Document:

EX-10.1

 Exhibit 10.1 

Sparton Corporation 
 425 North
Martingale Road 
 Suite 1000 

Schaumburg, Illinois 60173 

800.772.7866 
 www.sparton.com 

 
 

 
 EXECUTIVE EMPLOYMENT AGREEMENT 

THIS AGREEMENT is effective as of the first day of employment which will be agreed upon by both parties (“the Effective Date”), and
is made between SPARTON CORPORATION, an Ohio corporation, whose headquarters are located at 425 N. Martingale Road, Suite 1000, Schaumburg, IL 60173 (“Corporation”) and Joseph Schneider (“Executive”). 

ARTICLE I 
 EMPLOYMENT
AND DUTIES 
 1.1    Corporation agrees to employ Executive as Senior Vice President, Sales & Marketing, and
Executive agrees to such employment, all in accordance with the express terms, conditions, duties and obligations set forth in this Agreement. 

1.2    Executive will be based at Corporation’s headquarters located in Schaumburg, IL, although travel may be required during
the course of performing assigned job duties. However, both parties agree that Executive’s main place of employment will be the headquarters in Schaumburg, IL. 

1.3    Executive will, during the term of this Agreement: 
  

	 	(a)	Report directly to the President/CEO or their designee, will perform such duties as normally pertain to the position of Senior Vice President, Sales & Marketing, and will perform such other duties or leadership
responsibilities as may be designated, from time to time, by President/CEO or their designee. 

  

	 	(b)	Devote the whole of Executive’s working time, attention and ability to the performance of Executive’s employment duties and responsibilities, and truly and faithfully serve the best interests of Corporation at
all times. 

 1.4    Executive agrees to comply with all applicable laws, exercise the utmost degree of integrity,
honesty, fidelity and good faith, and perform Executive’s duties with the utmost degree of expertise, care and ability that may be expected of a person having the education, training and experience equivalent to the education, training and
experience of Executive. 

 

 
  
 ARTICLE II 

TERM 

2.1    Corporation will employ Executive on an at will basis, with no set term. Either party may terminate the employment
relationship at any time, and for any reason or no reason. 
 ARTICLE III 

COMPENSATION 

3.1    Corporation will pay Executive a base salary of Two Hundred Sixty Five Thousand Dollars ($265,000) per year (“Base
Salary”) subject to all applicable statutory withholding of which will be paid in accordance with Corporation’s regular payroll periods. 

3.2    In addition to the Base Salary, Executive will be eligible for: 

 

	 	(a)	An annual performance bonus based upon Corporation’s Short Term Incentive Plan (STIP) program provided certain target objectives, which will be established by the President/CEO, have been attained. Executive will
have a performance bonus target of forty-five percent (45%) of Base Salary with threshold and maximum targets established within the STIP. The bonus will be paid after a determination has been made regarding whether the required objectives were met,
but in any event not later than ninety (90) days after the end of the particular fiscal year for which the bonus is being paid. No bonus will be due or payable to Executive if Executive is not continuously employed by Corporation through and on
the payment date of the bonus. 

  

	 	(b)	Participation in Corporation’s annual Long Term Incentive Plan (LTIP) with an annual grant award target of One Hundred Fifty Thousand Dollars ($150,000). This grant award will be subject to the terms and conditions
contained in Corporation’s standard Award Agreement and the Amended and Restated Sparton Corporation Stock Incentive Plan. The grant of equity is expressly conditioned upon Executive’s execution of the Award Agreement. 

3.3    Executive’s compensation under Article 3.1 and 3.2 will be subject to annual review by the President/CEO or their
designee. 
 ARTICLE IV 

BENEFITS 

4.1    Executive will receive or participate in all employee benefits offered to the salaried employees of Corporation for which
Executive qualifies, under the same terms and subject to the same conditions as are then in effect for other salaried employees, and as such benefits may exist from time to time during the period of Executive’s employment, including, without
limitation, Corporation’s medical, dental, vision, life/AD&D, disability plans, employee assistant programs, 401K plan, and any applicable incentive programs. 

  
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 4.2    The Executive will
also be eligible to participate in the Corporation’s executive Non-Qualified Deferred Compensation Plan (NQDC). 

ARTICLE V 
 PAID TIME
OFF 
 5.1    During Executive’s employment, Executive will receive paid time off (PTO) in the amounts and under the
terms and conditions set forth in Corporation’s PTO policy. Any accrued but unused PTO remaining at the end of each calendar year will also be subject to the terms and conditions of Corporation’s PTO policy. 

ARTICLE VI 

TERMINATION 

6.1    Unless otherwise consented to by Corporation in writing, Executive will be entitled, upon thirty (30) days written
notice to Corporation, to terminate Executive’s employment with Corporation for any reason or for no reason, and in the event of such termination, Corporation will only be required to pay Executive, on a
pro-rata basis, Executive’s Base Salary which has accrued up to the date of termination. 

6.2    Corporation may terminate Executive’s employment at any time with or without “Cause.” For the purposes of
this Agreement, “Cause” will mean any of the following: Executive’s personal dishonesty; gross negligence; violation of any law, rule or regulation; breach of applicable confidentiality, nonsolicitation or noncompetition provisions to
which Executive is subject, including such provisions under this Agreement; a breach of any material provision of Corporation’s Code of Business Conduct and Ethics or other policies and procedures; use of alcohol or drugs to the extent such use
adversely affects Executive’s ability to perform Executive’s duties or adversely affects the business reputation of Executive or Corporation; use of illegal drugs; or failure or refusal to substantially perform Executive’s duties and
responsibilities to Corporation as reasonably determined from time to time by the President/CEO or their designee. 
 6.3    In
the event of the death or disability of Executive, Corporation will be entitled to terminate Executive’s employment. Upon such termination, Corporation will pay to Executive, or in the event termination is due to death, to Executive’s
legal personal representative, that portion of Executive’s Base Salary owed up to and including the date of termination. This payment will be made within thirty (30) days following termination of employment. Except for the obligation(s) to
Executive from any applicable benefit plan, following such payment, Corporation will have no further obligation to Executive or Executive’s heirs and beneficiaries, under this Agreement. 

6.4    If Corporation terminates Executive’s employment for any reason other than “Cause” (as defined above), death,
or disability, Corporation will provide Executive with the following Separation Benefits: 

  
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	 	(a)	A one-time, severance payment equal to nine (9) months of current Base Salary that will be made as a part of Corporation’s standard payroll over the nine (9) month
period. If, however, Executive is involuntarily terminated within twelve (12) months of a “Change in Control,” the severance payment will instead equal one hundred forty five percent (145%) of the greater of Executive’s Base
Salary at the time of the Change in Control or at the time Executive’s employment terminates, and it will be made as a part of Corporation’s standard payroll over a twelve (12) month period. Either severance payment will commence on
the first pay period after the expiration of any applicable revocation period following Executive’s date of termination, will be paid in equal installments over the applicable nine (9) or twelve (12) month period, and will be subject
to standard payroll deductions and all other legal requirements. 

  

	 	(b)	Payment of nine (9) months of COBRA premiums or, in the event of an involuntary termination within twelve (12) months of a Change in Control, twelve (12) months of COBRA premiums for medical insurance for
Executive and/or Executive’s dependents if, and only if, Executive timely elects coverage for COBRA continuation. 

  

	 	(c)	Payment of outplacement services in an amount not to exceed twenty-five thousand dollars ($25,000). 

  

	 	(d)	Executive agrees that in order to receive the Separation Benefits, Executive must execute a separation agreement and general waiver and release of claims in a form satisfactory to Corporation and return to Corporation
any property belonging to Corporation which is in Executive’s possession or control. If Executive fails to return the Release to Corporation in sufficient time so that it becomes irrevocable after the date of termination as provided under
applicable law or the separation agreement and general waiver and release of claims, Executive will forfeit Executive’s right to the Separation Benefits. Executive further agrees that if Executive violates Article VII, Corporation may terminate
the Separation Benefits and Executive will repay any severance payment he has received in excess of one (1) month. 

  

	 	(e)	 For purpose of this Article, the term “Change in Control” means: (i) any one person, or more than
one person acting as a group, acquires ownership of stock of Corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of
Corporation; (ii) any one person, or more than one person acting as a group, acquires (or has acquired during any twelve (12) month period) ownership of stock of Corporation possessing thirty percent (30%) or more of the total voting power
of the stock of Corporation; (iii) a majority of the members of the Board of Directors is replaced during any twelve (12) month period by directors whose appointment is not endorsed by a majority of the members of the Board of Directors
before the date of 

  
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	 	appointment or election; or (iv) any one person, or more than one person acting as a group, acquires (or has acquired during any twelve (12) month period) assets from Corporation that have a total gross fair
market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of Corporation immediately before such acquisition or acquisitions. 

6.5    Upon termination of employment for whatever reason, Executive will immediately deliver to Corporation all property of
Corporation which Executive has in Executive’s possession or under Executive’s control. 
 ARTICLE VII 

CONFIDENTIALITY AND
COVENANT-NOT-TO-COMPETE 

7.1    Executive will execute the confidentiality agreement(s) and any such other agreements as are normally required to be
executed by other Corporation salaried employees. During and after Executive’s employment, Executive will comply with said agreements and keep confidential all confidential information pertaining to Corporation which Executive learned while
employed by Corporation, as such confidential information is defined in the applicable confidentiality agreement(s). The promises, rights and obligations stated in Article VII will survive the termination of Executive’s employment. 

7.2    Unless approved in advance in writing by Corporation’s Senior Vice President of Human Resources, the Executive will
not, directly or indirectly, within the territory comprising the United States and Canada, for a period of twelve (12) months following the date of termination of his employment for whatever reason, either individually or in partnership or
jointly in conjunction with any person or persons, firm, association, joint venture, syndicate, company or corporation as principal, agent, shareholder, employee, or consultant, engage in any business activity that directly involves any product or
service similar to or competitive with any product or service of Corporation (including subsidiaries) without advance written approval of Corporation’s Senior Vice President of Human Resources, or: 

 

	 	(a)	induce or attempt to influence or induce any of the employees of Corporation (including its subsidiaries) to leave their employment; 

 

	 	(b)	hire, employ or utilize the services of any employee of Corporation (including its subsidiaries); or 

  

	 	(c)	contact any Corporation customer (or prospective customers that Corporation is actively soliciting) for the purposes of: (i) inducing them to terminate their business relationship with Corporation,
(ii) discouraging them from doing business with Corporation, or (iii) offering products or services that are similar to or competitive with those of Corporation. “Contact” with any customer includes responding to contact
initiated by the customer. 

  
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 7.3    The parties agree
that this Article’s terms are reasonable and that Executive has received adequate consideration for the covenants and obligations undertaken by Executive under this Article. Executive also agrees that this Article is reasonably necessary for
the protection of Corporation’s confidential information as defined in the applicable confidentiality agreement(s). Executive acknowledges that a breach or threatened breach by Executive of the provisions of this Article may result in
Corporation suffering irreparable harm which cannot be calculated or fully or adequately compensated by recovery of damages alone. Accordingly, Executive agrees that Corporation will be entitled to interim or permanent injunctive relief without
having to prove damages or post a bond or other security, specific performance and other equitable remedies, in addition to any other relief to which Corporation may become entitled, in the event of any such breach. Additionally, if Executive
violates this Article, in addition to all other remedies available to Corporation at law, in equity, and under contract, Executive agrees that Executive is obligated to pay all Corporation’s costs of enforcement of this Article, including
attorneys’ fees and expenses. 
 ARTICLE VIII 

NOTICE 

8.1    The parties agree that any notice required under this Agreement will be in writing and may be delivered personally or sent
by facsimile transmission or other means of recorded electronic communications or sent by registered mail to the parties at the following addresses: 

To Corporation: 
 Sparton
Corporation 
 425 N. Martingale Road 

Suite 1000 
 Schaumburg,
IL 60173 
  

			
	Attention:	  	Larry Brand
		  	Senior Vice President, Human Resources

 To Executive: 

Joseph Schneider 
 741
Saddle Ridge 
 Crystal Lake, IL 60012 

Any notice given will be deemed to have been given and received on the business day on which it was so delivered, and if not a business day,
then on the business day next following the day of delivery, and, if sent by electronic communications or facsimile will be deemed to have been received on the next business day following the date of transmission and if mailed, will be deemed to
have been given and received on the fifth day following the day on which it was so mailed. 

  
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 8.2    Either party may
change their address for notice in the above manner. 
 ARTICLE IX 

GENERAL 

9.1    Time will be of the essence in the performance of this Agreement. 

9.2    This Agreement constitutes the entire agreement between the parties with respect to the matters contained in this Agreement
and supersedes and replaces any previous agreements, contracts, oral understandings or discussions. This Agreement may not be amended or modified in any respect except by written instrument signed by the parties. 

9.3    This Agreement will be construed and enforced in accordance with the laws of the State of Illinois, without regard to choice
of law or conflicts of laws principles. 
 9.4    The language of this Agreement reflects the mutual intent of the parties and
will not be strictly construed against either party; therefore no rule of strict construction will apply in construing the terms of this Agreement. 

9.5    This Agreement will be for the benefit of and will be binding upon Corporation, its successors and assigns and, at the
discretion of Corporation, upon any person, firm or corporation with which Corporation may be merged or consolidated or which may acquire all or substantially all of Corporation’s assets through sale, lease, liquidation or otherwise. The rights
and benefits of Executive are personal to Executive and no such rights or benefits will be subject to assignment or transfer by Executive. 

9.6    This Agreement will inure to the benefit of and be binding upon the parties and their respective heirs, legal personal
representatives, successors and permitted assigns. 
 9.7    If for any reason, any provision or part of this Agreement will be
held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions or part provisions of this Agreement will not in any way be affected or impaired thereby. 

9.8    The waiver by either party of any breach of the provisions of this Agreement will not operate or be construed as a waiver by
that party of any other breach of the same or any other provision of this Agreement. 
 9.9    Except as specifically altered in
this Agreement, nothing in this Agreement will detract from, alter, modify or amend any obligations or duties owed by Executive to Corporation, pursuant to any statute, regulation, or at common law or equity. 

9.10    The parties intend this Agreement to comply with Code Section 409A and the Treasury Regulations and other guidance
issued under Section 409A. If a provision of this Agreement is contrary to or fails to address the requirements of Code Section 409A and related Treasury Regulations, this Agreement will be construed, administered, and amended, to the
maximum extent possible, as necessary to comply with such requirements. Corporation does not represent, warrant or guarantee that the payments and benefits that may be paid or provided under this Agreement will not be includible in Executive’s
federal gross income under Code Section 409A, nor does Corporation make any representation, warranty or guarantee to Executive as to the tax consequences. 

  
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 9.11    This Agreement
may be executed in any number of counter-parts, all of which when taken together, will constitute one original Agreement. 
 IN WITNESS
WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have executed this Agreement of their own free act, on the dates set forth below, to be effective as of the Effective Date
set forth in this Agreement. 
  

					
		 		 	SPARTON CORPORATION:
			
		 		 	By:
			
	  
	 		 	/s/ Larry Brand
		 		 	Larry Brand
	Date: 9/23/15                                	 		 	Senior Vice President, Human Resources
			
		 		 	EXECUTIVE:
			
	  
	 		 	/s/ Joseph Schneider
		 		 	Joseph Schneider
	Date: 9/23/15                                	 		 	

  
 8Exhibit 4.1

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE

 SERIES A CONVERTIBLE PREFERRED STOCK OF ATLANTIC ACQUISITION INC.

 

I, Benny Doro, hereby certify that I am the Chief Executive Officer and President of Atlantic Acquisition Inc. (the "Company"), a corporation organized and existing under the Nevada Revised Statutes (the "NRS"), and further do hereby certify:

 

That, pursuant to the authority expressly conferred upon the Board of Directors of the Company (the "Board") by the Company's Articles of Incorporation, as amended (the "Articles of Incorporation"), the Board on April 11, 2018 adopted the following resolutions creating a series of shares of preferred stock designated as Series A Convertible Preferred Stock, none of which shares have been issued:

 

RESOLVED, that the Board hereby designates the Series A Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights, powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Articles of Incorporation as follows:

 

TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK

 

1. Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of the Company designated as "Series A Convertible Preferred Stock" (the "Preferred Shares").  The authorized number of Preferred Shares shall be 10,007,981 shares.  Each Preferred Share shall have a par value of $0.001.  Capitalized terms not defined herein shall have the meanings as set forth in Section 23 below.

 

2. Ranking.  Except with respect to any other future series of preferred stock of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the "Senior Preferred Stock") or any future series of preferred stock of pari passu rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the "Parity Stock"), all shares of capital stock of the Company shall be junior in rank to all Preferred Shares with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the "Junior Stock").  The rights of all such shares of capital stock of the Company shall be subject to the rights, powers, preferences and privileges of the Preferred Shares.  In the event of the merger or consolidation of the Company with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, preferences, privileges, and designations provided for herein and no such merger or consolidation shall result inconsistent therewith.

 

 

Exhibit 4.1 -- Page 1

 

3. Dividends.

 

(a) From and after the date of issuance of each share of Preferred Shares (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") only when and if the Company declares dividends on the common stock of the Company ("Common Stock"), 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 as if such Preferred Shares were converted as set forth in Section 4 at the same dividend rate for the Company's Common Stock, which shall be non-cumulative.

 

(b) Dividends shall be payable on each Dividend Date as declared by the Company from time to time, to the Holders of record of the Preferred Shares on the applicable Dividend Date, in shares of Common Stock (the "Dividend Shares"); 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 Dividend Shares. The Company shall deliver a written notice (each, a "Dividend Election Notice") to each Holder on the Dividend Notice Due Date (the date such notice is delivered to all of the Holders, the "Dividend Notice Date"), which notice either (A) confirms that Dividends to be paid on such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to pay Dividends as Cash Dividends, Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and, in any event, specifies the amount of Dividends that shall be paid as Cash Dividends and the amount of Dividends, if any, that shall be paid in Dividend Shares.

 

(c) When any Dividend Shares are to be paid on a Dividend Date to any Holder, the Company shall (i) (A) provide 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) such Dividend Shares to be so issued are 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 Dividend Date, 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.

 

 

Exhibit 4.1 -- Page 2

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

 

(a) Holder's Conversion Right. Subject to the terms and conditions set forth herein and except in the event of a Fundamental Transaction, at any time or times after the date (the "Initial Conversion Date") that is twenty-four (24) months after the Initial Issuance Date, each Holder shall, in his or her sole discretion, be entitled to convert any whole number of Preferred Shares and any accrued but unpaid Dividends into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below). Upon the occurrence of a Fundamental Transaction, any and all of the Preferred Shares shall be automatically converted into Common Stock as set forth in Section 4.

(b) Conversion Rate. The number of validly issued, fully paid and non-assessable shares of Common Stock issuable upon conversion (the "Conversion Shares") of each Preferred Share pursuant to Section 4(a) shall be the lower of $4.00 per share (the "Conversion Price"), or (i) the volume weighted average price ("VWAP") as set forth below for a period of twenty (20) trading days prior to conversion or (ii) if there is no active trading market for the Company's Common Stock, then the Fair Market Value (the "FMV") of the Company's per share price of Common Stock . The actual rate upon which each Preferred Share is converted to Common Stock is the Conversion Rate. FMV shall be determined by a third party in the business of valuating business entities who is selected jointly by the holder of a majority of the outstanding Preferred Shares and the Board of Directors.  

 

No fractional shares of Common Stock are to be issued upon the conversion of any Preferred Shares. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.

(c) Mechanics of Conversion. The conversion of each Preferred Share shall be conducted in the following manner:

 

	
(i)

	
Holder's Conversion. To convert Preferred Shares into validly issued, fully paid and non-assessable shares of Common Stock on any date (a "Conversion Date"), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the "Conversion Notice") to the Company, which Conversion Notice shall list the Conversion Rate. If required by Section 4(c)(iv), within three (3) Trading Days following a conversion of any such Preferred Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Company the original certificates representing the share(s) of Preferred Shares (the "Preferred Share Certificates") so converted as aforesaid.

 

 

Exhibit 4.1 -- Page 3

 

(ii) Company's Response. On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that (x) the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program and (y) such Conversion Shares and Dividend Shares (as applicable) to be so issued are eligible for resale pursuant to Rule 144 (as defined in the Convertible Note Exchange Agreement) credit such aggregate number of Conversion Shares and Dividend Shares (as applicable) to which such Holder shall be entitled to such Holder's or its designee's balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if either of the immediately preceding clauses (x) or (y) are not satisfied, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of Conversion Shares and Dividend Shares (as applicable) to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(iv) is greater than the number of Preferred Shares being converted, then the Company shall if requested by such Holder, as soon as practicable and in no event later than three (3) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate representing the number of Preferred Shares not converted.

 

(iii)  Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

Exhibit 4.1 -- Page 4

(iv) Book-Entry. Notwithstanding anything to the contrary set forth in this Section 4, upon conversion of any Preferred Shares in accordance with the terms hereof, no Holder thereof shall be required to physically surrender the certificate representing the Preferred Shares to the Company following conversion thereof unless (A) the full or remaining number of Preferred Shares represented by the certificate are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(iv)) or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of any Preferred Shares. Each Holder and the Company shall maintain records showing the number of Preferred Shares so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the certificate representing the Preferred Shares upon each such conversion. In the event of any dispute or discrepancy, such records of such Holder establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each certificate for Preferred Shares shall bear the following legend:

 

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION'S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(iv) THEREOF. THE NUMBER OF SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES A PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(iv) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.

 

(d) Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Preferred Shares.

 

(e) RESERVED.

 

Exhibit 4.1 -- Page 5

(f) Anti-Dilution.  If, at any time while the Preferred Shares are outstanding,  the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock with a conversion formula that creates an effective price per share that is lower than the then Conversion Price (such lower price or conversion formula, the "Base Conversion Price" and such issuances, collectively, a "Dilutive Issuance") (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustment will be made under this Section 4(f) in respect of an Exempt Issuance.  The Company shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 4(f), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, conversion formula and other pricing terms (such notice, the "Dilutive Issuance Notice").  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 4(f), upon the occurrence of any Dilutive Issuance, the Holders will be entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

5. Voting Rights.

(a) Subject to the terms and conditions set forth herein, the Holders of Series A Preferred Stock shall be entitled to vote with holders of Common Stock on all corporate actions, including the election of the Company's directors. The Holders of Series A Preferred Stock shall be entitled to cast three votes for each share of Series A Preferred Stock.

(b) So long as any shares of the Series A Preferred Stock shall remain outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of at least a majority of the then outstanding shares of Series A Preferred Stock voting together as a class: (i) alter or change the rights, preferences or privileges of the shares of the Series A Preferred Stock so as to affect materially and adversely such shares; or (ii) create any new class of shares having preference over the Series A Preferred Stock.

 

 

Exhibit 4.1 -- Page 6

6.  Rights Upon Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents in accordance with the provisions of this Section 6 pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a Stated Value and Voting Rights equal to the stated value and voting rights of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and reasonably satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose shares of common stock are quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designations and the other Transaction Documents referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 7(a) and 12, which shall continue to be receivable thereafter)) issuable upon the conversion of the Preferred Shares prior to such Fundamental Transaction, such shares of publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which each Holder would have been entitled to receive upon the  consummation of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations. The provisions of this Section 6 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of the Preferred Shares.

 

 

Exhibit 4.1 -- Page 7

  

7. Rights Upon Issuance of Purchase Rights and Other Corporate Events.

 

(a) Purchase Rights. In addition to any adjustments pursuant to Section 8 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares) held by such Holder immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

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

 

 

Exhibit 4.1 -- Page 8

   

8. Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 7 or Section 12, if the Company at any time on or after the Initial Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 7 or Section 12, if the Company at any time on or after the Initial Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 8 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 8 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

9. Authorized Shares.

 

(a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock equal to 100% of the Conversion Amount of each Preferred Share as of the Initial Issuance Date (assuming for purposes hereof, that all the Preferred Shares issuable have been issued, such Preferred Shares are convertible at the Conversion Price and without taking into account any limitations on the conversion of such Preferred Shares set forth in herein). So long as any of the Preferred Shares are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, as of any given date, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Preferred Shares issued or issuable at the Conversion Price, as adjusted (the "Required Amount"). The initial number of shares of Common Stock reserved for conversions of the Preferred Shares and for issuance as Dividend Shares and each increase in the number of shares so reserved shall be allocated pro rata among the Holders based on the number of Preferred Shares held by each Holder on the Initial Issuance Date or increase in the number of reserved shares (as the case may be) (the "Authorized Share Allocation"). In the event a Holder shall sell or otherwise transfer any of such Holder's Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of Preferred Shares then held by such Holders.

 

 

Exhibit 4.1 -- Page 9

 

(b) Insufficient Authorized Shares. If, notwithstanding Section 9(a) and not in limitation thereof, at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and unissued shares of Common Stock to satisfy its obligation to have available for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Amount (an "Authorized Share Failure"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve and have available the Required Amount for all of the Preferred Shares then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting or obtain written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement or information statement, as applicable, and shall use its best efforts to solicit its stockholders' approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the stockholders that they approve such proposal.

  

10. Reserved.

 

11. Liquidation, Dissolution, Winding-Up. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Holder of each outstanding share of the Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to its equity shareholders on an as-converted basis upon such liquidation, whether such assets are capital or surplus of any nature.

(i) If the assets to be distributed pursuant to Section 11 above to the Holders of the Series A Preferred Stock and holders of Common Stock shall be insufficient to permit the receipt by such holders of the full preferential amounts aforesaid, then all of such assets shall be distributed among such Holders of Series A Preferred Stock and Common Stock holders ratably as if all the Preferred Shares were converted into shares of Common Stock.

(ii) The sale of all or substantially all of the Company's assets, any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section.

 

 

Exhibit 4.1 -- Page 10

 

12. Participation. In addition to any adjustments pursuant to Section 8, the Holders shall, as holders of Preferred Shares, be entitled to receive such dividends paid and distributions made to the holders of shares of Common Stock to the same extent as if such Holders had converted each Preferred Share held by each of them into shares of Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of shares of Common Stock.

   

13. Vote to Change the Terms of Preferred Shares. In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Articles of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not amend or repeal any provision of, or add any provision to, its Articles of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Preferred Shares, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or by merger, consolidation or otherwise; provided, however, the Company shall be entitled, without the consent of the Required Holders unless such consent is otherwise required by the NRS, to (a) amend the Articles of Incorporation to effectuate one or more reverse stock splits of its issued and outstanding Common Stock for purposes of maintaining compliance with the rules and regulations of the Principal Market; (b) purchase, repurchase or redeem any shares of capital stock of the Company junior in rank to the Preferred Shares (other than pursuant to equity incentive agreements (that have in good faith been approved by the Board) with employees giving the Company the right to repurchase shares upon the termination of services); or (c) issue any preferred stock that is junior in rank to the Preferred Shares.

 

14. Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificates representing Preferred Shares (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of an indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Company shall execute and deliver new certificate(s) of like tenor and date.

 

 

Exhibit 4.1 -- Page 11

15. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations and any of the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit any Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Certificate of Designations. The Company covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required, to the extent permitted by applicable law. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company's compliance with the terms and conditions of this Certificate of Designations.

  

16. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Preferred Shares above the Conversion Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Shares and (iii) shall, so long as any Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Preferred Shares then outstanding (without regard to any limitations on conversion contained herein).

 

17. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. This Certificate of Designations shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof.

 

 

Exhibit 4.1 -- Page 12

 

18. Notices. The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with the signature page of the Convertible Note Exchange Agreement. Without limiting the generality of the foregoing, the Company shall give written notice to each Holder (i) promptly following any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to all holders of shares of Common Stock as a class or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided, in each case, that such information shall be made known to the public prior to, or simultaneously with, such notice being provided to any Holder.

  

19. Transfer of Preferred Shares. Subject to the restrictions set forth in the Convertible Note Exchange Agreement, a Holder may transfer some or all of its Preferred Shares without the consent of the Company.

 

20. Preferred Shares Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holders), a register for the Preferred Shares, in which the Company shall record the name, address and facsimile number of the Persons in whose name the Preferred Shares have been issued, as well as the name and address of each transferee. The Company may treat the Person in whose name any Preferred Shares is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made transfers.

 

21. Stockholder Matters; Amendment.

 

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

 

 

Exhibit 4.1 -- Page 13

 

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

 

22. Dispute Resolution.

 

(a) Submission to Dispute Resolution.

 

(i) In the case of a dispute relating to a Closing Sale Price, a Conversion Price, a VWAP or a fair market value or the arithmetic calculation of a Conversion Rate (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the applicable Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by such Holder at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to promptly resolve such dispute relating to such Closing Sale Price, such Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Conversion Rate (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the case may be), then such Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

(ii) Such Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 22 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which such Holder selected such investment bank (the "Dispute Submission Deadline") (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the "Required Dispute Documentation") (it being understood and agreed that if either such Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such investment bank, neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation) .

 

 

Exhibit 4.1 -- Page 14

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

 

(b) Miscellaneous.

(i) The Company expressly acknowledges and agrees that (i) this Section 22 constitutes an agreement to arbitrate between the Company and each Holder (and constitutes an arbitration agreement) under §7501, et seq. of the New York Civil Practice Law and Rules ("CPLR") and that any Holder is authorized to apply for an order to compel arbitration pursuant to CPLR §7503(a) in order to compel compliance with this Section 22, (ii) the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected investment bank's resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Certificate of Designations and any other applicable Transaction Document, (iii) the applicable Holder (and only such Holder with respect to disputes solely relating to such Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 22 to any state or federal court sitting in the City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 22 and (iv) nothing in this Section 22 shall limit such Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 22).

(ii) Whenever any payment of cash is to be made by the Company to any Person pursuant to this Certificate of Designations, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing, provided that such Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and such Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Certificate of Designations is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount due hereunder which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of nine percent (9%) per annum from the date such amount was due until the same is paid in full ("Late Charge").

 

 

Exhibit 4.1 -- Page 15

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

 

(a) "1934 Act" means the Securities Exchange Act of 1934, as amended.

 

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

 

(c)  Reserved.  

(d)  "Bloomberg" means Bloomberg, L.P.

 

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

 

(f)  "Closing Sale Price" means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price (as the case may be) then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing 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 mutually determined by the Company and the applicable Holder. If the Company and such Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(g)  "Common Stock" means (i) the Company's shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

 

Exhibit 4.1 -- Page 16

(h)  "Common Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

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

 

(j)  "Conversion Amount" means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated Value thereof, plus (2) the Additional Amount thereon as of such date of determination.

 

(k)               Reserved.

(l) Reserved.

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

 

(n)  Reserved.

 

(o)  Reserved.

 

(p)  "Eligible Market" means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

 

(q) Reserved.

 

(r)  Reserved.

 

Exhibit 4.1 -- Page 17

 

(s)  "Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers, directors, advisors or independent contractors of the Company pursuant to any stock or option plan duly adopted for such purpose, (b) shares of Common Stock, warrants or options to advisors or independent contractors of the Company for compensatory purposes, (c) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Issuance Date, provided that such securities have not been amended since the Initial Issuance Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (d) securities issuable pursuant to any contractual anti-dilution obligations of the Company in effect as of the Initial Issuance Date, provided that such obligations have not been materially amended since the Initial Issuance Date, and (e) securities issued pursuant to acquisitions or any other strategic transactions approved by the Board of Directors, provided that any such issuance shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

(t) Reserved.

(u) "Fundamental Transaction" means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than fifty percent (50%) of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than fifty percent (50%)  of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) (I) reorganize, recapitalize or reclassify the Common Stock, (II) effect or consummate a stock combination, reverse stock split or other similar transaction involving the Common Stock or (III) make any public announcement or disclosure with respect to any stock combination, reverse stock split or other similar transaction involving the Common Stock (including, without limitation, any public announcement or disclosure of (x) any potential, possible or actual stock combination, reverse stock split or other similar transaction involving the Common Stock or (y) board or stockholder approval thereof, or the intention of the Company to seek board or stockholder approval of any stock combination, reverse stock split or other similar transaction involving the Common Stock), or (ii) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty percent (50%)  of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

 

Exhibit 4.1 -- Page 18

   

(v)  "GAAP" means United States generally accepted accounting principles, consistently applied.

 

(w)  "Indebtedness" of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, "capital leases" in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.

  

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

 

(y)  Reserved.

(z)  Reserved.

 

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

 

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

Exhibit 4.1 -- Page 19

 

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

 

(dd)  Reserved.

 

(ee)  "Principal Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or the OTCQB maintained by the OTC Markets Group, Inc.

(ff) Reserved.

(gg) Reserved.

(hh) Reserved.

 

(ii)  "Required Holders" means the holders of at least two-thirds of the outstanding Preferred Shares.

(jj)  "Rule 144" means Rule 144 promulgated by the SEC pursuant to the Securities Act of 1933, as amended, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

(kk)  "SEC" means the Securities and Exchange Commission or the successor thereto.

 

(ll)  "Securities" means, collectively, the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares.

 

(mm)  "Convertible Note Exchange Agreement" shall mean that certain Convertible Note Exchange Agreement, dated April 11, 2018, by and between the Company and the Holder.

 

(nn)  Reserved.

  

(oo)  "Stockholder Approval" means, for the purposes of this Certificate of Designations and any other Transaction Document, the affirmative approval of the stockholders of the Company providing for the Company's issuance of all of the Securities as described in the Transaction Documents in accordance with applicable law and the rules and regulations of the Principal Market.

 

 

Exhibit 4.1 -- Page 20

(pp)  Reserved.

 

(qq)  "Subsidiary" or "Subsidiaries" means any subsidiary of the Company, including, where applicable, any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

(rr)  "Successor Entity" means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(ss)  "Trading Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Required Holders.

 

(tt)  "Transaction Documents" means this Certificate of Designations, the Series A Certificate of Designations, the Securities, the Convertible Note Exchange Agreement and each of the other agreements and instruments entered into or delivered by the Company or any of the Holders in connection with the transactions contemplated thereby, all as may be amended from time to time in accordance with the terms hereof or thereof.

 

(uu)  Reserved. 

(vv)  "Voting Stock" of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

 

Exhibit 4.1 -- Page 21

(ww)  "VWAP" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its "Volume at Price" function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and such Holder. If the Company and such Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

   

24. Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Certificate of Designations, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall simultaneously with any such receipt or delivery publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to each Holder contemporaneously with delivery of such notice, and in the absence of any such indication, each Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or its Subsidiaries. Nothing contained in this Section 24 shall limit any obligations of the Company, or any rights of any Holder.

 

 

Exhibit 4.1 -- Page 22

IN WITNESS WHEREOF, the Company has caused this Certificate of Designations of Series A Convertible Preferred Stock of Atlantic Acquisition Inc. to be signed by its Chief Executive Officer on this 11th day of April, 2018.

 

 

	
 

	
 

	
 

	
 

	
 

	
 

	
Atlantic Acquisition Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:  

	 /s/ Benny Doro	
 

	
 

	
 

	
Name:  

	
Benny Doro

	
 

	
 

	
 

	
Title:  

	
President and Chief Executive Officer

	
 

  

 

Exhibit 4.1 -- Page 23

EXHIBIT I

 

Atlantic Acquisition Inc.

 

CONVERSION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of Atlantic Acquisition Inc. (the "Certificate of Designations"). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock, $0.001 par value per share (the "Preferred Shares"), of Atlantic Acquisition Inc., a Nevada corporation (the "Company"), indicated below into shares of common stock, $0.001 value per share (the "Common Stock"), of the Company, as of the date specified below.

 

	
Date of Conversion: _________________________________________________________________________

	
 

	
Number of Preferred Shares to be converted:  ______________________________________________________

	
 

	
Share certificate no(s). of Preferred Shares to be converted:  ___________________________________________

	
 

	
Tax ID Number (If applicable): _________________________________________________________________

	
 

	
Conversion Price**: _________________________________________________________________

	
 

	
Number of shares of Common Stock to be issued: ___________________________________________________

 

Please issue the shares of Common Stock into which the Preferred Shares are being converted in the following name and to the following address:

 

	
Issue to: _______________________________________________________________

	
 

	
                _______________________________________________________________

	
 

	
Address: _______________________________________________________________

	
 

	
Telephone Number: ____________________________________________________

	
 

	
Facsimile Number: _______________________________________________________

	
 

	
Holder: ______________________________________________________________

 

Exhibit 4.1 -- Page 24

	
By: ___________________________________________________

	
 

	
Title: _________________________________________________

	
 

	
Dated: _______________________________________________

 

	
Account Number (if electronic book entry transfer): _____________________________________________

	
 

	
Transaction Code Number (if electronic book entry transfer): ________________________________________

 

** Conversion Price may be based on the VWAP of the Trading Day prior to the Conversion Date and remains subject to adjustment upon the close of the Principal Market on the Conversion Date.

 

 

Exhibit 4.1 -- Page 25

EXHIBIT II

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs [                                ] to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 2018 from the Company and acknowledged and agreed to by [                              ].

 

     Atlantic Acquisition Inc. 

 

	
 

	
By:

	
 

	
 

	
Name:

	
 

	
 

	
Title:

	
 

 

	
 

 

 

 

  

Exhibit 4.1 -- Page 26

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