notice to that effect and (B) unless such Holder waives
the Equity Conditions Failure, such to-be-paid Dividends shall be paid as Cash
Dividends. Dividends that are to be paid to each Holder in Dividend Shares shall
be paid in a number of fully paid and non-assessable shares (rounded to the
nearest whole share, with 0.50 or more of a share being rounded up to the
nearest whole share and 0.49 or less of a share being rounded down to the
nearest whole share) of Common Stock equal to the quotient of (1) the amount of
Dividends payable to such Holder on such Dividend Date less any Cash Dividends
paid and (2) the lesser of (i) the Redemption Price in effect on the applicable
Dividend Date, and (ii) the VWAP on the Trading Day immediately preceding the
Dividend Date.

 

(Y-c) When any Dividend Shares are to be paid to any Holder, the Company shall
(i) (A) provided that (x) the Company’s transfer agent (the “Transfer Agent”) is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer Program and (y) either a Registration Statement for the resale by the
applicable Holder of the Dividend Shares or such Dividend Shares to be so issued
are otherwise eligible for resale pursuant to Rule 144 (as defined in the
Securities Purchase Agreement), credit such aggregate number of Dividend Shares
to which such Holder shall be entitled to such Holder’s or its designee’s
balance account with DTC through its Deposit and Withdrawal at Custodian system,
or (B) if either of the immediately preceding clauses (x) or (y) is not
satisfied, issue and deliver on the applicable Dividend Date, to the address set
forth in the register maintained by the Company for such purpose pursuant to the
Securities Purchase Agreement or to such address as specified by such Holder in
writing to the Company at least two (2) Business Days prior to the applicable
Dividend Date, a certificate, registered in the name of such Holder or its
designee, for the number of Dividend Shares to which such Holder shall be
entitled and (ii) with respect to each such payment of a Dividend, pay to such
Holder, in cash by wire transfer of immediately available funds, the amount of
any Cash Dividend. The Company shall pay any and all taxes that may be payable
with respect to the issuance and delivery of Dividend Shares.

 

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D. Amendment No. 1 to Section 5 (Mandatory Installment Redemptions; Triggering
Events) of the Filed Certificate. Section 5(b) of the Filed Certificate shall be
entitled Section 5(W-b) and shall relate only to those 315,000 shares of the
Series A Convertible Preferred Stock that are issued on or around February 13,
2017.

 

E. Additional Section to Section 5 (Mandatory Installment Redemptions;
Triggering Events) of the Filed Certificate. Section 5(X-b) shall relate only to
those 52,500 shares of the Series A Convertible Preferred Stock that were issued
on or around July 7, 2017.

 

X-(b) Mandatory Installment Redemption.

 

(i) On January 8, 2018, the Company shall redeem the Fifty-two Thousand Five
Hundred Dollars ($52,500) of Preferred Shares and any accrued but unpaid
Dividends thereon on such date (the “Installment Redemption Payment”). The
Installment Redemption Payment shall be made, at the Company’s option (subject
to the Company’s compliance with the Equity Conditions (i.e., there is no Equity
Conditions Failure)) in (i) cash at a price equal to the product of (A) the
applicable Installment Redemption Payment multiplied by (B) the Redemption
Premium or (ii) in shares of Common Stock (the “Installment Redemption Shares”)
at a price equal to the product of (A) the applicable Installment Redemption
Payment multiplied by (B) the Redemption Premium divided by the lesser of (x)
the Redemption Price (subject to adjustment for any share dividend, share split,
share combination, reclassification or similar transaction that proportionately
decreases or increases the Common Stock) or (y) the VWAP during the period
commencing five (5) Trading Days prior to the Installment Redemption Payment
(the “Installment Redemption Price”). In the event that the Company elects to
not pay the Installment Redemption Payment in cash and the Equity Conditions are
not met (i.e., there is an Equity Conditions Failure), then each Holder shall be
entitled to the redemption of the applicable Installment Redemption Payment at a
price equal to the Triggering Event Redemption Price until such time that the
Equity Conditions Failure is cured. For the avoidance of doubt, if Holder defers
the receipt of Installment Redemption Shares due to the limitations set forth in
Section 4, Holder shall remain entitled to such shares as originally calculated,
i.e., any weekly VWAP increase subsequent to the Installment Redemption Payment
shall not decrease the amount of shares due to the Holder. However, if Holder
defers the receipt of Installment Redemption Shares due to the limitations set
forth in Section 4 and any VWAP for the Installment Redemption Shares the VWAP
during any Subsequent Installment Redemption Paymentdue to the limitations set
forth in Section 4, then such portion shall be subject to the pricing period of
the Subsequent Installment Redemption Payment.

 

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In the event that the Installment Redemption Price from the immediately prior
Installment Redemption Payment, if any, is greater than the VWAP for the
Installment Redemption Payment, then the Company shall make one make-whole
payment to such Holder in additional shares of Common Stock (“Installment
Redemption Price Make-Whole Shares”) to compensate the Holder for the loss of
value for the immediately previous Installment Redemption Payment. The number of
Installment Redemption Price Make-Whole Shares shall be determined by the
quotient of (A) the Installment Redemption Payment (including the Redemption
Premium) divided by (B) the VWAP calculated during the Make-Whole VWAP Period
(the “Make-Whole VWAP Price”); and then subtracting from such result the number
of shares of Common Stock issued in connection with the Installment Redemption
Payment. Such Installment Redemption Price Make-Whole Shares shall be delivered
to Holder by no later than the next Installment Redemption Payment or, if such
Installment Redemption Price Make-Whole Shares relates to the final Installment
Redemption Payment, then Installment Redemption Price Make-Whole Shares shall be
delivered to Holder by no later than three Trading Days following the last
Trading Day of the relevant Make-Whole VWAP Period. For the avoidance of doubt,
the Make-Whole VWAP Period for the final Installment Redemption Payment shall be
the

 

The Company’s obligations to deliver the Installment Redemption Price Make-Whole
Shares shall continue even though a Triggering Event has occurred (for the
avoidance of doubt, in such event the Redemption Price that is utilized shall be
the Triggering Event Redemption Price in lieu of the Installment Redemption
Price). For the avoidance of doubt, if Holder defers the receipt of Installment
Redemption Price Make-Whole Shares due to the limitations set forth in Section
4, Holder shall remain entitled to the amount of the Installment Redemption
Price Make-Whole Shares as originally calculated, i.e., any weekly VWAP increase
subsequent to the Make-Whole VWAP Period shall not decrease the amount of
Installment Redemption Price Make-Whole Shares due to the Holder. However, if
Holder defers the receipt of Installment Redemption Price Make-Whole Shares due
to the limitations set forth in Section 4 and any VWAP for the the VWAP during
any Subsequent Make-Whole Perioddue to the limitations set forth in Section 4,
then such portion shall be subject to the pricing period of the Subsequent
Make-Whole VWAP Period. Further, the Holder may demand the receipt of any
portion of the Installment Redemption Price Make-Whole Shares prior to the
receipt of the next Installment Redemption Payment. In such event, the Company
shall deliver a separate Redemption Notice to the Holder with respect to the
next Installment Redemption Payment.

 

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(ii) On the Business Day immediately prior to each Installment Redemption
Payment, the Company shall deliver to each Holder a written notice of each
Installment Redemption Payment by facsimile or electronic mail in the form
attached to the Filed Certificate as Exhibit II, which shall (A) certify that
there has been no Equity Conditions Failure and (B) state the aggregate amount
of the Preferred Shares which is being redeemed in such Installment Redemption
Payment from such Holder and all of the other Holders of the Preferred Shares
pursuant to this Section 5(b). Redemptions made pursuant to this Section 5(b)
shall be made in accordance with Section 5(d).

 

(iii) Pursuant to the limitations set forth in Section 4, each Holder may defer
all or any portion of any Installment Redemption Payment (including without
limitation, any Installment Redemption Price Make-Whole Shares) and have it be
paid simultaneously with any future Installment Redemption Payment(s) or on any
other date. For the avoidance of doubt, if a Holder defers all or any portion of
any Installment Redemption Payment (including without limitation, any
Installment Redemption Price Make-Whole Shares) due to the limitations set forth
in Section 4, such deferral alone shall not be deemed a Triggering Event.

 

F. Additional Section to Section 5 (Mandatory Installment Redemptions;
Triggering Events) of the Filed Certificate. Section 5(Y-b) shall relate only to
first 131,250 shares of the Series A Convertible Preferred Stock that are sold
and issued subsequently to the date of this Amendment No. 1.

 

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Y-(b) Mandatory Installment Redemption.

 

(i) Beginning on the earlier of the effectiveness of a Registration Statement
and January 28, 2018, and so long as any Preferred Shares are outstanding, with
respect to any Holder, the Company shall redeem Twenty-six Thousand Two Hundred
Fifty Dollars ($26,250) of the outstanding amount of Preferred Shares and any
accrued but unpaid Dividends thereon on the first (1st) Business Day of each
week (each, an “Installment Redemption Payment”) for five (5) consecutive weeks.
Each Installment Redemption Payment shall be made, at the Company’s option
(subject to the Company’s compliance with the Equity Conditions (i.e., there is
no Equity Conditions Failure)) in (i) cash at a price equal to the product of
(A) the applicable Installment Redemption Payment multiplied by (B) the
Redemption Premium or (ii) in shares of Common Stock (the “Installment
Redemption Shares”) at a price equal to the product of (A) the applicable
Installment Redemption Payment multiplied by (B) the Redemption Premium divided
by the lesser of (x) the Redemption Price (subject to adjustment for any share
dividend, share split, share combination, reclassification or similar
transaction that proportionately decreases or increases the Common Stock) or (y)
the VWAP during the period commencing five (5) Trading Days prior to the
Installment Redemption Payment (the “Installment Redemption Price”).
Notwithstanding the foregoing, the Holder shall have the option to demand
payment of one (1) Installment Redemption Payment in shares of Common Stock at
price equal to the Installment Redemption Price, in lieu of the receipt of cash;
provided, that the Holder shall give the Company at least one (1) week’s notice
prior to the applicable Installment Redemption Payment. In the event that the
Company elects to not pay an Installment Redemption Payment in cash and the
Equity Conditions are not met (i.e., there is an Equity Conditions Failure),
then each Holder shall be entitled to the redemption of the applicable
Installment Redemption Payment at a price equal to the Triggering Event
Redemption Price until such time that the Equity Conditions Failure is cured.
For the avoidance of doubt, if Holder defers the receipt of Installment
Redemption Shares due to the limitations set forth in Section 4, Holder shall
remain entitled to such shares as originally calculated, i.e., any weekly VWAP
increase subsequent to the original Installment Redemption Payment shall not
decrease the amount of shares due to the Holder. However, if Holder defers the
receipt of Installment Redemption Shares due to the limitations set forth in
Section 4 and any VWAP for the Installment Redemption Shares the VWAP during any
Subsequent Installment Redemption Paymentdue to the limitations set forth in
Section 4, then such portion shall be subject to the pricing period of the
Subsequent Installment Redemption Payment.

 

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In the event that the Installment Redemption Price from the immediately prior
Installment Redemption Payment is greater than the VWAP for the Installment
Redemption Payment, then the Company shall make one make-whole payment to such
Holder in additional shares of Common Stock (“Installment Redemption Price
Make-Whole Shares”) to compensate the Holder for the loss of value for the
immediately previous Installment Redemption Payment. The number of Installment
Redemption Price Make-Whole Shares shall be determined by the quotient of (A)
the Installment Redemption Payment (including the Redemption Premium) divided by
(B) the VWAP calculated during the Make-Whole VWAP Period (the “Make-Whole VWAP
Price”); and then subtracting from such result the number of shares of Common
Stock issued in connection with the Installment Redemption Payment. Such
Installment Redemption Price Make-Whole Shares shall be delivered to Holder by
no later than the next Installment Redemption Payment or, if such Installment
Redemption Price Make-Whole Shares relates to the final Installment Redemption
Payment, then Installment Redemption Price Make-Whole Shares shall be delivered
to Holder by no later than three Trading Days following the last Trading Day of
the relevant Make-Whole VWAP Period. For the avoidance of doubt, the Make-Whole
VWAP Period for the final Installment Redemption Payment shall be the

 

The Company’s obligations to deliver the Installment Redemption Price Make-Whole
Shares shall continue even though a Triggering Event has occurred (for the
avoidance of doubt, in such event the Redemption Price that is utilized shall be
the Triggering Event Redemption Price in lieu of the Installment Redemption
Price). For an example of the issuance of Installment Redemption Price
Make-Whole Shares, see Exhibit I attached hereto. For the avoidance of doubt, if
Holder defers the receipt of Installment Redemption Price Make-Whole Shares due
to the limitations set forth in Section 4, Holder shall remain entitled to the
amount of the Installment Redemption Price Make-Whole Shares as originally
calculated, i.e., any weekly VWAP increase subsequent to the Make-Whole VWAP
Period shall not decrease the amount of Installment Redemption Price Make-Whole
Shares due to the Holder. However, if Holder defers the receipt of Installment
Redemption Price Make-Whole Shares due to the limitations set forth in Section 4
and any VWAP for the the VWAP during any Subsequent Make-Whole Perioddue to the
limitations set forth in Section 4, then such portion shall be subject to the
pricing period of the Subsequent Make-Whole VWAP Period. Further, the Holder may
demand the receipt of any portion of the Installment Redemption Price Make-Whole
Shares prior to the receipt of the next Installment Redemption Payment. In such
event, the Company shall deliver a separate Redemption Notice to the Holder with
respect to the next Installment Redemption Payment.

 

(ii) On the Business Day immediately prior to each Installment Redemption
Payment, the Company shall deliver to each Holder a written notice of each
Installment Redemption Payment by facsimile or electronic mail in the form
attached hereto as Exhibit II, which shall (A) certify that there has been no
Equity Conditions Failure and (B) state the aggregate amount of the Preferred
Shares which is being redeemed in such Installment Redemption Payment from such
Holder and all of the other Holders of the Preferred Shares pursuant to this
Section 5(b). Redemptions made pursuant to this Section 5(b) shall be made in
accordance with Section 5(d).

 

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(iii) Pursuant to the limitations set forth in Section 4, each Holder may defer
all or any portion of any Installment Redemption Payment (including without
limitation, any Installment Redemption Price Make-Whole Shares) and have it be
paid simultaneously with any future Installment Redemption Payment(s) or on any
other date. For the avoidance of doubt, if a Holder defers all or any portion of
any Installment Redemption Payment (including without limitation, any
Installment Redemption Price Make-Whole Shares) due to the limitations set forth
in Section 4, such deferral alone shall not be deemed a Triggering Event.

 

G. Application of Subsections 5(c) and 5(d) of Section 5 (Mandatory Installment
Redemptions; Triggering Events) of the Filed Certificate. Subsections 5(c) and
5(d) of Section 5 of the Filed Certificate shall apply both to the 367,500
shares of the Series A Convertible Preferred Stock that are issued and
outstanding as of the date of this Amendment No. 1 and to those shares of the
Series A Convertible Preferred Stock that are sold and issued subsequently to
the date of this Amendment No. 1, in each case without amendment or modification
hereby.

 

H. Application of Subsection 5(qq) of Section 5 (Certain Defined Terms) of the
Filed Certificate. “Subscription Date: as defined in Subsection 5(qq) of Section
5 of the Filed Certificate shall mean (i) February 13, 2017 as to the 315,000
shares of the Series A Convertible Preferred Stock that are issued and
outstanding as of the date of this Amendment No. 1, (ii) July 7, 2017, as to the
52,500 shares of the Series A Convertible Preferred Stock that are issued and
outstanding as of the date of this Amendment No. 1, and (iii) July 28, 2017, as
to the first 131,250 shares of Series A Convertible Preferred Stock that are
sold and issued subsequently to the date of this Amendment No. 1.

 

 9 

 

 

IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 1 to
Certificate of Designations of Series A Convertible Preferred Stock of nFüsz,
Inc. to be signed by its Chief Executive Officer on this 28th day of July, 2017.

 

  nFŰSZ, INC.         By:     Name: Rory J. Cutaia   Title: Chief Executive
Officer

 

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