Document:

CONSULTING, CONFIDENTIALITY AND PROPRIETARY
RIGHTS AGREEMENT

 

This Consulting, Confidentiality
and Proprietary Rights Agreement (“Agreement”) is entered into as of the 30th day of May, 2014 (the “Effective
Date”) by and between DigiPath, Inc. (the “Company”), and Joe Tanner (“Consultant”).

 

WHEREAS, the Company desires
to engage Joe Tanner (“Consultant”) to provide certain services as set forth on the Schedule attached hereto (“Services”)
and as specified from time to time by the Company.

 

NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants and conditions contained herein, the parties hereto agree as follows:

 

1. Engagement. The
Company hereby engages Consultant to perform, those duties set forth in the Schedule attached hereto and such other duties as may
be requested from time to time by the Board of Directors of the Company. Consultant hereby accepts such engagement upon the terms
and subject to conditions set forth in this Agreement.

 

2. Compensation.
For the services rendered by Consultant under this Agreement, the Company shall pay to Consultant the compensation specified in
the Schedule which shall include travel time, subject to the terms and conditions set forth in this Agreement.

 

3. Term and Survivability.
The term of this Agreement shall be four months from the Effective Date. Thereafter, this agreement may be extended on a month
to month basis by written agreement of the Parties. At any time this Agreement may be terminated if either party materially fails
to perform or comply with this Agreement or any material provision hereof. In such event, termination shall be effective five (5)
days after notice of such material failure to perform or comply with this Agreement or any material provision hereof to the defaulting
party if the defaults have not been cured within such five (5) day period. Upon termination of this Agreement for any reason the
following sections of this Agreement shall survive such termination: Sections 3, 5, 6, 7, 8, 10, 12 13 and 20.

 

4. Costs and Expenses
of Consultant’s Performance. Except as set forth on the Schedule, all costs and expenses of Consultant’s performance
hereunder shall be borne by the Consultant.

 

5. Taxes. Consultant
acknowledges and agrees that it is solely responsible for the payment of any taxes and/or assessments imposed on account of the
payment of compensation to its employees (i.e. Consultant), pursuant to this Agreement, including, without limitation, any unemployment
insurance tax, federal and state income taxes, federal Social Security (FICA) payments, and state disability insurance taxes. The
Company shall not make any withholdings or payments of said taxes or assessments with respect to amounts paid to Consultant hereunder;
provided, however, that if required by law or any governmental agency, the Company shall withhold such taxes or assessments from
amounts due Consultant, and any such withholding shall be for Consultant's account and shall not be reimbursed by the Company to
Consultant. Consultant expressly agrees to make all payments of such taxes, as and when the same may become due and payable with
respect to the compensation earned under this Agreement.

 

6. Confidentiality.
Consultant agrees that Consultant will not, except when required by applicable law or order of a court, during the term of this
Agreement or thereafter, disclose directly or indirectly to any person or entity, or copy, reproduce or use, any Trade Secrets
(as defined below) or Confidential Information (as defined below) or other information treated as confidential by the Company known,
learned or acquired by the Consultant during the period of the Consultant's engagement by the Company. For purposes of this Agreement,
"Confidential Information" shall mean any and all Trade Secrets, knowledge, data or know-how of the Company, any of its
affiliates or of third parties in the possession of the Company or any of its affiliates, and any nonpublic technical, training,
financial and/or business information treated as confidential by the Company or any of its affiliates, whether or not such information,
knowledge, Trade Secret or data was conceived, originated, discovered or developed by Consultant hereunder. For purposes of this
Agreement, "Trade Secrets" shall include, without limitation, any formula, concept, pattern, processes, designs, device,
software, systems, list of customers, training manuals, marketing or sales or service plans, business plans, marketing plans, financial
information, or compilation of information which is used in the Company's business or in the business of any of its affiliates.
[Note: I think the confidentiality requirement is very adequately covered without this sentence. This sentence will prevent discussions
with prospective employees for example, if only non public information may be discussed. Consultant acknowledges that all
of the Confidential Information is proprietary to the Company and is a special, valuable and unique asset of the business of the
Company, and that Consultant's past, present and future engagement by the Company has created, creates and will continue to create
a relationship of confidence and trust between the Consultant and the Company with respect to the Confidential Information. Furthermore,
Consultant shall immediately notify the Company of any information which comes to its attention which might indicate that there
has been a loss of confidentiality with respect to the Confidential Information. In such event, Consultant shall take all reasonable
steps within its power to limit the scope of such loss.

 

7. Return of the Company’s
Proprietary Materials. Consultant agrees to deliver promptly to the Company on termination of this Agreement for whatever reason,
or at any time the Company may so request, all documents, records, artwork, designs, data, drawings, flowcharts, listings, models,
sketches, apparatus, notebooks, disks, notes, copies and similar repositories of Confidential Information and any other documents
of a confidential nature belonging to the Company, including all copies, summaries, records, descriptions, modifications, drawings
or adaptations of such materials which Consultant may then possess or have under its control. Concurrently with the return of such
proprietary materials to the Company, Consultant agrees to deliver to the Company such further agreements and assurances to ensure
the confidentiality of proprietary materials. Consultant further agrees that upon termination of this Agreement, Consultant's,
employees, consultants, agents or independent contractors shall not retain any document, data or other material of any description
containing any Confidential Information or proprietary materials of the Company.

 

8. Assignment of Proprietary
Rights. Other than the Proprietary Rights listed on the Schedule attached hereto, if any, Consultant hereby assigns and transfers
to the Company all right, title and interest that Consultant may have, if any, in and to all Proprietary Rights (whether or not
patentable or copyrightable) made, conceived, developed, written or first reduced to practice by Consultant, whether solely or
jointly with others, during the period of Consultant's engagement by the Company which relate in any manner to the actual or anticipated
business or research and development of the Company, or result from or are suggested by any task assigned to Consultant or by any
of the work Consultant has performed or may perform for the Company.

 

Consultant acknowledges
and agrees that the Company shall have all right, title and interest in, among other items, all research information and all documentation
or manuals related thereto that Consultant develops or prepares for the Company during the period of Consultant's engagement by
the Company and that such work by Consultant shall be work made for hire and that the Company shall be the sole author thereof
for all purposes under applicable copyright and other intellectual property laws. Other than the Proprietary Rights listed on the
Schedule attached hereto, Consultant represents and covenants to the Company that there are no Proprietary Rights relating to the
Company's business which were made by Consultant prior to Consultant's engagement by the Company. Consultant agrees promptly to
disclose in writing to the Company all Proprietary Rights in order to permit the Company to claim rights to which it may be entitled
under this Agreement. With respect to all Proprietary Rights which are assigned to the Company pursuant to this Section 8, Consultant
will assist the Company in any reasonable manner to obtain for the Company's benefit patents and copyrights thereon in any and
all jurisdictions as may be designated by the Company, and Consultant will execute, when requested, patent and copyright applications
and assignments thereof to the Company, or other persons designated by the Company, and any other lawful documents deemed necessary
by the Company to carry out the purposes of this Agreement. Consultant will further assist the Company in every way to enforce
any patents, copyrights and other Proprietary Rights of the Company.

 

9. Trade Secrets of
Others. Consultant represents to the Company that its performance of all the terms of this Agreement does not and will not
breach any agreement to keep in confidence proprietary information or trade secrets acquired by Consultant in confidence or in
trust prior to its engagement by the Company, and Consultant will not disclose to the Company, or induce the Company to use, any
confidential or proprietary information or material belonging to others. Consultant agrees not to enter into any agreement, either
written or oral, in conflict with this Agreement.

 

10. Other Obligations.
Consultant acknowledges that the Company, from time to time, may have agreements with other persons which impose obligations or
restrictions on the Company regarding proprietary rights made or developed during the course of work hereunder or regarding the
confidential nature of such work. Consultant agrees to be bound by all such obligations and restrictions and to take all action
necessary to discharge the obligations of the Company hereunder.

 

11. Independent Contractor.
Consultant shall not be deemed to be an employee or agent of the Company for any purpose whatsoever. Consultant shall have the
sole and exclusive control over its employees, consultants or independent contractors who provide services to the Company, and
over the labor and employee relations policies and policies relating to wages, hours, working conditions or other conditions of
its employees, consultants or independent contractors.

 

12. Non-Solicit.
Consultant will not, during the term this Agreement and for one year thereafter, directly or indirectly (whether as an owner, partner,
shareholder, agent, officer, director, employee, independent contractor, consultant, or otherwise) with or through any individual
or entity: (i) employ, engage or solicit for employment any individual who is, or was at any time during the twelve-month period
immediately prior to the termination of this Agreement for any reason, an employee of the Company, or otherwise seek to adversely
influence or alter such individual's relationship with the Company; or (ii) solicit or encourage any individual or entity that
is, or was during the twelve-month period immediately prior to the termination of this Agreement for any reason, a customer or
vendor of the Company to terminate or otherwise alter his, her or its relationship with the Company or any of its affiliates. Section
12 does not apply to individuals or entities known to the Consultant previous to the Effective Date.

 

13. Equitable Remedies.
In the event of a breach or threatened breach of the terms of this Agreement by Consultant, the parties hereto acknowledge and
agree that it would be difficult to measure the damage to the Company from such breach, that injury to the Company from such breach
would be impossible to calculate and that monetary damages would therefore be an inadequate remedy for any breach. Accordingly,
the Company, in addition to any and all other rights which may be available, shall have the right of specific performance, injunctive
relief and other appropriate equitable remedies to restrain any such breach or threatened breach without showing or proving any
actual damage to the Company.

 

14. Governing Law.
This Agreement shall be governed, construed and interpreted in accordance with the internal laws of the State of Nevada. In the
event a judicial proceeding is necessary, the sole forum for resolving disputes arising under or relating to this Agreement are
the Municipal and Superior Courts for Clark County, Nevada or the Federal District Court of Nevada and all related appellate courts,
and the parties hereby consent to the jurisdiction of such courts, and that venue shall be in Clark County, Nevada.

 

15. Entire Agreement:
Modifications and Amendments. The terms of this Agreement are intended by the parties as a final expression of their agreement
with respect-to such terms as are included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous
agreement. The Schedule referred to in this Agreement is incorporated into this Agreement by this reference. This Agreement may
not be modified, changed or supplemented, nor may any obligations hereunder be waived or extensions of time for performance granted,
except by written instrument signed by the parties or by their agents duly authorized in writing or as otherwise expressly permitted
herein.

 

16. Attorneys Fees.
Should any party institute any action or proceeding to enforce this Agreement or any provision hereof, or for damages by reason
of any alleged breach of this Agreement or of any provision hereof, or for a declaration of rights hereunder, the prevailing party
in any such action or proceeding shall be entitled to receive from the other party all costs and expenses, including reasonable
attorneys' fees, incurred by the prevailing party in connection with such action or proceeding.

 

17. Prohibition of Assignment.
This Agreement and the rights, duties and obligations hereunder may not be assigned or delegated by Consultant without the prior
written consent of the Company. Any assignment of rights or delegation of duties or obligations hereunder made without such prior
written consent shall be void and of no effect.

 

18. Binding Effect:
Successors and Assignment. This Agreement and the provisions hereof shall be binding upon each of the parties, their successors
and permitted assigns.

 

19. Validity. This
Agreement is intended to be valid and enforceable in accordance with its terms to the fullest extent permitted by law. If any provision
of this Agreement is found to be invalid or unenforceable by any court of competent Jurisdiction, the invalidity or unenforceability
of such provision shall not affect the validity or enforceability of all the remaining provisions hereof.

 

20. Indemnification.
The Company shall indemnify, defend and hold harmless Consultant and Consultant from and against any and all liability, loss, damage,
expense, claims or suits arising out of: (i) Company’s breach of this Agreement, including any representations warranty contained
herein; or (ii) the Services provided by Consultant, provided such claim does not in any manner arise from Consultant’s grossly
negligent or willful act or omission. Additionally, Consultant will be covered under the Director’s and Officer’s policy
of the Company.  The Company will provide evidence of coverage to the Consultant. 

 

21. Notices. All
notices and other communications hereunder shall be in writing and, unless otherwise provided herein, shall be deemed duly given
if delivered personally or by telecopy or mailed by registered or certified mail (return receipt requested) or by Federal Express
or other similar courier service to the parties at the following addresses or (at such other address for the party as shall be
specified by like notice)

 

(i) If to the Company:

DigiPath, Inc.

28720 Roadside Drive, Suite 128,

Agoura Hills, CA 91301

todd@digipath.com

 

(ii) If to the Consultant:

Joe Tanner

17507 N.E. 33rd
Avenue

Ridgefield, WA. 98642

 

Any such notice, demand
or other communication shall be deemed to have been given on the date personally delivered or as of the date mailed, as the case
may be.

 

 

IN WITNESS WHEREOF, the
parties hereto have executed this Consulting, Confidentiality, and Proprietary Rights Agreement as of the Effective Date written
above.

 

 

Joe Tanner

 

/s/ Joe Tanner

 

By: _________________________________

			Name: Joe Tanner

 

 

The Company

 

 

/s/ Todd Denkin

By:_____________________

Name: Todd Denkin

			

			Title: President

 

 

    	 

    	 

    

Schedule

 

1. SERVICES

The Consultant
shall be referred to as Executive Chairman of the Company

Consultants duties
shall consist of the following:

		a)	the facilitation of Client’s business, with particular emphasis on the development of educational
courseware;

		b)	coordination of Client’s educational efforts;

		c)	efforts directed to the launch of testing laboratories in certain jurisdictions;

		d)	discussions with relevant public and private officials in various states where the Company may
have opportunities to launch operations;

		e)	strategic analysis of the prospects for expansion and growth of the Company;

		f)	assist in the recruitment of experts in fields relevant to the growth and success of the company,
whether as advisors, consultants or employees

		g)	Other duties as the Board of Directors determines from time to time.

 

2.SCHEDULE AND COMITTMENT
OF TIME:

The Consultant
shall dedicate such time as in the sole discretion of the Consultant is required to discharge the duties required under this contract.
If at any time during the performance of this contract any phases of the required tasks appear to be impossible of execution or
if any phase cannot be completed on schedule, it is agreed that Consultant will notify Company within one (1) week of such determination.
At the time of such notification Consultant shall explain to Company why a particular task is impossible to complete and propose
alternative procedures for achieving the desired result.

 

3.REPORTING SCHEDULE:

Consultant shall
report to the Board of Directors or their designee regularly, and not less frequent than twice per month progress on the tasks
enumerated above.

 

4.COMPENSATION AND
PAYMENT TERMS:

 

The Consultant
shall be paid $5,500 per month for the above services, commencing on the Effective Date.

 

Consultant shall
bill semi-monthly. All amounts shall be paid within 5 days of invoice.

Consultant shall
receive 500,000 shares of stock which shall vest quarterly over a period of one year. After such time, Company and Consultant shall
agree to stock compensation on a go forward basis.

 

4EXPENSES:

Company agrees to reimburse Consultant
for other reasonably necessary expenses which shall be paid at the end of every month. However, should such expenses exceed $500
in any given calendar month; such expenses shall be pre-approved in advance by Company in order to qualify for reimbursement. An
email authorization by an officer of Company shall be deemed a valid approval.mine_ex101.htm

Exhibit 10.1

 

    MINERCO RESOURCES, INC. 
 

CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES

OF THE SERIES B CONVERTIBLE PREFERRED STOCK

 

 

I, John F. Powers, President of MINERCO RESOURCES, INC., a Nevada corporation (hereinafter called the “Corporation”), pursuant to the provisions of Chapter 78 of the Nevada Revised Statutes, hereby makes this Certificate of Designation under the corporate seal of the Corporation and hereby states and certifies that pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation, the Board of Directors duly adopted the following resolutions:

 

RESOLVED, that there shall be a series of shares of the Corporation designated Series B Convertible Preferred Stock (the “Series B Preferred”); that the number of shares of such series shall be Two Million (2,000,000) and that the rights and preferences of such Series B Preferred and the limitations or restrictions thereon, shall be as set forth herein;

 

The following shall be adopted and incorporated by reference into the foregoing resolutions as if fully set forth therein:

 

1. Number of Shares.  The number of shares constituting the Series B Preferred is hereby fixed at Two Million (2,000,000).

 

2. Stated Capital.  The stated value per share of the Series B Preferred shall be Ten Dollars ($10.00) herein the “Stated Value”) and the par value per share shall be $.001 per share.

 

3. Dividends.

 

(a) The holders of the Series B Preferred shall be entitled to receive out of any assets legally available therefor dividends, at the rate per annum equal to: (i) 8% of the Stated Value, accrued daily and payable annually in arrears on January 31st of each year (“Dividend Date”), paid in cash.  Such dividends shall accrue on any given share from the day of original issuance of such share and shall accrue from day to day whether or not earned or declared.  If any Dividend Date is not a business day, such Dividend Date shall be the next succeeding business day. Such dividends shall be in preference and priority to any payment of any dividend on common stock of the Corporation, or any other class or series of preferred stock of the Corporation.  The holders of the Series B Preferred shall be entitled to participate pro rata in any dividends paid on the Common Stock on an as if converted basis. The term Holder shall refer to any record holder of Series B Preferred as shall appear on the stock register of the Corporation.

 

(b) Any dividend payable on a dividend payment date shall be paid in cash; provided that after an initial public offering of the Corporation’s Common Stock the dividends may be paid, at the option of the Corporation, either (i) in cash or (ii) in additional shares of Common Stock, valued based on the volume weighted average price of the Corporation’s Common Stock for the five business day period prior to the record date.

 

(c) Nothing contained herein shall be deemed to establish or require any payment or other charges in excess of the maximum permitted by applicable law.  In the event that any payment required to be paid or other charges hereunder exceed the maximum permitted by law, any payments in excess of such maximum shall reduce any amounts thereafter owed by the Corporation to the holder and thus refunded to the Corporation.

 

(d) In the event that pursuant to applicable law or contract the Corporation shall be prohibited or restricted from paying the full dividends to which the holders of the Series B Preferred shall be entitled, the amount available pursuant to applicable law or contract shall be distributed among the holders of the Series B Preferred ratably in proportion to the full amounts to which they would otherwise be entitled and any remaining amount due to holders of the Series B Preferred shall be accrued.  The amounts to be distributed pursuant to the preceding sentence shall, in each case, be adjusted by rounding down to the nearest whole cent.  Dividends on the Series B Preferred shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends.

 

  

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4. Voting Rights.  Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series B Preferred shall vote together with holders of the Common Stock of the Corporation as a single class on any matter presented to the Common Stock holders of the Corporation for their action or consideration at any meeting of such stockholders of the Corporation (or by written consent of the stockholders in lieu of a meeting), and each holder of Series B Preferred shall be entitled to 5 votes for each share of Common Stock into which such shares of Series B Preferred respectively held by them could be converted pursuant to the provisions of Section 6 at the record date for determining stockholders entitled to vote on such matter.  The holders of Series B Preferred shall not be entitled to vote on any matter for which voting is expressly reserved, by law solely for a class of classes of stock other than the Preferred Stock or a class other than the Series B Preferred.

 

5. Liquidation, Dissolution, Winding-Up.

 

(a) Preference Payments to Holders of Series B Preferred.  Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (each, a “Liquidation Event”), before any distribution or payment shall be made to the holders of any shares of Common Stock or any series of Preferred Stock not expressly identified as ranking senior to, or pari passu with, the Series B Preferred on liquidation other than the Series A Preferred Stock which shall be senior with respect to liquidation rights, each holder of Series B Preferred shall be entitled to be paid, out of the assets of the Corporation, an amount in cash per share equal to the sum of: (x) the Stated Value (as adjusted for any stock splits, stock dividends, reorganizations, recapitalizations and the like) held by such holder and (y) all accrued but unpaid dividends on such shares.

 

If upon any such Liquidation Event the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the Holders of shares of Series B Preferred the full amount to which they shall be entitled under this Section 5(a), the Holders of shares of Series B Preferred shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. “Liquidation Event” means any termination, liquidation, dissolution or winding up of the Corporation either voluntary or involuntary.

 

(b) Payments to Holders of Common Stock and Series B Preferred.  Upon any Liquidation Event, after the payment of all preferential amounts required to be paid to the Holders of shares of Series B Preferred, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of any other class or series of Preferred Stock and then to holders of shares of Common Stock and the Series B Preferred on a pro-rata as-if converted basis, pro rata based on the number of shares held by each such holder; provided, however that the aggregate amount distributed to each holder of Series B Preferred shall not exceed 125% of the sum of the Stated Value and any accrued dividends.

 

(c) Additional Liquidation Events.  The following events (each an “Additional Liquidation Event”) shall each be considered a Liquidation Event under this Section 5; provided, however that if the holders of at least two-thirds of the Series B Preferred elect not have an event treated as an Additional Liquidation Event then the event shall not be treated as an  Additional Liquidation Event:

 

(i) any consolidation or merger of the Corporation with or into any other individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or other entity (each a “Person”), or any other corporate reorganization or similar transaction, in which the stockholders of the Corporation, immediately prior to such consolidation, merger, reorganization or similar transaction, possess less than a majority of the voting power of the Corporation (or the surviving entity if the Corporation is not the surviving entity) immediately after such consolidation, merger, reorganization or similar transaction, or any other transaction or series of related transactions to which the Corporation is a party in which, as a result thereof, in excess of 50% of the Corporation’s voting power is vested in Persons other than the stockholders of the Corporation immediately prior thereto;

 

(ii) any sale, transfer, lease, assignment, conveyance or other disposition by the Corporation or its subsidiaries or an exclusive license of all or substantially all of the Corporation’s material intellectual property, other than a sale, transfer, lease, assignment, conveyance or other disposition to a wholly owned subsidiary; or

 

(iii) Any other transaction which results in the holders of the Corporation’s capital stock as of immediately before the transaction owning less than 50% of the voting power of the Corporation’s capital stock as of immediately after the transaction; provided, however, that an equity financing transaction in which the Corporation is the surviving corporation and does not (directly or through a subsidiary) receive any assets other than cash and rights to receive cash shall be deemed not to constitute an Additional Liquidation Event.

 

(iv) For purposes of this Section 4(c) a series of related transactions shall be deemed to constitute a single transaction, and where such transactions involve securities issuances, they shall be deemed “related” if under applicable securities laws they would be treated as integrated.

 

(d) Valuation of Consideration.  If the consideration received by the Corporation is other than cash in connection with any of the events set forth above, its value will be deemed its fair market value (“Fair Market Value”) on the closing date of any such event.  The Fair Market Value of any such consideration, other than securities, shall be the amount which a willing buyer would pay a willing seller in an arm’s-length transaction determined in good faith by the Board of Directors acting by vote of a majority of the Board of Directors.

 

  

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(e) Notice of Liquidation Event; Distribution of Proceeds.

 

(i) The Corporation shall give each record holder of Series B Preferred written notice of any impending Liquidation Event (including any Additional Liquidation Event) no later than the date on which notice is given to stockholders of the meeting called to approve such transaction, or 15 business days prior to the closing of such Liquidation Event, whichever is earlier, and shall also notify such holders in writing of the final approval of such Liquidation Event.  The first of such notices shall describe the material terms and conditions of the impending Liquidation Event (including, without limitation, the amount of proceeds to be paid in respect of each share in connection with the Liquidation Event) and the provisions of this Section 5, and the Corporation shall thereafter give such holders prompt notice of any material changes to the information set forth in such notice.  The Liquidation Event shall in no event take place sooner than 15 business days after the Corporation has given the first notice provided for herein or sooner than 15 business days after the Corporation has given notice of any material changes provided for herein.

 

6. Conversion Right.

 

(a) Right to Convert by Holders of Series B Preferred.

 

(i) At any time after the date that a Holder purchases shares of Series B Preferred, such Holder may, at its election, convert each share of Series B Preferred into that number of fully paid and non-assessable shares of Common Stock (or such other equity security of the Corporation for which all of its Common Stock has been exchanged or into which all of its Common Stock has been converted) equal to (x) the  Stated Value divided by (y) the Conversion Price, subject to adjustments as set forth in Section 7 hereof. The initial Conversion Price shall be .02; provided, however, that the Conversion Price shall be subject to adjustment as set forth in Section 7 hereof.

 

(ii) In order to convert shares of the Series B Preferred into shares of Common Stock, the holder thereof shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or its transfer agent, together with written notice to the Corporation stating that it elects to convert the same and setting forth the name or names it wishes the certificate or certificates for Common Stock to be issued, and the number of shares of Series B Preferred being converted.  The Corporation shall, as soon as practicable after the surrender of the certificate or certificates evidencing shares of Series B Preferred for conversion at the office of the Corporation or its transfer agent, issue to each holder of such shares, or its nominee or nominees, a certificate or certificates evidencing the number of shares of Common Stock to which it shall be entitled and, in the event that only a part of the shares evidenced by such certificate or certificates are converted, a certificate evidencing the number of shares of Series B Preferred which are not converted.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock at such date and shall, with respect to such shares, have only those rights of a holder of Common Stock of the Corporation.

 

(b) Automatic Conversion.  Each share of Series B Preferred shall convert automatically into that number of fully paid and non-assessable shares of Common Stock (or such other equity security of the Corporation for which all of its Common Stock has been exchanged or into which all of its Common Stock has been converted) equal to (x) the  Stated Value divided by (y) the Conversion Price, subject to adjustments as set forth in Section 7 hereof, with no action required by the holder thereof, upon: (i) the consent of holders of at least two-thirds of the outstanding shares of Series B Preferred; or (ii) immediately prior to the closing of a firmly underwritten public offering of shares of Common Stock for gross offering proceeds of at least $10,000,000 (before deducting underwriters commissions and expenses) (a “Qualified Offering”).

 

7. Protection Against Dilution.  If the Corporation, with respect to the Common Stock (i) pays a dividend or makes a distribution on shares of Common Stock that is paid in shares of Common Stock or in securities convertible into or exchangeable or exercisable for Common Stock (in which latter event the number of shares of common stock initially issuable upon the conversion, exchange or exercise of such securities shall be deemed to have been distributed); (ii) subdivides outstanding shares of Common Stock; (iii) combines outstanding shares of Common Stock into a smaller number of shares; or (iv) issues by reclassification of Common Stock any shares of capital stock of the Corporation, the Conversion Price in effect immediately prior thereto shall be adjusted so that each Holder thereafter shall be entitled to receive the number and kind of shares of Common Stock or other capital stock of the Corporation that it would have owned or been entitled to receive in respect of the Series B Preferred  immediately after the happening of any of the events described above had the Series B Preferred been converted immediately prior to the happening of that event. An adjustment made in accordance with this Section 7 shall become effective immediately after the record date, in the case of a dividend, and shall become effective immediately after the effective date, in the case of a subdivision, combination, or reclassification.  If, as a result of an adjustment made in accordance with this Section 7, the Holder becomes entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Corporation, the board of directors (whose determination shall be conclusive) shall determine in good faith the allocation of the adjusted Conversion Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock.

 

8. Company Redemption.  The Company shall have the right, at any time after the date the Series B Preferred have been issued, to redeem all or a portion of any Holder's Series B Preferred at a price per Series B Preferred equal to the Stated Value, multiplied by 125% (the "Company Redemption Price").  To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a “Redemption Notice”), indicating the date the Company intends to pay the Company Redemption Price (the “Redemption Date”), which date may not be less than 120 days from the date the Redemption Notice is delivered to Holder.  The Holder of Series B Preferred on the Redemption Date shall have the right to receive such amount in cash equal to the Company Redemption Price per Series B Preferred, such amount to be paid on the Redemption Date, and each Series B Preferred shall have no further rights. The provisions of this Section 7 shall not be deemed to restrict the ability of a Holder to convert the Series B Preferred pursuant to the provisions of Section 5 at any time and from time to time after receipt of the Redemption Notice until the date prior to the Redemption Date.

 

9. Lost or Stolen Certificates.  Upon receipt by the Corporation of evidence reasonably satisfactory to the Corporation of the loss, theft, destruction or mutilation of any certificates representing shares of Series B Preferred, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder thereof to the Corporation in customary form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Corporation shall execute and deliver new certificate(s) of like tenor and amount.

 

  

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10. Notice.  Any notice required or permitted to be given to a Holder under this Certificate of Designations shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the Nevada General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

11. Preferred Share Register.  The Corporation and/or its transfer agent may treat the Person in whose name any share of Series B Preferred is registered on the register of the Corporation as the owner and holder of such shares of Series B Preferred for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made transfers.

 

12. Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Preferred, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.

 

13. Fractional Shares.  No fractional share shall be issued upon the conversion of any share or shares of Series B Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Preferred by a Holder shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, round such fractional share up to the next whole share of Common Stock and issue such whole share of Common Stock to the Holder upon such conversion.

 

14. No Other Rights.  Shares of Series B Preferred: (a) shall not have any rights of preemption as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options may be designated, issued or granted; (b) shall not be redeemable; and (c) shall not have any other rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof not set forth herein or in the Certificate of Incorporation, as amended, or as provided by applicable law.

 

IN WITNESS WHEREOF, MINERCO RESOURCES, INC. has caused this certificate of designation to be signed by John F. Powers, its President and Chief Executive Officer, on this 23rd day of May, 2014.

 

	 	 
MINERCO RESOURCES, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ John F. Powers	 
	 	 	John F. Powers, President	 
	 	 	 	 
	 	 	 	 

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