PROP Prairie Operating Company

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 15, 2024

 

 

Prairie Operating Co.

(Exact name of registrant as specified in its charter)

 

 

Delaware		001-41895		98-0357690
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

55 Waugh Drive Suite 400 Houston, TX		77007
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (713) 424-4247

 

N/A

(Former Name or Former Address, If Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		PROP		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).

 

Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01

Entry into a Material Definitive Agreement.

 

Amendment to Asset Purchase Agreement

 

As previously reported, on January 11, 2024, Prairie Operating Co. (the “Company”) entered into an asset purchase agreement (the “APA”), by and among the Company, Nickel Road Development LLC (“NRD”), Nickel Road Operating LLC (“NRO” and, together with NRD, collectively, the “Sellers”) and Prairie Operating Co., LLC (“Prairie LLC” and, together with the Company, NRD and NRO, collectively, the “Parties”), to acquire the assets of NRO (the “Assets”) for total consideration of $94.5 million (the “Purchase Price” and such acquisition, the “NRO Acquisition”).

 

On August 15, 2024, the Company and the Sellers entered into an amendment to the APA (the “Amendment”). Pursuant to the Amendment, the Parties agreed to, among other things, amend: (i) the Effective Time from February 1, 2024 to January 1, 2024; (ii) the Outside Date from August 15, 2024 to September 17, 2024; (iii) the Spud Fees that the Company is required to pay to Sellers from an amount not to exceed $11.5 million to $0; (iv) the cash Purchase Price from $83.0 million to $84.5 million, and certain other Purchase Price adjustments; and (v) certain provisions relating to the Deposit in escrow, including release of $6.0 million of the Deposit to NRD on August 15, 2024. The foregoing amendments to the APA result in a reduction to the cash consideration amount to be paid at Closing of approximately $14.5 million resulting in a $57.0 million cash consideration amount to be paid at Closing, subject to net positive interim cash flow adjustments. Capitalized terms used, but not defined, in this Current Report on Form 8-K have the meanings set forth in the Amendment.

 

The foregoing description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Consent & Agreement

 

On August 15, 2024, the Company entered into a Consent & Agreement (the “Consent & Agreement”) with Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (the “Holder”). Prior to entering into the Consent & Agreement, the Holder was the beneficial owner of 25% of the Common Stock of the Company. Pursuant to the Consent & Agreement, the Holder, as a holder of the Series D convertible preferred stock, par value $0.01 per share (the “Series D Preferred Stock”), of the Company and as the sole holder of the Series E convertible preferred stock, par value $0.01 per share (the “Series E Preferred Stock” and, together with the Series D Preferred Stock, collectively, the “Preferred Stock”), of the Company, consented to, and waived any and all negative covenants with respect to, any and all transactions the Company may consummate in connection with the funding of the NRO Acquisition and its ongoing operations pursuant to Section 4 and Section 9 of each of the Series D Certificate (as defined below) and the Series E Certificate (as defined below) (the “Consents”). The Holder also released its mortgage on certain property of the Company, which was established in favor of the Holder securing the Company’s obligations under the Series E Certificate.

 

 

Each of the Series D Preferred Stock, Series E Preferred Stock, an A Warrant to purchase common stock, par value $0.01 per share (“Common Stock”), of the Company (the “Series D A Warrant”) issued in connection with the Series D Preferred Stock, an A Warrant to purchase Common Stock (the “Series E A Warrant”) and B Warrant to purchase Common Stock (the “Series E B Warrant” and, together with the Series D A Warrant and Series E A Warrant, collectively, the “Warrants”), each of the Series E A Warrant and Series E B Warrant issued in connection with the Series E Preferred Stock, held by the Holder, were subject to a limitation on exercise or conversion, as applicable, if as a result of such exercise or conversion, the Holder would own more than 4.99% of the outstanding shares of common stock (the “Beneficial Ownership Limitation”), which may be increased by the Holder upon written notice to the Company, to any specified percentage not in excess of 9.99% (the “Beneficial Ownership Limitation Ceiling”). As previously reported, on November 13, 2023, the Holder entered into an agreement with the Company pursuant to which it amended the terms of each of its Warrants to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 25% and gave notice to the Company that it was increasing its Beneficial Ownership Limitation to 25% with respect to each of its Warrants.

 

Pursuant to the Consent & Agreement, the Company and the Holder agreed to (i) amend Section 6(d) of the Series E Certificate to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9%; (ii) subject to consent from the requisite holders of the Series D Preferred Stock, amend Section 6(d) of the Series D Certificate to increase the Beneficial Ownership Limitation from 9.99% to 49.9% (the “Series D BOL Amendment”); and (iii) amend Section 2(e) of each of the Holder’s Series D A Warrant and Series E A Warrant and Section 2(d) of the Holder’s Series E B Warrant to increase the Beneficial Ownership Limitation Ceiling from 25% to 49.9% (collectively, the “BOL Amendments”). Concurrently with the Consent & Agreement, the requisite holders of the Series D Preferred Stock provided consent pursuant to Section 6 of the Series D Certificate for the Series D BOL Amendment (the “Series D Consent”). If the Beneficial Ownership Limitation, as amended, does not permit the conversion of any or all of the Series D Preferred Stock held by the Holder, the Company must periodically, but no less than once per month, determine whether greater than 100,000 shares of Common Stock underlying the Series D Preferred Stock may be converted, and if so, provide notice to the Holder.

 

In connection with the increase to the Beneficial Ownership Limitation Ceiling, the Holder agreed pursuant to the Consent & Agreement that (i) until its remaining Preferred Stock and Warrants are exercised or converted, as applicable, it will not acquire any other shares of Common Stock of the Company, and (ii) for a period of ten years following the date of the Consent & Agreement, it will not, directly or indirectly, acquire by means of public equity trading markets, any Common Stock or other securities with underlying Common Stock, to the extent the Holder would beneficially own the voting, investment or economic control over 49.9% of the Common Stock of the Company (the “Standstill”).

 

The Holder further agreed that if at any time it beneficially owns, or exercises control over, shares of Common Stock with voting rights that exceed 29.9% of the Common Stock of the Company (the “Voting Threshold”), the Company shall exercise the voting rights with respect to such shares of Common Stock beneficially owned in excess of the Voting Threshold in the same proportion as the outstanding Common Stock (excluding Common Stock beneficially owned, directly or indirectly, by the Holder or any Affiliate (as defined in the Consent & Agreement) of the Holder, but including any securities of the Company eligible to vote with the Common Stock on an as-converted basis) voted on all matters submitted to a vote of the holders of Common Stock of the Company (the “Voting Agreement”).

 

The foregoing description of the Consent & Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Consent & Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.

 

 

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

The Series D Preferred Stock is governed by that certain Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “Series D Certificate”), filed with the Delaware Secretary of State on May 3, 2023. The Series E Preferred Stock is governed by that certain Certificate of Designation of Preferences, Rights and Limitations of the Series E Convertible Preferred Stock (the “Series E Certificate”), filed with the Delaware Secretary of State on August 15, 2023. Pursuant to the Consent & Agreement and the Series D Consent, on August 20, 2024, the Company filed amendments to each of the Series D Certificate and the Series E Certificate (collectively, the “Certificates of Amendment”) with the Delaware Secretary of State to amend Section 6(d) of each of the Series D Certificate and the Series E Certificate to increase the Beneficial Ownership Limitation Ceiling thereof from 9.99% to 49.9%. In connection with the filing of the Certificates of Amendment, the Company filed a Certificate of Correction to its Second Amended and Restated Certificate of Incorporation to address an immaterial clerical error.

 

Copies of the Second Amended and Restated Certificate of Incorporation, the Series D Certificate and the Series E Certificate are filed as Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3, respectively, to this Report and are incorporated herein by reference.

 

Item 8.01

Other Events.

 

In connection with the Consent & Agreement, the Holder provided notice to the Company of its election to exercise the Series E B Warrant to purchase 4 million shares of Common Stock pursuant to Section 2(a) of the Series E B Warrant, and delivered payment in full of $24.0 million to the Company in immediately available funds (the “Warrant Exercise”). The Company intends to use the proceeds from the Warrant Exercise for general working capital purposes, which may include funding a portion of the Purchase Price for the NRO Acquisition or for drilling activities. In addition, in connection with the Consent & Agreement, the Holder delivered conversion notices with respect to the conversion of 20,000 shares of Series E Preferred Stock into 4,000,000 shares of Common Stock and the conversion of 2,000 shares of Series D Preferred Stock into 400,000 shares of Common Stock. No shares of Series E Preferred Stock remained outstanding after the conversion.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit Number		Description
3.1		Second Amended and Restated Certificate of Incorporation.
3.2		Certificate of Amendment to the Certificate of Designation of Series D Convertible Preferred Stock of Prairie Operating Co.
3.3		Certificate of Amendment to the Certificate of Designation of Series E Convertible Preferred Stock of Prairie Operating Co.
10.1		Amendment to Asset Purchase Agreement, dated as of August 15, 2024, by and among Nickel Road Development LLC, Nickel Road Operating LLC, Prairie Operating Co. and Prairie Operating Co., LLC.
10.2		Consent and Agreement, dated as of August 15, 2024, by and among Prairie Operating Co. and Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	PRAIRIE OPERATING CO.
Date: August 20, 2024
	By:	/s/ Daniel T. Sweeney
		Daniel T. Sweeney
		Executive Vice President, General Counsel & Corporate Secretary

 

 

Exhibit 3.1

 

SECOND AMENDED AND RESTATED

 

CERTIFICATE OF INCORPORATION

OF

PRAIRIE OPERATING CO.

 

Prairie Operating Co. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “DGCL”), hereby certifies as follows:

 

1. The original Certificate of Incorporation of the Corporation (formerly known as GOEnergy, Inc.) was filed with the Secretary of State of the State of Delaware on May 2, 2001, and the Amended and Restated Certificate of Incorporation of the Corporation (as amended, the “Amended and Restated Certificate of Incorporation”) was filed with the Secretary of State of the State of Delaware on June 5, 2020.

 

2. This Second Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”), which restates and amends the Amended and Restated Certificate of Incorporation, has been declared advisable by the board of directors of the Corporation (the “Board”), duly adopted by the stockholders of the Corporation and duly executed and acknowledged by the officers of the Corporation in accordance with Sections 103, 228, 242 and 245 of the DGCL.

 

3. Effective as of October 16, 2023, at 12:01 a.m. Eastern Time, the Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:

 

First: The name of the Corporation is Prairie Operating Co.

 

Second: The address of its registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 in New Castle County, Delaware. The name of its registered agent at such address is The Corporation Trust Company.

 

Third: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any and all lawful acts or activities for which corporations may be organized under the DGCL as it currently exists or may hereafter be amended, and the Corporation shall have the power to perform all lawful acts and activities.

 

Fourth: The total number of shares of stock that the Corporation shall have authority to issue is 550,000,000 shares of stock, classified as (i) 50,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”), and (ii) 500,000,000 shares of common stock, par value $0.01 per share (“Common Stock”).

 

 

The designations and the powers, preferences, rights, qualifications, limitations and restrictions of Preferred Stock and Common Stock are as follows:

 

1. Provisions Relating to Preferred Stock.

 

(a) Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof, as are stated and expressed herein and in the resolution or resolutions providing for the issue of such class or series adopted by the Board as hereafter prescribed (a “Preferred Stock Designation”).

 

(b) Authority is hereby expressly granted to and vested in the Board to authorize the issuance of Preferred Stock from time to time in one or more classes or series, and with respect to each series of Preferred Stock, to fix and state by the resolution or resolutions from time to time adopted by the Board providing for the issuance thereof the designation and the powers, preferences, rights, qualifications, limitations and restrictions relating to each class or series of Preferred Stock, including, but not limited to, the following:

 

(i) whether or not the class or series is to have voting rights, full, special or limited, or is to be without voting rights, and whether or not such class or series is to be entitled to vote as a separate class either alone or together with the holders of one or more other classes or series of stock;

 

(ii) the number of shares to constitute the class or series and the designations thereof;

 

(iii) the preferences, and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to any class or series;

 

(iv) whether or not the shares of any class or series shall be redeemable at the option of the Corporation or the holders thereof or upon the happening of any specified event, and, if redeemable, the redemption price or prices (which may be payable in the form of cash, notes, securities or other property), and the time or times at which, and the terms and conditions upon which, such shares shall be redeemable and the manner of redemption;

 

(v) whether or not the shares of a class or series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement, and, if such retirement or sinking fund or funds are to be established, the annual amount thereof, and the terms and provisions relative to the operation thereof;

 

(vi) the dividend rate, whether dividends are payable in cash, stock of the Corporation or other property, the conditions upon which and the times when such dividends are payable, the preference to or the relation to the payment of dividends payable on any other class or classes or series of stock, whether or not such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which such dividends shall accumulate;

 

 

(vii) the preferences, if any, and the amounts thereof which the holders of any class or series thereof shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding up of, or upon any distribution of the assets of, the Corporation;

 

(viii) whether or not the shares of any class or series, at the option of the Corporation or the holder thereof or upon the happening of any specified event, shall be convertible into or exchangeable for, the shares of any other class or classes or of any other series of the same or any other class or classes of stock, securities or other property of the Corporation and the conversion price or prices or ratio or ratios or the rate or rates at which such conversion or exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided for in such resolution or resolutions; and

 

(ix) such other powers, preferences, rights, qualifications, limitations and restrictions with respect to any series as may to the Board seem advisable.

 

(c) The shares of each class or series of Preferred Stock may vary from the shares of any other class or series thereof in any or all of the foregoing respects. The Board may increase the number of shares of the Preferred Stock designated for any existing class or series by a resolution adding to such class or series authorized and unissued shares of the Preferred Stock not designated for any class or other series. Unless otherwise provided in the Preferred Stock Designation, the Board may decrease the number of shares of the Preferred Stock designated for any existing class or series by a resolution subtracting from such class or series authorized and unissued shares of the Preferred Stock designated for such existing class or series, and the shares so subtracted shall become authorized, unissued and undesignated shares of the Preferred Stock.

 

2. Provisions Relating to Common Stock.

 

(a) Each share of Common Stock shall have identical rights and privileges in every respect. Common Stock shall be subject to the express terms of Preferred Stock and any class or series thereof. Except as may otherwise be provided in this Certificate of Incorporation, in a Preferred Stock Designation or by applicable law, each stockholder shall be entitled to one vote for each share of Common Stock held by that stockholder. Except as may otherwise be provided in this Certificate of Incorporation (including any Preferred Stock Designation), the holders of shares of Common Stock shall have the exclusive right to vote for the election of directors and on all other matters upon which stockholders are entitled to vote, and the holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders. Each holder of Common Stock shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation (as they may be amended or restated from time to time, the “Bylaws”) as in effect at the time in question and applicable law on all actions to be taken by the stockholders of the Corporation.

 

 

(b) Notwithstanding the foregoing, except as otherwise required by applicable law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such class or series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation) or pursuant to the DGCL.

 

(c) Subject to the prior rights and preferences, if any, applicable to shares of Preferred Stock or any class or series thereof, and subject to the right of participation, if any, of the holders of Preferred Stock in any dividends, the holders of shares of Common Stock shall be entitled to receive ratably in proportion to the number of shares of Common Stock held by them such dividends and distributions (payable in cash, stock or otherwise), if any, as may be declared thereon by the Board at any time and from time to time out of any funds of the Corporation legally available therefor.

 

(d) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock or any class or series thereof, and subject to the right of participation, if any, of the holders of Preferred Stock in any dividends, the holders of shares of Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them. A liquidation, dissolution or winding-up of the Corporation, as such terms are used in this paragraph (d), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or other entity or a sale, lease, exchange or conveyance of all or a part of the assets of the Corporation.

 

(e) The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding plus the number reserved for issuance upon the exercise, conversion or exchange of outstanding securities) by the affirmative vote of the majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote generally on the election of directors, voting as a single class, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of either Common Stock or Preferred Stock voting separately as a class or series shall be required therefor.

 

3. General.

 

(a) Subject to the foregoing provisions of this Certificate of Incorporation, the Corporation may issue shares of Preferred Stock and Common Stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board, which is expressly authorized to fix the same in its absolute discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares.

 

(b) The Corporation shall have authority to create and issue rights and options entitling their holders to purchase shares of the Corporation’s capital stock of any class or series or other securities of the Corporation, and such rights and options shall be evidenced by instrument(s) approved by the Board. The Board shall be empowered to set the exercise price, duration, times for exercise and other terms of such rights or options; provided, however, that the consideration to be received for any share of capital stock subject thereto shall not be less than the par value thereof.

 

 

4. Designation of Series D Convertible Preferred Stock.

 

The Corporation has designated 50,000 shares of Preferred Stock as the “Series D Convertible Preferred Stock,” which shall have the rights, powers, preferences and limitations set forth in the Certificate of Designation of Preferences, Rights and Limitations set forth as Exhibit A attached hereto.

 

5. Designation of Series E Convertible Preferred Stock.

 

The Corporation has designated 50,000 shares of Preferred Stock as the “Series E Convertible Preferred Stock,” which shall have the rights, powers, preferences and limitations set forth in the Certificate of Designation of Preferences, Rights and Limitations set forth as Exhibit B attached hereto.

 

Fifth: The business and affairs of the Corporation shall be managed by or under the direction of the Board. Subject to applicable law, the rights of the holders of any class or series of Preferred Stock and the then-applicable terms of the Stockholders’ Agreement, dated as of the date hereof (as may be amended, restated, supplemented, modified or replaced), among the Corporation and certain of its stockholders (the “Stockholders’ Agreement”), any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. No decrease in the number of authorized directors constituting the Board shall shorten the term of any incumbent director.

 

Subject to the rights of the holders of shares of any class or series of Preferred Stock, if any, to elect or remove additional directors pursuant to this Certificate of Incorporation (including any Preferred Stock Designation thereunder) and the then-applicable terms of the Stockholders’ Agreement, any director or the entire Board may be removed with or without cause by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors.

 

Subject to the rights of the holders of any class or series of Preferred Stock to elect directors under specified circumstances, if any, and the then-applicable terms of the Stockholders’ Agreement, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the members of the Board serving at that time. Unless and except to the extent that the Bylaws so provide, the election of directors need not be by written ballot.

 

Cumulative voting for the election of directors shall be prohibited.

 

 

The Board may designate and appoint from among its members one or more committees, which may have one or more members, and may designate one or more of its members as alternate members, who may, subject to any limitations imposed by the Board, replace absent or disqualified members at any meeting of such committee. The stockholders of the Corporation shall have no power to appoint or remove directors as members of committees of the Board, nor to abrogate the power of the Board to establish any such committees or the power of any such committee to exercise the powers and authority of the Board.

 

Sixth: Subject to the rights of the holders of any class or series of Preferred Stock with respect to such class or series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly held annual or special meeting of stockholders and may not be taken by any consent in writing of such stockholders.

 

Seventh: Except as otherwise required by applicable law and the rights of the holders of any class or series of Preferred Stock, special meetings of stockholders of the Corporation, and any proposals to be considered at such meetings, may be called and proposed only by the Chairman (or any Co-Chairman) of the Board or the Board pursuant to a resolution adopted by a majority of the total number of directors then in office. Subject to the rights of the holders of any class or series of Preferred Stock, the stockholders of the Corporation do not have the power to call a special meeting of stockholders of the Corporation.

 

Eighth: In furtherance of, and not in limitation of, the powers conferred by the laws of the State of Delaware, the Board is expressly authorized to adopt, amend or repeal the Bylaws without any action on the part of the stockholders of the Corporation. Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the members of the Board serving at the time of that vote. The stockholders of the Corporation shall have the power to adopt, alter, amend and repeal the Bylaws with the vote of holders of not less than 66⅔% in voting power of the then-outstanding shares of stock entitled to vote generally on the election of directors, voting together as a single class. No bylaws hereafter made or adopted, nor any repeal of or amendment thereto, shall invalidate any prior act of the Board that was valid at the time it was taken, nor contain any provision inconsistent with this Certificate of Incorporation.

 

Ninth: No director or officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, as applicable, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as it now exists. In addition to the circumstances in which a director or officer of the Corporation is not personally liable as set forth in the preceding sentence, a director or officer of the Corporation shall not be liable to the fullest extent permitted by any amendment to the DGCL hereafter enacted that further limits the liability of a director or officer.

 

Any amendment, repeal or modification of this Article Ninth shall be prospective only and shall not affect any limitation on liability of a director or officer for acts or omissions occurring prior to the date of such amendment, repeal or modification.

 

 

Tenth: The (a) directors of the Corporation and (b) officers of the Corporation (each such person, a “Specified Party,” and collectively, the “Specified Parties”) have participated (directly or indirectly) in and may, but shall have no duty to, continue to (1) participate (directly or indirectly) in venture capital and other direct investments in corporations, joint ventures, limited liability companies and other entities conducting business of any kind, nature or description (“Other Investments”) and (2) have interests in, participate with, aid and maintain seats on the boards of directors or similar governing bodies of Other Investments, in each case that may, are or will be competitive with the business of the Corporation and its subsidiaries or in the same or similar lines of business as the Corporation and its subsidiaries, or that could be suitable for the Corporation or its subsidiaries; provided, however, that an individual who is an employee of the Corporation or one of its subsidiaries shall only be a Specified Party for purposes of this Article Tenth to the extent that, prior to participating in the Other Investment or business opportunity for such Other Investment in question (including any overriding royalty interest participation program) pursuant to clauses (1) or (2) above, (a) such Specified Party receives prior written approval from the Audit Committee of the Board authorizing such participation and (b) the Corporation publicly discloses such participation. To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, any such Other Investment or any business opportunities for such Other Investments that are from time to time presented to any Specified Party or are business opportunities in which a Specified Party participates or desires to participate, even if the Other Investment or business opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and, subject to the requirements included in this Article Tenth, each such Specified Party shall have no duty to communicate or offer any such Other Investment or business opportunity to the Corporation and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries or any stockholder, including for breach of any fiduciary or other duty, as a director or officer or controlling stockholder or otherwise, and the Corporation shall indemnify each Specified Party against any claim that such Specified Party is liable to the Corporation or its stockholders for breach of any fiduciary duty, by reason of the fact that such Specified Party (i) participates in any such Other Investment or pursues or acquires any such business opportunity, (ii) directs any such business opportunity to another person or (iii) fails to present any such Other Investment or business opportunity, or information regarding any such Other Investment or business opportunity, to the Corporation or its subsidiaries, unless, in the case of a Specified Party who is a director or officer of the Corporation, such business opportunity is expressly offered to such Specified Party in writing solely in his or her capacity as a director or officer of the Corporation.

 

Neither the amendment nor repeal of this Article Tenth, nor the adoption of any provision of this Certificate of Incorporation or the Bylaws, nor, to the fullest extent permitted by Delaware law, any modification of law, shall eliminate, reduce or otherwise adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification (regardless of when any proceeding (or part thereof) relating to such event, act or omission arises or is first threatened, commenced or completed).

 

If any provision or provisions of this Article Tenth shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Tenth (including, without limitation, each portion of any paragraph of this Article Tenth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Article Tenth (including, without limitation, each such portion of any paragraph of this Article Tenth containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by applicable law.

 

 

This Article Tenth shall not limit any protections or defenses available to, or indemnification or advancement rights of, any director or officer of the Corporation under this Certificate of Incorporation, the Bylaws, applicable law or as may be set forth in individual indemnification agreements with such director or officer. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article Tenth.

 

Eleventh: The Corporation shall have the right, subject to any express provisions or restrictions contained in this Certificate of Incorporation or Bylaws, from time to time, to amend this Certificate of Incorporation or any provision hereof in any manner now or hereafter provided by applicable law, and all rights and powers of any kind conferred upon a director, officer, or stockholder of the Corporation by this Certificate of Incorporation or any amendment hereof are subject to such right of the Corporation.

 

Twelfth: Notwithstanding any other provision of this Certificate of Incorporation or the Bylaws (and in addition to any other vote that may be required by applicable law, this Certificate of Incorporation or the Bylaws), the affirmative vote of at least 66⅔% of the voting power of the outstanding shares of stock of the Corporation entitled to vote in an election of directors, voting together as a single class, shall be required to amend, alter or repeal any provision of this Certificate of Incorporation.

 

Thirteenth: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, in each case, subject to that court having personal jurisdiction over the indispensable parties named defendants therein) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for a breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine including, without limitation, any action to interpret, apply, enforce or determine the validity of this Second Amended and Restated Certificate or the Bylaws of the Corporation (as they shall be amended from time to time), or any provision thereof. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article Thirteenth.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Incorporation this 12th day of October, 2023.

 

	PRAIRIE OPERATING CO.
	By:	/s/ Edward Kovalik
	Name:	Edward Kovalik
	Title:	Chief Executive Officer

 

[Signature Page to Second Amended and Restated Certificate of Incorporation]

 

 

Exhibit A

 

PRAIRIE OPERATING CO.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES d CONVERTIBLE PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE

Delaware GENERAL CORPORATION LAW

 

The undersigned, Gary Hanna and Edward Kovalik, do hereby certify that:

 

1. They are the President and Chief Executive Officer, respectively, of Prairie Operating Co., a Delaware corporation (the “Corporation”).

 

2. The Corporation is authorized to issue 50,000,000 shares of preferred stock, of which 17,276 have been issued.

 

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 50,000,000 shares, $0.01 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement, up to 50,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

 

 

TERMS OF PREFERRED STOCK

 

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

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

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

 

“Base Conversion Price” shall have the meaning set forth in Section 7(b).

 

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

 

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

 

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

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the Corporation’s obligations to deliver the Securities have been satisfied or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Corporation’s common stock, par value $0.01 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants 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.

 

“Conversion Amount” means the sum of the Stated Value at issue.

 

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

 

 

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

 

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

 

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

 

“Conversion Shares Registration Statement” means a registration statement that registers the resale of all of the Conversion Shares by the Holders, which shall be named as “selling stockholders” therein, and meets the requirements of the Registration Rights Agreement.

 

“Dilutive Issuance” shall have the meaning set forth in Section 7(b).

 

“Dilutive Issuance Notice” shall have the meaning set forth in Section 7(b).

 

“Effective Date” means the date that the Conversion Shares Registration Statement filed by the Corporation pursuant to the Registration Rights Agreement is first declared effective by the Commission.

 

“Equity Conditions” means, during the period in question, (a) the Corporation shall have effected all conversions required to occur by virtue of one or more Notices of Conversion of the applicable Holder on or prior to the dates so requested or required, if any, (b) the Corporation shall have paid all liquidated damages and other amounts owing to the applicable Holder in respect of the Preferred Stock, (c)(i) there is an effective Conversion Shares Registration Statement pursuant to which the Holders are permitted to utilize the prospectus thereunder to resell all of the Conversion Shares (and the Corporation has no reason to believe, in good faith, that such effectiveness will be interrupted for the foreseeable future) or (ii) all of the Conversion Shares may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Corporation has no reason to believe, in good faith, that trading of the Common Stock on a Trading Market will be interrupted for the foreseeable future), (e) there is a sufficient number of authorized, but unissued and otherwise unreserved, shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) the issuance of the shares in question (or, in the case of a redemption, the shares issuable upon conversion in full of the redemption amount) to the applicable Holder would not violate the limitations set forth in Section 6(d) herein, (g) the applicable Holder is not in possession of any information provided directly by the Corporation, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public information, (h) for each Trading Day in any period of 22 Trading Days during a 30 consecutive Trading Day period prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds 100,000 shares per Trading Day (subject to adjustment for forward and reverse stock splits and the like), and (i) the Corporation shall have completed a reverse split of its common stock at a ratio not less than 1:28.5714286.

 

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors of the Corporation or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Corporation, (b) securities upon the exercise or exchange of or conversion of any securities issued pursuant to the Note Conversion Agreements, Purchase Agreement (including the Warrants) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Purchase Agreement (which shall be deemed to include any securities issued in connection with (x) the Prairie Transactions and (y) the conversion or exchange of certain 12% senior secured convertible debentures by the holders thereof for Preferred Stock, Common Stock and the Amended and Restated Debentures), provided that such securities have not been amended since the date of this Agreement, the Note Conversion Agreements or the Support Agreements Agreement, as applicable, to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, (c) securities issued pursuant to any merger, acquisition (including any asset acquisition), consolidation or other strategic transaction (i) approved by a majority of the disinterested directors of the Corporation or (ii) in an arms’-length transaction, (d) up to an amount of Preferred Stock, warrants and/or other securities equal to $30 million on the same terms as the Purchase Agreement and (e) securities in connection with any split, dividend or reorganization by the Corporation.

 

“Forced Conversion Date” shall have the meaning set forth in Section 8(a).

 

“Forced Conversion Notice” shall have the meaning set forth in Section 8(a).

 

“Forced Conversion Notice Date” shall have the meaning set forth in Section 8(a).

 

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

 

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

 

“GAAP” means United States generally accepted accounting principles.

 

“Holder” shall have the meaning given such term in Section 2.

 

 

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.

 

“Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Liquidation” shall have the meaning set forth in Section 5.

 

“New Common Stock” shall have the meaning set forth in Section 7(a).

 

“New York Courts” shall have the meaning set forth in Section 11(d).

 

“Note Conversion Agreements” means those certain Support Agreements entered into on or after the date hereof, between (i) the Company and Bristol Investment Fund, Ltd. (“Bristol”) and (ii) the Company and Barlock 2019 Fund, LP (“Barlock”), respectively, as amended, modified or supplemented from time to time in accordance with their terms, relating to, among other things, the amendment and restatement of those certain 12% senior secured convertible debentures held by each of Bristol and Barlock (the “Amended and Restated Debentures”).

 

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

 

“Optional Redemption” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Amount” means the sum of (a) 105% of the aggregate Stated Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated damages and other amounts due in respect of the Preferred Stock.

 

“Optional Redemption Date” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Notice” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Notice Date” shall have the meaning set forth in Section 8(b).

 

“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates, if any, which may be issued to evidence such Preferred Stock.

 

 

“Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue Date, (b) the Amended and Restated Debentures, (c) lease obligations and purchase money indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, (d) debt under any working capital credit agreement or reserve-based credit agreement and (e) any non-convertible debt with a tenor greater than 5 years.

 

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Corporation) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Corporation’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Corporation’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Corporation and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder, and (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Corporation or its Subsidiaries other than the assets so acquired or leased.

 

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

 

“Prairie Transactions” means, collectively, the transactions contemplated by that certain Agreement and Plan of Merger, dated as of October 24, 2022, by and among the Corporation, Creek Road Merger Sub, LLC and Prairie Operating Co., LLC (as amended in the form of amendment set forth in Exhibit D to the Purchase Agreement) and the agreements and other instruments contemplated therein (including but not limited to the grant by the Corporation of certain non-compensatory options to certain directors and officers thereof).

 

“Preferred Stock” shall have the meaning set forth in Section 2.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of May 3, 2023, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Corporation and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.

 

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities” means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

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

 

“Stated Value” shall have the meaning set forth in Section 2.

 

“Subscription Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Corporation and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.

 

“Successor Entity” shall have the meaning set forth in Section 7(e).

 

“Threshold Period” shall have the meaning set forth in Section 8(a).

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Trading Market” means any of 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, OTCQB or OTCQX (or any successors to any of the foregoing).

 

 

“Transaction Documents” means this Certificate of Designation, the Purchase Agreement, the Warrants, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.

 

“Transfer Agent” means Vstock Transfer, LLC, the current transfer agent of the Corporation and any successor transfer agent of the Corporation.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion and upon exercise of the Warrants.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTCQB Venture Market (“OTCQB”) or the OTCQX Best Market (“OTCQX”) is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the Pink Open Market (“Pink Market”) operated by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Holders at the Closing in accordance with Section 2.2(a) of the Purchase Agreement.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series D Convertible Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 50,000 (which shall not be subject to increase without the written consent of the holders of not less than 66% of the then outstanding shares of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.01 per share and a stated value equal to $1,000 (the “Stated Value”).

 

Section 3. Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.

 

 

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of not less than 66% of the then outstanding shares of the Preferred Stock, (a) alter or change the powers, preferences or rights given to the Preferred Stock in a materially adverse manner or alter or amend this Certificate of Designation in such a manner so as to materially adversely affect any rights of the Holders, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that materially adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

 

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Section 6. Conversion.

 

a) Conversions at Option of Holders. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth herein) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price (the “Conversion Ratio”). Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”); provided that the Corporation shall not be required to honor such request if such conversion does not involve an underlying conversion value of Common Stock of at least $25,000 based on the Stated Value of such Preferred Stock subject to the conversion on the Conversion Date (as defined below) (unless such lesser amount relates to all of a Holder’s and its Affiliates’ Preferred Stock). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by .pdf via email such Notice of Conversion to the Corporation (such date, the “Conversion Date”). The Corporation shall be entitled to rely on any Notice of Conversion if it is received from the notice address the Corporation is provided in connection with such transfer. If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall deliver transfer instruments reasonably satisfactory to the Corporation and shall surrender any certificate(s) representing the shares of such Preferred Stock to the Corporation. Upon surrender of a certificate that is to be redeemed or converted in part pursuant to this Certificate of Designation, the Corporation shall execute and deliver to the Holder of such certificate a new certificate representing the number of shares of Preferred Stock that are not so redeemed or converted. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.

 

 

b) Conversion Price. The conversion price for the Preferred Stock shall equal $0.175, subject to adjustment herein (the “Conversion Price”).

 

c) Mechanics of Conversion.

 

i. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion Shares being acquired upon the conversion of the Preferred Stock which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement or any restrictions under applicable securities laws). If the Corporation is able to deliver the Conversion Shares free of restrictive legends and trading restrictions, the Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, such Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such conversion, in which event the Corporation shall promptly return to such Holder any original Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion and there shall be no obligation to pay further liquidated damages following such recission.

 

 

iii. Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim or recoupment; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, in accordance with the terms of this Certificate of Designation. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such conversion when it was required to do so under this Certificate of Designation, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after the Share Delivery Date) for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Nothing herein shall require the Corporation to issue Conversion Shares (or pay liquidated damages for its failure to do so) if the Notice of Conversion is incomplete or was not properly delivered to the Corporation in accordance with this Certificate of Designation.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holders shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.

 

 

v. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders (and the other holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Conversion Shares Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Conversion Shares Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement and such Common Stock being registrable for public resale).

 

vi. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock. As to any fraction of a share which the Holders would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share. Notwithstanding anything to the contrary contained herein, but consistent with the provisions of this subsection with respect to fractional Conversion Shares, nothing shall prevent any Holder from converting fractional shares of Preferred Stock.

 

vii. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

 

d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the reasonable discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case in relation to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred Stock, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holders and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61^st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.

 

 

Section 7. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. If the Corporation, at any time while this Preferred Stock is outstanding, authorizes and issues an additional class of common or special stock, with dividend and voting rights at a ratio different than the existing class of Common Stock (the “New Common Stock”), then this Preferred Stock will automatically become convertible, at the election of the Holders, into shares of the New Common Stock at an adjusted Conversion Price proportional to the then-current Conversion Price multiplied by a fraction, the numerator of which shall be the number of votes per share of the class of New Common Stock, and the denominator of which shall be the number of votes per share of the existing class of Common Stock.

 

b) Subsequent Equity Sales. If, at any time while this Preferred Stock is outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise sells 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 at an effective price per share that is lower than the then Conversion Price (such lower price, 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 simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance 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 7(b) in respect of an Exempt Issuance, provided however for the purposes of this sentence the Amended and Restated Debentures shall not be deemed an Exempt Issuance. If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Corporation 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 7(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are 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 a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the applicable 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 such Holder’s Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) 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 shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that such Holder’s right to participate in any such Purchase Right would result in such Holder exceeding the Beneficial Ownership Limitation, then such Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Beneficial Ownership Limitation). Notwithstanding the foregoing, no adjustment will be made under this Section 7(c) in respect of an Exempt Issuance.

 

d) Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Preferred Stock, then, in each such case, each Holders shall be entitled to participate in such Distribution to the same extent that such Holder would have participated therein if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that any Holder’s right to participate in any such Distribution would result in such Holder exceeding the Beneficial Ownership Limitation, then such Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Beneficial Ownership Limitation).

 

 

e) Fundamental Transaction. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person, whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (excluding, for the avoidance of doubt, the Prairie Transactions, each, a “Fundamental Transaction”), then the Corporation shall deliver written notice of such Fundamental Transaction to each Holder promptly upon the signing of such Fundamental Transaction, and in any event, at least twenty (20) calendar days prior to the consummation of such Fundamental Transaction (the “Fundamental Transaction Notice Date”), which notice shall include the high-level terms of such Fundamental Transaction, including the expected size and type of consideration to be payable to the securityholders of the Corporation. By the deadline set forth in such notice, which shall be at least ten (10) calendar days following the date of the Fundamental Transaction Notice Date, each Holder shall inform the Corporation in writing of its election to either (A) convert all, but not less than all, of its Preferred Stock into Common Stock at the Conversion Ratio or (B) upon any subsequent conversion of this Preferred Stock, receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock), the number of securities of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the applicable Holder(s) and approved by not less than 66% of such Holder(s) (without unreasonable delay and such 66% majority shall be calculated based on the Stated Values of the Preferred Stock of such Holder(s)) prior to such Fundamental Transaction. Upon the occurrence of any such 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 Designation and the other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.

 

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

 

 

g) Notice to the Holders.

 

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

 

ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation (and all of its Subsidiaries, taken as a whole), or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered by email to each Holder at its last email address as it shall appear upon the stock books of the Corporation, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the 10-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

Section 8. Forced Conversion and Redemption.

 

a) Forced Conversion. Notwithstanding anything herein to the contrary, if after the Effective Date the average of the VWAPs for any 22 Trading Days during a 30 consecutive Trading Day period (“Threshold Period”), exceeds $0.2975 (subject to adjustment for reverse and forward stock splits and the like), the Corporation may, within two (2) Trading Days after the end of any such Threshold Period, deliver a written notice to all Holders (a “Forced Conversion Notice” and the date such notice is delivered to all Holders, the “Forced Conversion Notice Date”) to cause each Holder to convert all or part of such Holder’s Preferred Stock (as specified in such Forced Conversion Notice) up to a maximum amount as to a Forced Conversion Date not to exceed, in the aggregate among all Holders, 15% of the average daily trading volume of the Common Stock on the principal Trading Market during the applicable Threshold Period, and all liquidated damages and other amounts due in respect of the Preferred Stock pursuant to Section 6, it being agreed that the “Conversion Date” for purposes of Section 6 shall be deemed to occur no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following the Forced Conversion Notice Date (such date, the “Forced Conversion Date”). The Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Corporation shall not be effective, unless the applicable Equity Conditions have been met as of the Forced Conversion Notice Date through and including the later of the Forced Conversion Date and the Trading Day on which that the Conversion Shares issuable pursuant to such conversion are actually delivered to the Holders pursuant to the Forced Conversion Notice. Additionally, the Corporation may only deliver one Forced Conversion Notice in any 22 consecutive Trading Day period. Any Forced Conversion Notices shall be applied ratably to all of the Holders based on each Holder’s initial purchases of Preferred Stock hereunder, provided that any voluntary conversions by a Holder shall be applied against such Holder’s pro rata allocation, thereby decreasing the aggregate amount forcibly converted hereunder if less than all shares of the Preferred Stock are forcibly converted. For purposes of clarification, a conversion effected by this Section 8(a) shall be subject to all of the provisions of Section 6, including, without limitation, the provisions requiring payment of liquidated damages and limitations on conversions and determining the number of shares of Common Stock being issued using the Conversion Ratio.

 

b) Optional Redemption at Election of Corporation. Subject to the provisions of this Section 8, at any time commencing on the 24-month anniversary of the Closing Date, the Corporation may deliver a notice to the Holders (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding Preferred Stock, for cash in an amount equal to the Optional Redemption Amount on the 10th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date” and such redemption, the “Optional Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Corporation may only effect an Optional Redemption if each of the Equity Conditions shall have been met on each Trading Day occurring during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made. If any of the Equity Conditions shall cease to be satisfied at any time during such 10 Trading Day period, then a Holder may elect to nullify the Optional Redemption Notice as to such Holder by notice to the Corporation within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if, by a provision of the Transaction Documents, the Corporation is obligated to notify the Holders of the non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the Corporation) in which case the Optional Redemption Notice shall be null and void, ab initio. The Corporation covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date the Optional Redemption Amount is paid in full. If any portion of the cash payment for an Optional Redemption has not been paid by the Corporation on the Optional Redemption Date, interest shall accrue thereon until such amount is paid in full at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.

 

 

Section 9. Negative Covenants. As long as any shares of Preferred Stock are outstanding, unless the holders of more than 25% in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holders;

 

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Preferred Stock is outstanding;

 

e) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or

 

 

f) enter into any agreement with respect to any of the foregoing.

 

Section 10. Transfer Restrictions. Any transferee of this Preferred Stock shall comply with Section 5.7 of the Purchase Agreement, and any attempted sale, assignment or transfer of this Preferred Stock made without such compliance shall be void ab initio and of no effect.

 

Section 11. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Gary Hanna and Edward Kovalik, e-mail addresses gh@prairieopco.com and ek@prairieopco.com, or such other e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 11. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Corporation, or if no such e-mail address or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, an indemnity in form and substance reasonably satisfactory to the Corporation, and of the ownership hereof reasonably satisfactory to the Corporation.

 

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

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

 

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

 

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

 

i) Status of Converted or Redeemed Preferred Stock. Except in connection with any financing transaction undertaken by the Corporation, shares of Preferred Stock may only be issued pursuant to an agreement with the same form, terms and conditions as the Purchase Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series D Convertible Preferred Stock.

 

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

 

 

RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

 

IN WITNESS WHEREOF, the undersigned have executed this Certificate this ___ day of _____ 2023.

 

Name:	Gary Hanna		Name:	Edward Kovalik
Title:	President		Title:	Chief Executive Officer

 

Signature Page to

Certificate of Designation of Preferences, Rights and Limitations of

Series D-Convertible Preferred Stock

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert Shares of Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series D Convertible Preferred Stock indicated below into shares of common stock, par value $0.01 per share (the “Common Stock”), of Prairie Operating Co., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _____________________________________________

 

Number of shares of Preferred Stock owned prior to Conversion: ________________

 

Number of shares of Preferred Stock to be Converted: ________________________

 

Stated Value of shares of Preferred Stock to be Converted: _____________________

 

Number of shares of Common Stock to be Issued: ___________________________

 

Applicable Conversion Price:____________________________________________

 

Number of shares of Preferred Stock subsequent to Conversion: ________________

 

Address for Delivery: ______________________

or

DWAC Instructions:

Broker no: _________

Account no: ___________

 

	[HOLDER]
	By:
	Name:
	Title:

 

 

EXHIBIT B

 

PRAIRIE OPERATING CO.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES E CONVERTIBLE PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE

Delaware GENERAL CORPORATION LAW

 

The undersigned, Gary Hanna and Edward Kovalik, do hereby certify that:

 

1. They are the President and Chief Executive Officer, respectively, of Prairie Operating Co., a Delaware corporation (the “Corporation”).

 

2. The Corporation is authorized to issue 50,000,000 shares of preferred stock, of which 21,799 have been issued.

 

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 50,000,000 shares, $0.01 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement, up to 50,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

 

 

TERMS OF PREFERRED STOCK

 

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

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

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

 

“Amended and Restated Debentures” means those certain Amended and Restated Debentures, entered into on May 3, 2023, between (i) the Corporation and Bristol Investment Fund, Ltd. and (ii) the Corporation and Barlock 2019 Fund, LP, respectively, as amended, modified or supplemented from time to time in accordance with their terms.

 

“Base Conversion Price” shall have the meaning set forth in Section 7(b).

 

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

 

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

 

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

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the Corporation’s obligations to deliver the Securities have been satisfied or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Corporation’s common stock, par value $0.01 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants 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.

 

“Conversion Amount” means the sum of the Stated Value at issue.

 

 

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

 

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

 

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

 

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

 

“Conversion Shares Registration Statement” means a registration statement that registers the resale of all of the Conversion Shares by the Holders, which shall be named as “selling stockholders” therein, and meets the requirements of the Registration Rights Agreement.

 

“Dilutive Issuance” shall have the meaning set forth in Section 7(b).

 

“Dilutive Issuance Notice” shall have the meaning set forth in Section 7(b).

 

“Effective Date” means the date that the Conversion Shares Registration Statement filed by the Corporation pursuant to the Registration Rights Agreement is first declared effective by the Commission.

 

“Equity Conditions” means, during the period in question, (a) the Corporation shall have effected all conversions required to occur by virtue of one or more Notices of Conversion of the applicable Holder on or prior to the dates so requested or required, if any, (b) the Corporation shall have paid all liquidated damages and other amounts owing to the applicable Holder in respect of the Preferred Stock, (c)(i) there is an effective Conversion Shares Registration Statement pursuant to which the Holders are permitted to utilize the prospectus thereunder to resell all of the Conversion Shares (and the Corporation has no reason to believe, in good faith, that such effectiveness will be interrupted for the foreseeable future) or (ii) all of the Conversion Shares may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Corporation has no reason to believe, in good faith, that trading of the Common Stock on a Trading Market will be interrupted for the foreseeable future), (e) there is a sufficient number of authorized, but unissued and otherwise unreserved, shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) the issuance of the shares in question (or, in the case of a redemption, the shares issuable upon conversion in full of the redemption amount) to the applicable Holder would not violate the limitations set forth in Section 6(d) herein, (g) the applicable Holder is not in possession of any information provided directly by the Corporation, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public information, (h) for each Trading Day in any period of 22 Trading Days during a 30 consecutive Trading Day period prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds 100,000 shares per Trading Day (subject to adjustment for forward and reverse stock splits and the like), and (i) the Corporation shall have completed a reverse split of its common stock at a ratio not less than 1:28.5714286.

 

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors of the Corporation or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Corporation, (b) securities upon the exercise or exchange of or conversion of any securities issued pursuant to the Purchase Agreement (including the Warrants) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Purchase Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, (c) securities issued pursuant to any merger, acquisition (including any asset acquisition), consolidation or other strategic transaction (i) approved by a majority of the disinterested directors of the Corporation or (ii) in an arms’-length transaction, (d) up to an amount of Preferred Stock, warrants and/or other securities equal to $30 million on the same terms as the Purchase Agreement and (e) securities in connection with any split, dividend or reorganization by the Corporation.

 

“Forced Conversion Date” shall have the meaning set forth in Section 8(a).

 

“Forced Conversion Notice” shall have the meaning set forth in Section 8(a).

 

“Forced Conversion Notice Date” shall have the meaning set forth in Section 8(a).

 

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

 

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

 

“GAAP” means United States generally accepted accounting principles.

 

“Holder” shall have the meaning given such term in Section 2.

 

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.

 

 

“Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Liquidation” shall have the meaning set forth in Section 5.

 

“Mortgage” shall have the meaning set forth in Section 11(j).

 

“Mortgagee” shall have the meaning set forth in Section 11(j).

 

“Mortgagor” shall have the meaning set forth in Section 11(j).

 

“New Common Stock” shall have the meaning set forth in Section 7(a).

 

“New York Courts” shall have the meaning set forth in Section 11(d).

 

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

 

“O’Neill Holder” shall have the meaning set forth in Section 11(j).

 

“Optional Redemption” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Amount” means the sum of (a) 105% of the aggregate Stated Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated damages and other amounts due in respect of the Preferred Stock.

 

“Optional Redemption Date” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Notice” shall have the meaning set forth in Section 8(b).

 

“Optional Redemption Notice Date” shall have the meaning set forth in Section 8(b).

 

“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates, if any, which may be issued to evidence such Preferred Stock.

 

“Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue Date, (b) the Amended and Restated Debentures, (c) lease obligations and purchase money indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, (d) debt under any working capital credit agreement or reserve-based credit agreement and (e) any non-convertible debt with a tenor greater than 5 years.

 

 

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Corporation) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Corporation’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Corporation’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Corporation and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder, (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Corporation or its Subsidiaries other than the assets so acquired or leased, and (e) Liens incurred in connection with the Mortgage.

 

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

 

“Preferred Stock” shall have the meaning set forth in Section 2.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of August 15, 2023, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Corporation and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities” means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.

 

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

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

 

“Stated Value” shall have the meaning set forth in Section 2.

 

“Subscription Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Corporation and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.

 

“Successor Entity” shall have the meaning set forth in Section 7(e).

 

“Threshold Period” shall have the meaning set forth in Section 8(a).

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Trading Market” means any of 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, OTCQB or OTCQX (or any successors to any of the foregoing).

 

“Transaction Documents” means this Certificate of Designation, the Purchase Agreement, the Warrants, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.

 

“Transfer Agent” means Vstock Transfer, LLC, the current transfer agent of the Corporation and any successor transfer agent of the Corporation.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of the number of shares of Preferred Stock purchased for the Subscription Amount and upon exercise of the Warrants.

 

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTCQB Venture Market (“OTCQB”) or the OTCQX Best Market (“OTCQX”) is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the Pink Open Market (“Pink Market”) operated by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Holders at the Closing in accordance with Section 2.2(a) of the Purchase Agreement.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series E Convertible Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 50,000 (which shall not be subject to increase without the written consent of the holders of not less than 66% of the then outstanding shares of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.01 per share and a stated value equal to $1,000 (the “Stated Value”).

 

Section 3. Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.

 

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of not less than 66% of the then outstanding shares of the Preferred Stock, (a) alter or change the powers, preferences or rights given to the Preferred Stock in a materially adverse manner or alter or amend this Certificate of Designation in such a manner so as to materially adversely affect any rights of the Holders, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that materially adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

 

 

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Section 6. Conversion.

 

a) Conversions at Option of Holders. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth herein) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price (the “Conversion Ratio”). Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”); provided that the Corporation shall not be required to honor such request if such conversion does not involve an underlying conversion value of Common Stock of at least $25,000 based on the Stated Value of such Preferred Stock subject to the conversion on the Conversion Date (as defined below) (unless such lesser amount relates to all of a Holder’s and its Affiliates’ Preferred Stock). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by .pdf via email such Notice of Conversion to the Corporation (such date, the “Conversion Date”). The Corporation shall be entitled to rely on any Notice of Conversion if it is received from the notice address the Corporation is provided in connection with such transfer. If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall deliver transfer instruments reasonably satisfactory to the Corporation and shall surrender any certificate(s) representing the shares of such Preferred Stock to the Corporation. Upon surrender of a certificate that is to be redeemed or converted in part pursuant to this Certificate of Designation, the Corporation shall execute and deliver to the Holder of such certificate a new certificate representing the number of shares of Preferred Stock that are not so redeemed or converted. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.

 

 

b) Conversion Price. The conversion price for the Preferred Stock shall equal $0.175, subject to adjustment herein (the “Conversion Price”).

 

c) Mechanics of Conversion.

 

i. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion Shares being acquired upon the conversion of the Preferred Stock which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement or any restrictions under applicable securities laws). If the Corporation is able to deliver the Conversion Shares free of restrictive legends and trading restrictions, the Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, such Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such conversion, in which event the Corporation shall promptly return to such Holder any original Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion and there shall be no obligation to pay further liquidated damages following such recission.

 

 

iii. Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim or recoupment; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, in accordance with the terms of this Certificate of Designation. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such conversion when it was required to do so under this Certificate of Designation, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after the Share Delivery Date) for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law. Nothing herein shall require the Corporation to issue Conversion Shares (or pay liquidated damages for its failure to do so) if the Notice of Conversion is incomplete or was not properly delivered to the Corporation in accordance with this Certificate of Designation.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holders shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.

 

 

v. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders (and the other holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Conversion Shares Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Conversion Shares Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement and such Common Stock being registrable for public resale).

 

vi. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock. As to any fraction of a share which the Holders would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share. Notwithstanding anything to the contrary contained herein, but consistent with the provisions of this subsection with respect to fractional Conversion Shares, nothing shall prevent any Holder from converting fractional shares of Preferred Stock.

 

 

vii. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the reasonable discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case in relation to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred Stock, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holders and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61^st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.

 

 

Section 7. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. If the Corporation, at any time while this Preferred Stock is outstanding, authorizes and issues an additional class of common or special stock, with dividend and voting rights at a ratio different than the existing class of Common Stock (the “New Common Stock”), then this Preferred Stock will automatically become convertible, at the election of the Holders, into shares of the New Common Stock at an adjusted Conversion Price proportional to the then-current Conversion Price multiplied by a fraction, the numerator of which shall be the number of votes per share of the class of New Common Stock, and the denominator of which shall be the number of votes per share of the existing class of Common Stock.

 

b) Subsequent Equity Sales. If, at any time while this Preferred Stock is outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise sells 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 at an effective price per share that is lower than the then Conversion Price (such lower price, 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 simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance 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 7(b) in respect of an Exempt Issuance, provided however for the purposes of this sentence the Amended and Restated Debentures shall not be deemed an Exempt Issuance. If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Corporation 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 7(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are 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 a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the applicable 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 such Holder’s Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) 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 shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that such Holder’s right to participate in any such Purchase Right would result in such Holder exceeding the Beneficial Ownership Limitation, then such Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Beneficial Ownership Limitation). Notwithstanding the foregoing, no adjustment will be made under this Section 7(c) in respect of an Exempt Issuance.

 

d) Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Preferred Stock, then, in each such case, each Holders shall be entitled to participate in such Distribution to the same extent that such Holder would have participated therein if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that any Holder’s right to participate in any such Distribution would result in such Holder exceeding the Beneficial Ownership Limitation, then such Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Beneficial Ownership Limitation).

 

 

e) Fundamental Transaction. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person, whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (each, a “Fundamental Transaction”), then the Corporation shall deliver written notice of such Fundamental Transaction to each Holder promptly upon the signing of such Fundamental Transaction, and in any event, at least twenty (20) calendar days prior to the consummation of such Fundamental Transaction (the “Fundamental Transaction Notice Date”), which notice shall include the high-level terms of such Fundamental Transaction, including the expected size and type of consideration to be payable to the securityholders of the Corporation. By the deadline set forth in such notice, which shall be at least ten (10) calendar days following the date of the Fundamental Transaction Notice Date, each Holder shall inform the Corporation in writing of its election to either (A) convert all, but not less than all, of its Preferred Stock into Common Stock at the Conversion Ratio or (B) upon any subsequent conversion of this Preferred Stock, receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock), the number of securities of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction. For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the applicable Holder(s) and approved by not less than 66% of such Holder(s) (without unreasonable delay and such 66% majority shall be calculated based on the Stated Values of the Preferred Stock of such Holder(s)) prior to such Fundamental Transaction. Upon the occurrence of any such 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 Designation and the other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.

 

 

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

 

g) Notice to the Holders.

 

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

 

ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation (and all of its Subsidiaries, taken as a whole), or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered by email to each Holder at its last email address as it shall appear upon the stock books of the Corporation, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the 10-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

Section 8. Forced Conversion and Redemption.

 

a) Forced Conversion. Notwithstanding anything herein to the contrary, if after the Effective Date the average of the VWAPs for any 22 Trading Days during a 30 consecutive Trading Day period (“Threshold Period”), exceeds $0.2975 (subject to adjustment for reverse and forward stock splits and the like), the Corporation may, within two (2) Trading Days after the end of any such Threshold Period, deliver a written notice to all Holders (a “Forced Conversion Notice” and the date such notice is delivered to all Holders, the “Forced Conversion Notice Date”) to cause each Holder to convert all or part of such Holder’s Preferred Stock (as specified in such Forced Conversion Notice) up to a maximum amount as to a Forced Conversion Date not to exceed, in the aggregate among all Holders, 15% of the average daily trading volume of the Common Stock on the principal Trading Market during the applicable Threshold Period, and all liquidated damages and other amounts due in respect of the Preferred Stock pursuant to Section 6, it being agreed that the “Conversion Date” for purposes of Section 6 shall be deemed to occur no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following the Forced Conversion Notice Date (such date, the “Forced Conversion Date”). The Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Corporation shall not be effective, unless the applicable Equity Conditions have been met as of the Forced Conversion Notice Date through and including the later of the Forced Conversion Date and the Trading Day on which that the Conversion Shares issuable pursuant to such conversion are actually delivered to the Holders pursuant to the Forced Conversion Notice. Additionally, the Corporation may only deliver one Forced Conversion Notice in any 22 consecutive Trading Day period. Any Forced Conversion Notices shall be applied ratably to all of the Holders based on each Holder’s initial purchases of Preferred Stock hereunder, provided that any voluntary conversions by a Holder shall be applied against such Holder’s pro rata allocation, thereby decreasing the aggregate amount forcibly converted hereunder if less than all shares of the Preferred Stock are forcibly converted. For purposes of clarification, a conversion effected by this Section 8(a) shall be subject to all of the provisions of Section 6, including, without limitation, the provisions requiring payment of liquidated damages and limitations on conversions and determining the number of shares of Common Stock being issued using the Conversion Ratio.

 

b) Optional Redemption at Election of Corporation. Subject to the provisions of this Section 8, at any time commencing on the 24-month anniversary of the Closing Date, the Corporation may deliver a notice to the Holders (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding Preferred Stock, for cash in an amount equal to the Optional Redemption Amount on the 10th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date” and such redemption, the “Optional Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Corporation may only effect an Optional Redemption if each of the Equity Conditions shall have been met on each Trading Day occurring during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made. If any of the Equity Conditions shall cease to be satisfied at any time during such 10 Trading Day period, then a Holder may elect to nullify the Optional Redemption Notice as to such Holder by notice to the Corporation within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if, by a provision of the Transaction Documents, the Corporation is obligated to notify the Holders of the non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the Corporation) in which case the Optional Redemption Notice shall be null and void, ab initio. The Corporation covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date the Optional Redemption Amount is paid in full. If any portion of the cash payment for an Optional Redemption has not been paid by the Corporation on the Optional Redemption Date, interest shall accrue thereon until such amount is paid in full at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.

 

Section 9. Negative Covenants. As long as any shares of Preferred Stock are outstanding, unless the holders of more than 25% in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

 

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holders;

 

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Preferred Stock is outstanding;

 

e) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or

 

f) enter into any agreement with respect to any of the foregoing.

 

Section 10. Transfer Restrictions. Any transferee of this Preferred Stock shall comply with Section 5.7 of the Purchase Agreement, and any attempted sale, assignment or transfer of this Preferred Stock made without such compliance shall be void ab initio and of no effect.

 

Section 11. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Gary Hanna and Edward Kovalik, e-mail addresses gh@prairieopco.com and ek@prairieopco.com, or such other e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 11. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Corporation, or if no such e-mail address or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, an indemnity in form and substance reasonably satisfactory to the Corporation, and of the ownership hereof reasonably satisfactory to the Corporation.

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

 

e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

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

 

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

 

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

 

i) Status of Converted or Redeemed Preferred Stock. Except in connection with any financing transaction undertaken by the Corporation, shares of Preferred Stock may only be issued pursuant to an agreement with the same form, terms and conditions as the Purchase Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series E Convertible Preferred Stock.

 

j) Mortgage. All obligations and amounts owing by the Company under this Certificate of Designation to Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust in its capacity as a Holder of Preferred Stock (the “O’Neill Holder”) are secured pursuant to that certain Deed of Trust, Mortgage, Assignment of As-Extracted Collateral, Security Agreement and Fixture Filing and Financing Statement, dated on or around the Closing Date, by and among Prairie Operating Co., LLC as “Mortgagor,” Gregory O’Neill as Trustee, and Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust as “Mortgagee” (the “Mortgage”); provided, however, that pursuant to the terms of the Mortgage, except as otherwise set forth therein, Mortgagee shall not be permitted to assign any of its Liens or rights under the Mortgage without the express written consent of Mortgagor. In the event that no shares of Preferred Stock remain outstanding (whether by conversion, redemption or otherwise) or are no longer beneficially owned or otherwise held by the O’Neill Holder (or any of its Affiliates) and all other conditions precedent in connection with the Release Date (as defined in the Mortgage) shall have occurred, the Liens under the Mortgage shall be released in accordance with the terms and procedures set forth in the Mortgage.

 

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

 

 

RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

 

IN WITNESS WHEREOF, the undersigned have executed this Certificate this 15th day of August 2023.

 

Name:	Gary Hanna		Name:	Edward Kovalik
Title:	President		Title:	Chief Executive Officer

 

Signature Page to

Certificate of Designation of Preferences, Rights and Limitations of

Series E-Convertible Preferred Stock

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert Shares of Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series E Convertible Preferred Stock indicated below into shares of common stock, par value $0.01 per share (the “Common Stock”), of Prairie Operating Co., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _____________________________________________

 

Number of shares of Preferred Stock owned prior to Conversion: ________________

 

Number of shares of Preferred Stock to be Converted: ________________________

 

Stated Value of shares of Preferred Stock to be Converted: ____________________

 

Number of shares of Common Stock to be Issued: ___________________________

 

Applicable Conversion Price:___________________________________________

 

Number of shares of Preferred Stock subsequent to Conversion: ________________

 

Address for Delivery: ______________________

or

DWAC Instructions:

Broker no: _________

Account no: ___________

 

	[HOLDER]
	By:
	Name:
	Title:

 

 

 

Exhibit 3.2

 

Certificate of Amendment of
Certificate of Designation of
Series D Convertible Preferred Stock of
PRAIRIE OPERATING CO.

 

Pursuant to Section 242 of the
Delaware General Corporation Law

 

This Certificate of Amendment to the Certificate of Designation of Series D Convertible Preferred Stock (the “Amendment”) is dated as of August 19, 2024.

 

WHEREAS, the board of directors (the “Board”) of Prairie Operating Co., a Delaware corporation (the “Company”), pursuant to the authority granted to it by the Company’s Certificate of Incorporation (the “Certificate of Incorporation”) and Section 151(g) of the Delaware General Corporation Law (the “DGCL”), has previously fixed the rights, preferences, restrictions and other matters relating to a series of the Company’s preferred stock, consisting of 50,000 authorized shares of preferred stock, classified as Series D Convertible Preferred Stock (the “Preferred Stock”) and the Certificate of Designation of the Preferred Stock (as amended, the “Certificate of Designation”) was initially filed with the Secretary of State of the State of Delaware on May 3, 2023;

 

WHEREAS, pursuant to Section 4 of the Certificate of Designation, the Company shall not, without the affirmative vote of the holders of not less than 66% of the outstanding shares of Preferred Stock (the “Required Holders”) amend the Certificate of Designation;

 

WHEREAS, the Required Holders pursuant to the Certificate of Designation have consented, in accordance with the DGCL, on August 16, 2024, to this Amendment on the terms set forth herein; and

 

WHEREAS, the Board has duly adopted resolutions proposing to adopt this Amendment and declaring this Amendment to be advisable and in the best interest of the Company and its stockholders.

 

NOW, THEREFORE, this Amendment has been duly adopted in accordance with Section 242 of the DGCL and has been executed by a duly authorized officer of the Company as of the date first set forth above to amend the terms of the Certificate of Designation as follows:

 

1.	Section 6(d) of the Certificate of Designation is hereby amended and restated to read as follows:

 

Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the reasonable discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case in relation to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred Stock, 49.9%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 49.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holders and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Amendment to be signed by its duly authorized officer this 19th day of August, 2024.

 

PRAIRIE OPERATING CO.
By:	/s/ Edward Kovalik
Name:	Edward Kovalik
Title:	Chief Executive Officer
By:	/s/ Gary Hanna
Name:	Gary Hanna
Title:	President

 

 

 

Exhibit 3.3

 

Certificate of Amendment of
Certificate of Designation of
Series E Convertible Preferred Stock of
PRAIRIE OPERATING CO.

 

Pursuant to Section 242 of the
Delaware General Corporation Law

 

This Certificate of Amendment to the Certificate of Designation of Series E Convertible Preferred Stock (the “Amendment”) is dated as of August 19, 2024.

 

WHEREAS, the board of directors (the “Board”) of Prairie Operating Co., a Delaware corporation (the “Company”), pursuant to the authority granted to it by the Company’s Certificate of Incorporation (the “Certificate of Incorporation”) and Section 151(g) of the Delaware General Corporation Law (the “DGCL”), has previously fixed the rights, preferences, restrictions and other matters relating to a series of the Company’s preferred stock, consisting of 50,000 authorized shares of preferred stock, classified as Series E Convertible Preferred Stock (the “Preferred Stock”) and the Certificate of Designation of the Preferred Stock (as amended, the “Certificate of Designation”) was initially filed with the Secretary of State of the State of Delaware on August 16, 2023;

 

WHEREAS, pursuant to Section 4 of the Certificate of Designation, the Company shall not, without the affirmative vote of the holders of not less than 66% of the outstanding shares of Preferred Stock (the “Required Holders”) amend the Certificate of Designation;

 

WHEREAS, the Required Holders pursuant to the Certificate of Designation have consented, in accordance with the DGCL, on August 15, 2024, to this Amendment on the terms set forth herein; and

 

WHEREAS, the Board has duly adopted resolutions proposing to adopt this Amendment and declaring this Amendment to be advisable and in the best interest of the Company and its stockholders.

 

NOW, THEREFORE, this Amendment has been duly adopted in accordance with Section 242 of the DGCL and has been executed by a duly authorized officer of the Company as of the date first set forth above to amend the terms of the Certificate of Designation as follows:

 

1.	Section 6(d) of the Certificate of Designation is hereby amended and restated to read as follows:

 

d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the reasonable discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case in relation to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred Stock, 49.9%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 49.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holders and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Amendment to be signed by its duly authorized officer this 19th day of August, 2024.

 

PRAIRIE OPERATING CO.
By:	/s/ Edward Kovalik
Name:	Edward Kovalik
Title:	Chief Executive Officer
By:	/s/ Gary Hanna
Name:	Gary Hanna
Title:	President

 

 

 

Exhibit 10.1

 

AMENDMENT to asset purchase agreement

 

This Amendment to asset purchase agreement (this “Amendment”), is made and entered into as of August 15, 2024 (the “Effective Date”), by and among Nickel Road Development LLC, a Delaware limited liability company (“Seller”), Nickel Road Operating LLC, a Delaware limited liability company (“NR Operator”), and Prairie Operating Co., a Delaware corporation (“Purchaser”) and Prairie Operating Co., LLC, a Delaware limited liability company (“Purchaser Operator”). Seller, NR Operator, Purchaser, and Purchaser Operator sometimes are referred to herein individually as a “Party” and collectively as the “Parties”. Capitalized terms herein shall be the definitions assigned to them in the test or as defined in the Agreement (as defined below).

 

Recitals:

 

WHEREAS, the Parties entered into that certain Asset Purchase Agreement, dated as of January 11, 2024 (the “Agreement”), whereby Seller and Purchaser set forth their desire for Seller to sell and Purchaser to purchase those certain oil and gas properties, rights and related assets defined and described in the Agreement up the terms set forth therein.

 

WHEREAS, pursuant to Section 12.10 of the Agreement, the Parties desire to amend certain of those terms and conditions set forth in the Agreement as further described herein.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each Party hereunder, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties agree as follows

 

Article i

Amendments

 

Section 1.1 Amendments

 

(a) Section 1.2(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

Section 1.2 Purchase Price

 

(a) In consideration of the sale of the Properties by Seller to Purchaser, Purchaser shall pay to Seller the sum of Eighty-Four Million Five Hundred Thousand Dollars ($84,500,000) in cash (such cash, the “Cash Consideration” and such amount shall be the “Purchase Price”).

 

 

(b) Section 1.2(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) [BLANK].

 

(c) Section 1.3(a)(i)(E) of the Agreement is hereby deleted in its entirety.

 

(d) Section 1.3(a)(ii)(H) of the Agreement is hereby deleted in its entirety

 

(e) Section 1.3(a)(iii)(B) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(B) all expenses (including all drilling costs, all capital expenditures, all overhead charges actually charged to Third Parties, and all applicable royalties and similar burdens on production, but excluding Taxes) incurred in connection with the Oil and Gas Properties prior to the Effective Date will be borne by Seller, except for the capital expenditures set forth on Schedule 3.10(a);

 

(f) Section 1.3(b)(ii) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(ii) Purchaser shall have the right, but not the obligation, to review the proposed preliminary settlement statement submitted by Seller in accordance with Section 1.3(b)(i) and may, on or before the day that is five (5) Business Days prior to the Closing Date, provide comments and proposed revisions to Seller with respect to the Adjusted Purchase Price as set forth therein. In the event Purchaser provides Seller with any comments and proposed revisions, the Seller and Purchaser will work in good faith to mutually agree upon a revised preliminary settlement statement, that does not materially deviate from the schedules set forth herein or adversely affect Purchaser, for the period of January 1, 2024 to June 30, 2024.

 

(g) Section 1.4(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) [BLANK].

 

(h) Section 1.4(c) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(c) If the Closing does not occur on or prior to August 15, 2024, the Parties will execute and deliver to Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit as follows: (i) Six Million Dollars ($6,000,000.00) shall be released to Seller and (ii) the balance of the Deposit shall be released to Purchaser.

 

(i) Section 9.2(f) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) [BLANK].

 

 

(j) Section 10.2(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) In the event that (i) all conditions precedent to the obligations of Seller set forth in Section 9.1 have been satisfied (or waived by Seller), and (ii) the Closing has not occurred as a result of the failure of Seller to materially perform, when required, any of Seller’s covenants or obligations to consummate the Transaction at Closing (specifically including its obligations set forth in Section 6.1(1)), then, upon the satisfaction of the conditions set forth in subparts (i) and (ii) of this Section 10.2(b), Purchaser shall have the right to seek specific performance of this Agreement, and such remedy shall be Purchaser’s sole and exclusive remedy.

 

(k) Section 10.2(c) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(c) In the event that (i) all conditions precedent to the obligations of Purchaser set forth in Section 9.2 have been satisfied (or waived by Purchaser), and (ii) the Closing hereunder has not occurred as a result of the failure of Purchaser to materially perform, when required, any of Purchaser’s covenants or obligations hereunder to consummate the Transaction at Closing, then, upon the satisfaction of the conditions set forth in subparts (i) and (ii) of this Section 10.2(c), Seller shall be entitled to the Deposit as released in accordance with Section 1.4(c) and Seller’s retention of such portion of the Deposit shall constitute liquidated damages hereunder, which remedy shall be the sole and exclusive remedy available to Seller for any such failure of Purchaser. Seller and Purchaser acknowledge and agree that (A) Seller’s actual damages upon the event of such a termination are difficult to ascertain with any certainty, (B) the portion of the Deposit released in accordance with Section 1.4(c) of this Agreement is a reasonable estimate by the Parties of such actual damages of Seller and (C) such liquidated damages do not constitute a penalty. THE PARTIES HEREBY ACKNOWLEDGE THAT THE EXTENT OF DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THE TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT RELEASED IN ACCORDANCE WITH SECTION 1.4(C) OF THIS AGREEMENT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY; provided, however, that the termination of this Agreement shall not relieve any Party from any obligation or liability for such Party’s actual fraud.

 

 

(l) Section 10.2(d) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(d) [BLANK].

 

(m) Section 10.3 of the Agreement is hereby deleted in its entirety and replaced with the following:

 

[BLANK].

 

(n) Section 13.1 of the Agreement is hereby amended by replacing the following defined terms in their entirety as follows:

 

“Cash Consideration” has the meaning set forth in Section 1.2(a).

 

“Effective Date” means 7:00 a.m. (Mountain Time) on January 1, 2024.

 

“Outside Date” means 11:59 p.m. (Mountain Time) on September 17, 2024.

 

“Purchase Price” has the meaning set forth in Section 1.2(a).

 

(o) Section 13.1 of the Agreement is hereby further amended to remove the following defined terms:

 

“Deposit Release” has the meaning set forth in Section 10.3(a).

 

“Deposit Release Amount” has the meaning set forth in Section 10.3(a)(i).

 

“Final Deposit Release Date” has the meaning set forth in Section 10.3(a)(iii).

 

“First Deposit Release Date” has the meaning set forth in Section 10.3(a)(i).

 

“Remaining Deposit” has the meaning set forth in Section 10.3(b).

 

“Seller’s Interim Net Cash Flow” means during the period from October 1, 2023, to the Effective Date, the amount of all proceeds from the sale of Hydrocarbons produced from or allocable to the Oil and Gas Properties (net of applicable royalties, overriding royalties and other similar burdens on production and net of the Asset Taxes allocable to Seller’s interest) less all expenses (which, for purposes of this definition mean all capital expenditures as set forth on Schedule 3.10(a), lease operating expenses, and all overhead charges under applicable operating agreements, all other overhead charges actually charged by Third Parties, but excluding Taxes and general and administrative expenses) to the extent incurred in the ownership, maintenance, or operation of the Oil and Gas Properties.

 

“Spud Fee” has the meaning set forth in Section 1.2(a)(ii).

 

 

Section 1.2 No Other Amendments. Except as expressly set forth in this Amendment, there are no changes to the Agreement, the remaining terms of which shall remain in effect as written.

 

Article ii

MisCELLANEOUS

 

Section 2.1 Dispute Resolution. Any dispute arising out of this Amendment shall be resolved in accordance with the dispute resolution provisions set forth in Section 12.1 of the Agreement.

 

Section 2.2 Notices. All notices and other communications given or made pursuant to this Amendment shall be made as provided in Section 12.2 of the Agreement.

 

Section 2.3 Entire Agreement. This Amendment, together with the Agreement, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof.

 

Section 2.4 Binding Effect; Assignment; No Third Party Benefit. This Amendment, together with the Agreement, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof.

 

Section 2.5 Severability. If any provisions of this Amendment is held to be unenforceable, this Amendment shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by Applicable Law.

 

Section 2.6 Governing Law and Venue. This Amendment, shall be governed by and construed in accordance with the governing law and venue provisions set forth in Section 12.6 of the Agreement.

 

Section 2.7 Counterparts. This Amendment may be executed in any number of counterparts, each of which for all purposes shall be deemed an original, and all of which shall constitute, collectively, one instrument. It is not necessary that each Party execute the same counterpart so long as identical counterparts are executed by each such Party. This Amendment may be validly executed and delivered by electronic transmission.

 

Section 2.8 Amendment. This Amendment may not be amended except by an instrument in writing signed by or on behalf of all the Parties.

 

 

Executed, as of the date set forth above, by:

 

	SELLER:
	NICKEL ROAD DEVELOPMENT LLC
	By:	/s/ Andrew Haney
	Name:	Andrew Haney
	Title:	Co-President
	NR OPERATOR:
	NICKEL ROAD OPERATING LLC
	By:	/s/ Andrew Haney
	Name:	Andrew Haney
	Title:	Co-President

 

Signature Page to Amendment to APA – Nickel Road

 

 

Executed, as of the date set forth above, by:

 

	PURCHASER:
	PRAIRIE OPERATING CO.
	By:	/s/ Edward Kovalik
	Name:	Edward Kovalik
	Title:	Chief Executive Officer
	PRAIRIE OPERATING CO., LLC
	By:	/s/ Edward Kovalik
	Name:	Edward Kovalik
	Title:	Chief Executive Officer

 

Signature Page to Amendment to APA – Prairie Operating

 

 

Exhibit 10.2

 

CONSENT AND AGREEMENT

 

August 15, 2024

 

This Consent and Agreement (this “Agreement”) is dated as of August 15, 2024, by and between Prairie Operating Co., a Delaware corporation (the “Company”) and Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (including its successors and assigns, the “Holder”).

 

WHEREAS, the Holder is the holder of (i) 2,039,614 shares of common stock, par value $0.01 per share, of the Company (“Common Stock”); (ii) 10,000 shares of Series D convertible preferred stock, par value $0.01 per share, of the Company (“Series D Preferred Stock”) convertible into 2,000,000 shares of Common Stock; (iii) an A warrant to purchase 2,000,000 shares of Common Stock (the “Series D A Warrant”) expiring May 3, 2028; (iv) 20,000 shares of Series E convertible preferred stock, par value $0.01 per share, of the Company (“Series E Preferred Stock”) convertible into 4,000,000 shares of Common Stock; (v) an A warrant to purchase 4,000,000 shares of Common Stock (the “Series E A Warrant”) expiring August 15, 2028; and (vi) a B warrant to purchase 4,000,000 shares of Common Stock, expiring August 15, 2024 (the “Series E B Warrant,” and, together with the Series D A Warrant and the Series E A Warrant, the “Warrants”);

 

WHEREAS, the Series D Preferred Stock is governed by that certain Certificate of Designation of Preferences, Rights and Limitations of the Series D Preferred Stock, filed with the Delaware Secretary of State on May 3, 2024 (the “Series D CoD”);

 

WHEREAS, the Series E Preferred Stock is governed by that certain Certificate of Designation of Preferences, Rights and Limitations of the Series E Preferred Stock, filed with the Delaware Secretary of State on August 15, 2024 (the “Series E CoD”);

 

WHEREAS, upon issuance, the conversion or exercise, as applicable, of each of the Series D Preferred Stock, Series D A Warrant, Series E Preferred Stock, Series E A Warrant and Series E B Warrant, may not be effected to the extent that after giving effect to such exercise the Holder or any of its Affiliates (as defined below) would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion or exercise, as applicable, of the Series D Preferred Stock, the Series E Preferred Stock or the applicable Warrant (the “Beneficial Ownership Limitation”); provided, however, that the Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of the Series D Preferred Stock, the Series E Preferred Stock or the applicable Warrant so long as, among other things, the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the exercise of the Series D Preferred Stock, the Series E Preferred Stock or the applicable Warrant (such 9.99% ceiling, the “Beneficial Ownership Limitation Ceiling”), with any such increase not to be effective until the 61st day after such notice is delivered to the Company (such 61-day period, the “Waiting Period”);

 

 

WHEREAS, pursuant to that certain letter agreement, dated as of November 13, 2023, by and between the Company and the Holder (the “BOL Letter Agreement”), the Company and the Holder agreed to amend each of the Warrants to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 25%, the Holder notified the Company of its election to increase the Beneficial Ownership Limitation to the amended Beneficial Ownership Limitation Ceiling and the Company and the Holder agreed to waive the Waiting Period with respect to such increase;

 

WHEREAS, the Holder desires to exercise the Series E B Warrant in full (the “Warrant Exercise”) for an aggregate exercise price of $24 million (the “Exercise Price”) and to convert its Series D Preferred Stock and Series E Preferred Stock, subject to the Beneficial Ownership Limitation;

 

WHEREAS, the Holder desires to increase the Beneficial Ownership Limitation to 49.9% with respect to the Series D Preferred Stock, the Series E Preferred Stock and the Warrants (the “BOL Increase”);

 

WHEREAS, pursuant to Section 4 of the Series D CoD and the Series E CoD, the Company shall not, without the affirmative vote of the holders of not less than 66% of the then outstanding shares of each series of Preferred Stock, among other things authorize or create any class of stock ranking senior to, or otherwise pari passu with, such series of Preferred Stock;

 

WHEREAS, Section 9 of each of the Series D CoD and the Series E CoD, sets forth certain negative covenants (the “Negative Covenants”), which provide that for so long as any shares of either such series of Preferred Stock are outstanding, unless the holders of more than 25% of the then outstanding shares of each such series of Preferred Stock, voting as a separate class, shall have otherwise given prior written consent, the Company shall not, subject to certain exceptions, incur indebtedness or liens or enter into certain agreements;

 

WHEREAS, pursuant to Section 11(j) of the Series E CoD and that certain Deed of Trust, Mortgage, Assignment of As-Extracted Collateral, Security Agreement and Fixture Filing and Financing Statement, dated August 15, 2023, by and among the Company and Holder (the “Mortgage”), the Company’s obligations under the Series E CoD are secured by a mortgage on certain property of the Company in favor of the Holder for so long as any shares of Series E Preferred Stock are outstanding;

 

WHEREAS, it is contemplated that the Company will enter into one or more agreements with investors or creditors to raise funds to fund the cash consideration in connection with the acquisition of the assets of Nickel Road Operating LLC (“NRO”) pursuant to that certain asset purchase agreement, dated January 11, 2024 (the “APA”), by and among the Company, NRO and Nickel Road Development LLC (the “NRO Acquisition”), and in order to fund its ongoing operations, and that such agreements may include the offer and issuance of debt, equity or convertible securities, a revolving credit facility, each of which may include the incurrence of liens on certain property of the Company (any such issuance, facility or agreement, a “Transaction” and, together, the “Transactions”)

 

WHEREAS, the consent of the Holder may be required under the Series D CoD and the Series E CoD to consummate certain of the contemplated Transactions (the “Consent”);

 

WHEREAS, the release of the Mortgage by the Holder may be required in order to consummate certain of the Transactions (the “Release”);

 

 

WHEREAS, it is proposed that the Holder’s voting interest with respect to shares of Common Stock beneficially owned by the Holder and its Affiliates be limited to 29.9% of the voting power on any matter submitted to a vote of the holders of Common Stock (the “Voting Threshold”), and the remainder to be voted in a Neutral Manner (as defined below) (the “Voting Limitation”);

 

WHEREAS, it is proposed that the Holder agree, for a period of 10 years, not to purchase any additional shares of Common Stock of the Company that would result in beneficial ownership by the Holder of greater than 49.9% of the voting or economic interest in the Common Stock of the Company, subject to the exceptions set forth herein (the “Standstill”); and

 

WHEREAS, the board of directors of the Company (the “Board”) has determined that it is advisable and in the best interest of the Company to: (i) amend the Series E B Warrant to permit the Warrant Exercise upon payment in full of the Exercise Price; (ii) amend the Series D A Warrant, the Series E A Warrant and the Series E CoD to effect the BOL Increase with respect to the Series E Preferred Stock, the Series D A Warrant and the Series E A Warrant; and (iii) upon receipt by the Company of the consent of the requisite holders of Series D Preferred Stock, amend the Series D CoD to effect the BOL Increase with respect to the Series D Preferred Stock, in each case, conditioned upon the Holder delivering the Consent with respect to any and all contemplated Transactions, the Waiver of Negative Covenants and Future Consents, the Release with respect to the Mortgage, including the execution and filing of the Evidence of Release (as defined below), and establishment of the Voting Limitation and the Standstill.

 

NOW, THEREFORE, in consideration of the mutual covenants, and agreements contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Holder agree as follows:

 

1. Holder Consent to the Transactions. The Holder, in its capacity as a holder of the Series D Preferred Stock and as the sole holder of the Series E Preferred Stock, pursuant to Section 4 and Section 9 of each of the Series D CoD and the Series E CoD, hereby irrevocably consents to the Transactions and the Holder waives any and all future rights with respect to the Transactions in the Holder’s capacity as a holder of the Series D Preferred Stock and as the sole holder of the Series E Preferred Stock.

 

2. Waiver of Negative Covenants and Future Consents. The Holder, in its capacity as a holder of the Series D Preferred Stock and as the sole holder of the Series E Preferred Stock, hereby irrevocably (i) waives any and all consent rights with respect to the Negative Covenants set forth in Section 9 of the Series E CoD and the consent rights with respect to any issuance of securities under Section 4 of the Series E CoD (the “Waiver”); and (ii) to the extent any consent is required under Section 4 of the Series D CoD with respect to an issuance of securities or under Section 9 with respect to the Negative Covenants, the Holder agrees to vote in favor of the recommendation of the Board with respect to any such consent for so long as Holder holds any shares of Series D Preferred Stock (the “Future Consent”).

 

3. Release of the Mortgage. The Holder hereby irrevocably releases the Mortgage and agrees to execute and deliver or cause to be executed and delivered such instruments of satisfaction and reassignment as may be requested by the Company to effect such Release, including, for the avoidance of doubt, the Release of Deed of Trust and Release by Holder of the Evidence of Debt without Production of Evidence of Debt pursuant to § 38-39-102 (1) (a) and (3), Colorado Revised Statutes (the “Evidence of Release”), attached hereto as Exhibit A.

 

 

4. Beneficial Ownership Limitation.

 

(a) The amendments set forth in this Section 4 shall become effective upon the satisfaction of the following conditions:

 

(i) The execution and delivery of this agreement, including the Consent, Waiver, Future Consent and Release set forth herein;

 

(ii) The execution and delivery by the Holder of the Evidence of Release;

 

(iii) The payment in full by the Holder of the Exercise Price for the Series E B Warrants and delivery of the Notice of Exercise specified in Section 5(a);

 

(iv) The delivery of the Conversion Notice specified in Section 5(b); and

 

(v) With respect to the amendments to the Series D CoD in clause (c), the receipt by the Company of the consent of the requisite holders of Series D Preferred Stock pursuant to Section 4 of the Series D CoD.

 

(b) Series E Preferred Stock.

 

(i) Pursuant to Section 4 of the Series E CoD, the Holder, in its capacity as the sole holder of the Series E Preferred Stock, consents to the amendment of Section 6(d) of the Series E CoD to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9% (the “Series E CoD Amendment”).

 

(ii) Upon satisfaction of the conditions set forth in clause (a), the Company agrees to enter into the Series E CoD Amendment and to promptly file the amended Series E CoD with the Delaware Secretary of State.

 

(iii) Effective upon the filing of the Series E CoD Amendment with the Delaware Secretary of State, the Holder hereby provides notice to the Company of its election with respect to the Series E Preferred Stock to increase the Beneficial Ownership Limitation from 4.99% to 49.9% and the Company and the Holder hereby agree to waive the Waiting Period with respect to such increase in the Beneficial Ownership Limitation.

 

 

(c) Series D Preferred Stock.

 

(i) Pursuant to Section 4 of the Series D CoD, the Holder, in its capacity as a holder of the Series D Preferred Stock, consents to the amendment of Section 6(d) of the Series D CoD to increase the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9% (the “Series D CoD Amendment”).

 

(ii) Upon satisfaction of the conditions set forth in clause (a), the Company agrees to enter into the Series D CoD Amendment and to promptly file the amended Series D CoD with the Delaware Secretary of State.

 

(iii) Effective upon the filing of the Series D CoD Amendment with the Delaware Secretary of State, the Holder hereby provides notice to the Company of its election with respect to the Series D Preferred Stock to increase the Beneficial Ownership Limitation from 4.99% to 49.9% and the Company and the Holder hereby agree to waive the Waiting Period with respect to such increase in the Beneficial Ownership Limitation.

 

(d) Warrants.

 

(i) Pursuant to Section 5(l) of each of the Series D A Warrant, the Series E A Warrant and the Series E B Warrant, the Company and the Holder agree to amend Section 2(e) of each of the Series D A Warrant and the Series E A Warrant and Section 2(d) of the Series E B Warrant to increase the Beneficial Ownership Limitation Ceiling from 25% to 49.9%, upon satisfaction of the conditions set forth in clause (a).

 

(ii) The Holder hereby provides notice to the Company of its election to increase the Beneficial Ownership Limitation of the Warrants from 25% to 49.9% and the Company and the Holder hereby agree to waive the Waiting Period with respect to such increase in the Beneficial Ownership Limitation.

 

5. Exercises and Conversions.

 

(a) The Holder shall deliver a Notice of Exercise pursuant to Section 2(a) of the Series E B Warrant of its election to exercise the Series E B Warrants held by the Holder, and shall deliver payment in full of the Exercise Price to the Company in immediately available funds. The Company shall immediately effect the exercise of the number of Series E B Warrants permitted by the Beneficial Ownership Limitation in place at such time. Upon the effectiveness of the increase of the Beneficial Ownership Limitation set forth in Section 4(d), the Company shall effect the exercise of the remaining Series E B Warrants.

 

(b) The Holder shall deliver a Notice of Conversion pursuant to Section 6 of the Series E CoD of its election to convert all of the Series E Preferred Stock held by the Holder, subject to the Beneficial Ownership Limitation, as amended. Upon the effectiveness of the Series E CoD Amendment and exercise in full of the Series E B Warrants, the Company shall effect the conversion of the Series E Preferred Stock, up to the Beneficial Ownership Limitation. The result of the conversion will result in the retirement of the Series E Preferred Stock and the release of the Mortgage.

 

 

(c) The Holder shall deliver a Notice of Conversion pursuant to Section 6 of the Series D CoD of its election to convert the Series D Preferred Stock held by the Holder, subject to the Beneficial Ownership Limitation, as may be amended. Upon the effectiveness of the Series D CoD Amendment and conversion in full of the Series E Preferred Stock, the Company shall effect the conversion of Holder’s Series D Preferred Stock, up to the Beneficial Ownership Limitation. If the Beneficial Ownership Limitation, as may be amended, does not permit the conversion of any or all of the Series D Preferred Stock held by the Holder, the Company shall periodically, and no less than once per month, determine whether additional shares could be issued pursuant to the Beneficial Ownership Limitation and shall provide notice to Holder if greater than 100,000 additional shares of Series D Preferred Stock could be converted within the Beneficial Ownership Limitation and shall promptly effect such conversion upon direction by Holder.

 

6. Standstill and Voting Agreement.

 

(a) The Holder agrees that until such time that all the Series E B Warrants, all the Series E Preferred Stock and all the Series D Preferred Stock held by the Holder have been exercised or converted, as applicable, the Holder shall not (i) exercise the Series D A Warrants or Series E A Warrants held by the Holder, or, (ii) directly or indirectly, acquire, offer or seek to acquire, agree to acquire, or acquire rights or options to acquire (except by way of stock dividends or other distributions or offerings made available to holders of Common Stock generally on a pro rata basis), any Common Stock of the Company.

 

(b) The Holder agrees that for a period of 10 years following the date hereof, it shall not, directly or indirectly, acquire, offer or seek to acquire, agree to acquire, or acquire rights or options to acquire (except by way of stock dividends or other distributions or offerings made available to holders of Common Stock generally on a pro rata basis), by means of public equity trading markets, whether through the acquisition of control of another person, by joining a group, through swap or hedging transactions or otherwise, any Common Stock (other than through a broad-based market basket or index), or any derivative securities, contracts or instruments in any way related to the price of shares of Common Stock, that would result in Holder beneficially owning the voting, investment or economic control over greater than 49.9% of the Common Stock of the Company.

 

(c) If the Holder shall at any time beneficially own, or exercise control over, shares of Common Stock with voting rights that exceed the Voting Threshold, the Holder will not be permitted to exercise the voting rights with respect to any shares of Common Stock held by the Holder in excess of the Voting Threshold, and the Company shall exercise the voting rights with respect to such shares of Common Stock in excess of the Voting Threshold in the same proportion as the outstanding Common Stock (excluding the Common Stock beneficially owned, directly or indirectly, by the Holder or any Affiliate of the Holder, but including any securities of the Company eligible to vote with the Common Stock on an as-converted basis) voted on all matters submitted to a vote of the holders of Common Stock (a “Neutral Manner”). The Holder deems to irrevocably appoint as its proxy and attorney-in-fact, the Chief Executive Officer, the Chief Financial Officer and the General Counsel of the Company, each of them individually, with full power of substitution and resubstitution, to consent to or vote any shares of Common Stock held by them in excess of the Voting Threshold with respect to any matters that must be voted in a Neutral Manner. “Affiliate” shall mean an individual or entity of any kind that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Holder, as such terms are used in and construed under Rule 405 of the Securities Act.

 

 

7. Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

8. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior support or other agreements between the Holder and the Company with respect to the subject matter hereof.

 

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the conflict of law provisions thereof to the extent such provisions would require or permit the application of the laws of any jurisdiction other than the State of Delaware. Any legal suit, action, proceeding or dispute arising out of or relating to this Agreement or the transactions contemplated hereby or thereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in each case located in the city of Wilmington and county of New Castle County, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action, proceeding or dispute.

 

10. Severability. In the event that any of the provisions of this Agreement are held to be invalid or unenforceable in whole or in part, all other provisions will nevertheless continue to be valid and enforceable with the invalid or unenforceable parts severed from the remainder of this Agreement.

 

[Signature Pages Follow.]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	PRAIRIE OPERATING CO.
	By:	/s/ Edward Kovalik
	Name:	Edward Kovalik
	Title:	Chief Executive Officer

 

Signature Page to

Consent and Agreement

 

 

	NARROGAL NOMINEES PTY LTD ATF GREGORY K O’NEILL FAMILY TRUST
	By:	/s/ Gregory K. O’Neill
	Name:	Gregory K. O’Neill
	Title:	Managing Director

 

Signature Page to

Consent and Agreement

 

 

EXHIBIT A

 

Evidence of Release

 

Execution Version

 

AFTER RECORDING RETURN TO: Vinson & Elkins L.L.P. 1114 6th Ave 32nd Floor New York, NY 10036 Attn: Kerryanne McHugh

) ) ) ) )

 

FULL RELEASE OF LIENS

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned does hereby fully release and discharge and forever relinquish all of its rights, titles, interests, liens and security interests (including, without limitation, any assignment of production) under the instruments heretofore executed or delivered to or for the benefit of the undersigned (together with any deed of trust or mortgage amended thereby or any supplement, modification or amendment thereto, the “Mortgage”) more particularly described on Schedule I hereto, including all liens, security interests and assignments created and existing under the Mortgage on all of the properties and interests described in and burdened thereby and does hereby terminate and release the Mortgage.

 

Reference is hereby made to the Mortgage and the recordation thereof for all purposes in connection herewith. Recording references of the Mortgage are to the mortgage, deed of trust, financing statement or other appropriate records in the county in which the original Mortgage is recorded. Capitalized terms used in this Full Release of Liens or in Schedule I but not defined herein or therein shall have the meanings given to such terms in the Mortgage.

 

This Full Release of Liens may be executed in multiple counterparts, all of which are identical and shall constitute one and the same instrument.

 

[Signature page follows]

 

 

EXECUTED this 15th day of August, 2024.

 

	Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust, as Mortgagee
	By:

 

 

SCHEDULE I

 

1.

Deed of Trust, Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement dated as of August 15, 2023 from Prairie Operating Co., LLC, a Delaware limited liability company, as Mortgagor, to Gregory O’Neill, as Trustee, for the benefit of Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust and recorded as follows:

 

Jurisdiction		Filing Reference		File Date
Weld County, CO		Document No. 4915993		08/18/2023

 

v3.24.2.u1

Cover	Aug. 15, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 15, 2024
Current Fiscal Year End Date	--12-31
Entity File Number	001-41895
Entity Registrant Name	Prairie Operating Co.
Entity Central Index Key	0001162896
Entity Tax Identification Number	98-0357690
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	55 Waugh Drive
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77007
City Area Code	(713)
Local Phone Number	424-4247
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	PROP
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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