UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
| ☒ |
Preliminary
Proxy Statement |
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| ☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| ☐ |
Definitive
Proxy Statement |
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| ☐ |
Definitive
Additional Materials |
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| ☐ |
Soliciting
Material under §240.14a-12 |
Prairie
Operating Co.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
| ☒ |
No
fee required |
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|
| ☐ |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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| ☐ |
Fee
paid previously with preliminary materials. |
PRAIRIE
OPERATING CO.
55
Waugh Drive, Suite 400
Houston,
Texas 77007
[April
18], 2025
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
the Stockholders of Prairie Operating Co.:
You
are cordially invited to attend the Special Meeting of Stockholders (the “Special Meeting”) of Prairie Operating Co., a Delaware
corporation (the “Company,” “Prairie Operating Co.,” “we,” “us” or “our”).
The meeting will be held on May 8, 2025 at 10 a.m. Central Time at The Westin Oaks Houston, 5011 Westheimer At, Post Oak Blvd., Houston,
Texas 77056.
The
Special Meeting will be held for the following purposes:
| 1. | To
approve, pursuant to Nasdaq Rule 5635, the issuance of shares of the Company’s common
stock, $0.01 par value per share (“Common Stock”) upon the conversion of or otherwise
pursuant to the terms of the Series F Convertible Preferred Stock, $0.01 par value per share
(“Series F Preferred Stock”), issued pursuant to the Securities Purchase Agreement
dated March 24, 2025 by and among the Company and each of the investors listed on the Schedule
of Buyers attached thereto (collectively, the “Buyer”) (the “Securities
Purchase Agreement”) and the corresponding Certificate of Designation of Preferences,
Rights and Limitations of Series F Convertible Preferred Stock (the “Nasdaq Stock Issuance
Proposal (Preferred Stock)”); |
| | |
| 2. | To
approve, pursuant to Nasdaq Rule 5635, the issuance of shares of the Common Stock upon the
exercise of the warrants (the “Warrants”) to purchase the Common Stock, issued
pursuant to the Securities Purchase Agreement (the “Nasdaq Stock Issuance Proposal
(Warrants)”); and |
| | |
| 3. | To
approve a proposal to adjourn the Special Meeting to a later date or dates, if necessary
or appropriate, to permit further solicitation and vote of proxies in the event that there
are insufficient votes for, or otherwise in connection with, one or more of the other proposals
to be voted on at the Special Meeting. |
These
items of business are more fully described in the proxy statement accompanying this notice.
This
Notice of Special Meeting, the accompanying proxy statement and form of proxy are first being mailed on or about April [18], 2025 to
stockholders of record as of March 24, 2025. Only stockholders of record at the close of business on that date may vote at the meeting
or any adjournment thereof. Your execution of the enclosed proxy will not affect your right as a stockholder to attend the Special Meeting
and to vote in person. The stock transfer books will not be closed. A list of stockholders entitled to vote at the Special Meeting will
be available for examination at the Company’s principal executive offices for ten days prior to the Special Meeting.
The
enclosed Proxy Statement is also available via the Internet at www.sec.gov, and on our website free of charge at www.prairieopco.com
in the “SEC Filings” subsection of the “Investor Relations” section. Information contained on, or that can be accessed through,
our website is not intended to be incorporated by reference into this Proxy Statement and references to our website address in this Proxy
Statement are inactive textual references only.
Our
Board of Directors unanimously recommends that you vote FOR each of the proposals described in this Proxy Statement. We urge you to read
these proxy materials in their entirety and to consider them carefully, including the effect that adopting or failing to adopt the proposals
will have on stockholders.
Whether
or not you plan to attend the Special Meeting, please vote electronically via the Internet, by telephone, or complete, sign, date, and
return the accompanying proxy card and mail it promptly in the enclosed postage paid return envelope.
Sincerely,
Executive
Vice President, General Counsel and Corporate Secretary
Table
of Contents
PROXY
STATEMENT SUMMARY
FOR
THE SPECIAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 8, 2025
INTRODUCTION
AND GENERAL INFORMATION
This
proxy statement (this “Proxy Statement”) and the accompanying proxy card are being furnished to stockholders of Prairie Operating
Co., a Delaware corporation (“Prairie Operating Co.,” the “Company,” “our,” “us,” or
“we”), in connection with the solicitation of proxies by our board of directors (the “Board”) for use at our
Special Meeting of Stockholders to be held on May 8, 2025, including any adjournment, postponement or rescheduling thereof (the “Special
Meeting”).
Only
stockholders of record as of the close of business on March 24, 2025, the record date for determination of the stockholders entitled
to vote at the Special Meeting (the “Record Date”), will be entitled to vote at the Special Meeting.
By
granting a proxy, you authorize the persons named in the proxy to represent you and vote your shares at the Special Meeting or any adjournment(s)
or postponement(s) thereof.
If
you attend the Special Meeting, you may vote in person. Even if you plan to attend the Special Meeting in person, we urge you to vote
in advance of the meeting using one of these advance voting methods:
| By
Internet: |
|
By
Phone: |
|
By
Mail: |
| www.proxyvote.com |
|
1-800-690-6903 |
|
Vote
Processing |
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|
|
|
c/o
Broadridge |
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|
51
Mercedes |
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Edgewood,
|
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|
NY
11717. |
Brokers
are not permitted to vote your shares for non-discretionary matters, which include all the proposals hereto, without your instructions
as to how to vote. Please return your proxy so that your vote can be counted on such matters.
This
summary highlights information that is contained elsewhere in this Proxy Statement. This summary does not contain all of the information
that you should consider, and you should read the entire Proxy Statement carefully before voting. This Proxy Statement and the related
proxy materials were first mailed to stockholders and made available on the internet on or about April [18], 2025.
Important
Notice Regarding the Availability of Proxy Materials
All
stockholders will have the ability to access the proxy materials via the Internet at www.sec.gov, and the Company’s website
at www.prairieopco.com in the “SEC Filings” subsection of the “Investor Relations” section.
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why
am I receiving these materials?
We
have sent you these proxy materials because the Board of the Company is soliciting your proxy to vote at the Special Meeting of Stockholders,
including at any adjournments or postponements of the meeting. You are invited to attend the Special Meeting to vote on the proposals
described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete,
sign and return the enclosed proxy card, or follow the instructions below to submit your proxy by telephone or through the Internet.
How
do I attend and participate in the Special Meeting?
The
meeting will be held on May 8, 2025 at 10:00 a.m. Central Time at The Westin Oaks Houston, 5011 Westheimer At, Post Oak Blvd., Houston,
Texas 77056. You may attend, vote and ask questions at the Special Meeting by attending in person. If you are a stockholder of record,
you will be asked to provide the proxy card. If you are a beneficial owner of shares registered in the name of your broker, bank or other
agent, follow the instructions from your broker or bank.
You
may submit a question at any point during the Special Meeting (until the floor is closed to questions). Stockholder questions or comments
are welcome, but we will only answer questions pertinent to Special Meeting matters, subject to time constraints. Questions regarding
personal matters and statements of advocacy are not pertinent to Special Meeting matters and therefore will not be addressed. Questions
that are substantially similar may be grouped and answered together to avoid repetition.
Will
a list of record stockholders as of the Record Date be available?
In
accordance with the Delaware General Corporation Law, the Company will maintain at its corporate offices in Houston, Texas a list of
the stockholders entitled to vote at the Special Meeting. The list will be open to the examination of any stockholder during ordinary
business hours for ten days before the Special Meeting.
Who
can vote at the Special Meeting?
Only
stockholders of record at the close of business on March 24, 2025 will be entitled to vote at the Special Meeting. On the Record Date,
there were 26,963,790 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), outstanding
and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If,
on March 24, 2025 your shares were registered directly in your name with the Company’s transfer agent, VStock Transfer, LLC, then
you are a stockholder of record. As a stockholder of record, you may vote in person during the meeting or vote by proxy. Whether or not
you plan to attend the Special Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy through the Internet
or by telephone to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If,
on March 24, 2025 your shares were held, not in your name, but rather in an account at a brokerage firm, bank or other similar organization,
then you are the beneficial owner of shares held in “street name”. The organization holding your account is considered to
be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your
broker, bank or other agent regarding how to vote the shares in your account. You are also invited to attend the Special Meeting.
What
if another matter is properly brought before the meeting?
Pursuant
to the Company’s Amended and Restated Bylaws, business transacted at any special meeting of stockholders will be limited to the
purposes stated in the Notice of the Meeting.
How
do I vote?
For
each proposal, you may either vote “For” or “Against” or abstain from voting. The Board recommends you vote
“For” each of the proposals presented in this Proxy.
The
procedures for voting are as follows:
If
you are a record stockholder, you may vote your shares or submit a proxy to have your shares voted by one of the following methods:
| ● | By
Internet. You may submit a proxy electronically via the Internet by visiting the website
listed on the proxy card. Please have the Notice of Special Meeting, this Proxy Statement
and the proxy card (the “Proxy Materials”) in hand when you log onto the
website. Internet voting is available until 11:59 p.m. Eastern Time on May 7, 2025. |
| ● | By
Telephone. You may submit a proxy by telephone by calling the toll-free number listed on
the proxy card. Please have your Proxy Materials in hand when you call. Telephone voting
is available until 11:59 p.m. Eastern Time on May 7, 2025. |
| ● | By
Mail. You may submit a proxy by mail by signing, dating and returning your proxy card
in the provided pre-addressed envelope. |
If
your shares are held in street name, you will receive instructions from the holder of record that you must follow in order for your shares
to be voted. Internet and/or telephone voting will also be offered to stockholders owning shares through most banks and brokers.
How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of Common Stock you own as of the Record Date. Representatives of Broadridge
Financial Solutions, Inc. will tabulate the votes. Neither our Second Amended and Restated Certificate of Incorporation or our Amended
and Restated Bylaws (our “Bylaws”) allow for cumulative voting rights.
If
I am a stockholder of record and I do not vote, or if I return a proxy card or otherwise vote without giving specific voting instructions,
what happens?
If
you are a stockholder of record and do not vote by completing your proxy card, through the Internet, by telephone or electronically during
the Special Meeting, your shares will not be voted.
If
you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted “For”
each proposal presented in this Proxy Statement. If any other matter is properly presented at the meeting, your proxyholder (one of the
individuals named on your proxy card) will vote your shares at his or her discretion. The Board knows of no matters, other than those
previously stated herein, to be presented for consideration at the Special Meeting.
If
I am a beneficial owner of shares held in street name and I do not provide my broker or bank with voting instructions, what happens?
If
you are a beneficial owner of shares held in street name and you do not instruct your broker, bank or other agent how to vote your shares,
your broker, bank or other agent may still be able to vote your shares in its discretion.
Although
the shares of Common Stock are listed for trading on the NASDAQ® Capital Market (“Nasdaq”), brokerage firms and nominees
that are members of the New York Stock Exchange (“NYSE”) generally abide by the rules of the NYSE with respect
to matters regarding the exercise of discretion in the voting of shares on behalf of beneficial owners of those shares. In this regard,
under the rules of the NYSE, which are also applicable to Nasdaq-listed companies, brokers, banks and other securities intermediaries
that are subject to NYSE rules may use their discretion to vote your “uninstructed” shares with respect to matters considered
to be “routine” under the NYSE rules, but not with respect to “non-routine” matters. A broker non-vote occurs
when a broker, banker or other agent has not received voting instructions from the beneficial owner of the shares and the broker, banker
or other agent cannot vote the shares because the matter is considered “non-routine” under NYSE rules. In this regard, Proposals
1, 2 and 3 are considered to be “non-routine” under NYSE rules meaning that your broker may not vote your shares on those
proposals in the absence of your voting instructions.
If
you are a beneficial owner of shares held in street name, and you do not plan to attend the meeting, in order to ensure your shares are
voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided
in the materials you receive from your broker, bank or other agent.
Who
is paying for this proxy solicitation?
The
cost of preparing, printing, assembling and mailing the Proxy Materials, as well as the reasonable cost of forwarding
solicitation materials to the beneficial owners of shares of our common stock, and other costs of solicitation, will be exclusively borne
by us. Wages of regular employees and officers are not considered to be expenses incurred with respect to the solicitation of proxies.
In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made, by telephone or by electronic
communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities.
In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means
of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse
brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What
does it mean if I receive more than one set of proxy materials?
If
you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please
follow the voting instructions on each set of proxy materials to ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Stockholder
of Record: Shares Registered in Your Name
Yes.
You may revoke your proxy in writing at any time before it is exercised at the Special Meeting by: (i) delivering to the Secretary of
the Company a written notice of the revocation; (ii) signing, dating and delivering to the Secretary of the Company a proxy with a later
date; (iii) voting again by Internet or by telephone, if available, prior to the start of the Special Meeting or (iv) voting again at
the Special Meeting.
Your
most current proxy card or Internet or telephone proxy is the one that is counted.
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If
your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.
What
are “broker non-votes”?
As
discussed above, when a beneficial owner of shares held in street name does not give voting instructions to his or her broker, bank or
other securities intermediary holding his or her shares as to how to vote on matters deemed to be “non-routine” under NYSE
rules, the broker, bank or other such agent cannot vote the shares. These unvoted shares are counted as “broker non-votes.”
Proposals 1, 2 and 3 are considered to be “non-routine” under NYSE rules and we therefore expect broker non-votes to exist
in connection with those proposals.
As
a reminder, if you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would
prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you
receive from your broker, bank or other agent.
How
many votes are needed to approve each proposal?
The
following table summarizes the minimum vote needed to approve each proposal and the effect of abstentions and broker non-votes.
| Proposal
Number |
|
Proposal
Description |
|
Vote
Required |
|
Effect
of Abstentions |
|
Broker
Non-Vote |
| 1 |
|
Nasdaq
Stock Issuance Proposal (Preferred Stock) |
|
A
majority of the total votes cast |
|
No Effect |
|
No
Effect |
| |
|
|
|
|
|
|
|
|
| 2 |
|
Nasdaq
Stock Issuance Proposal (Warrant) |
|
A
majority of the total votes cast |
|
No Effect |
|
No
Effect |
| |
|
|
|
|
|
|
|
|
| 3 |
|
Adjournment
Proposal |
|
A
majority of the voting power of shares entitled to vote that are present in person or represented by proxy |
|
Count
as votes AGAINST |
|
No
Effect |
Pursuant
to voting agreements entered into with certain holders of our Common Stock owning more than 50% of our issued and outstanding shares
of Common Stock, we expect to have sufficient votes to establish a quorum at the Special Meeting and to approve both the Nasdaq Stock
Issuance Proposal (Preferred Stock) and the Nasdaq Stock Issuance Proposal (Warrant). Please see the section of this Proxy Statement
entitled “Proposal 1 Nasdaq Stock Issuance Proposal (Preferred Stock) – Securities Purchase Agreement” for additional
information regarding these voting agreements.
What
is the quorum requirement?
A
quorum of stockholders is necessary to transact business at a meeting of stockholders. The presence, in person or by proxy, of the holders
of a majority of the shares entitled to vote at the Special Meeting is necessary to constitute a quorum. On the Record Date, there
were 26,963,790 shares outstanding and entitled to cast vote. Thus, the holders of 13,481,896 shares must be present in person
or represented by proxy at the meeting to have a quorum.
Your
shares will be counted toward the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or
other nominee) or if you attend the Special Meeting. Abstentions will be counted toward the quorum requirement. The chairman of the
meeting or the holders of a majority of the voting power of common stock of the Company entitled to vote at the Special Meeting who
are present in person or represented by proxy, whether or not a quorum is present, shall have the power to adjourn or recess a meeting
of stockholders from time to time, for any reason, without notice other than an announcement at the Special Meeting, until a quorum is
present. At any adjourned or recessed meeting at which a quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally called.
How
can I find out the results of the voting at the Special Meeting?
Preliminary
voting results will be announced at the Special Meeting. In addition, final voting results will be published in a current report on Form
8-K that we expect to file within four business days after the Special Meeting. If final voting results are not available to us in time
to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within
four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
What
proxy materials are available on the Internet?
All
stockholders will have the ability to access the proxy materials via the Internet at www.sec.gov, and the Company’s website
at www.prairieopco.com in the “SEC Filings” subsection of the “Investor Relations” section.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
proxy statement (this “proxy statement”) contains “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Forward-looking statements appear in a number of places in this proxy statement. In addition,
any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,”
“believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,”
“forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,”
“potential,” “predict,” “should,” “would” and other similar words and expressions, but
the absence of these words does not mean that a statement is not forward-looking.
The
forward-looking statements are based on the current expectations of our management and are inherently subject to uncertainties and changes
in circumstances and their potential effects and speak only as of the date such statements are made. These forward-looking statements
involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different
from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those
described in “Item 1A. Risk Factors” and other sections in the Annual Report on Form 10-K filed by us on March 6, 2025, and
in our prospectus or any prospectus supplement which are on file with the Securities and Exchange Commission.
These
and other factors could cause actual results to differ from those implied by the forward-looking statements. Forward-looking statements
are not guarantees of performance and speak only as of the date hereof. There can be no assurance that future developments will be those
that have been anticipated or that we will achieve or realize these plans, intentions, or expectations.
All
forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing
cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.
In
addition, statements of belief and similar statements reflect our beliefs and opinions on the relevant subject. These statements are
based upon information available to us as of the date they are made, and while we believe such information forms a reasonable basis for
such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted
an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain,
and you are cautioned not to unduly rely upon these statements.
PROPOSAL
1
NASDAQ
STOCK ISSUANCE PROPOSAL (PREFERRED STOCK)
We
are seeking approval of the issuance of shares of Common Stock upon the conversion of or otherwise pursuant to the terms of shares of
the Series F Convertible Preferred Stock, $0.01 par value per share (“Series F Preferred Stock”), issued pursuant to the
Securities Purchase Agreement dated March 24, 2025 by and among the Company and each of the investors listed on the Schedule of Buyers
attached thereto (collectively, the “Buyer”) (the “Securities Purchase Agreement”) and the corresponding Certificate
of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock (the “Certificate of Designation”
or “Series F Certificate of Designation”), in accordance with Nasdaq Rule 5635. None of the other proposals are conditioned
upon the approval of this Proposal 1.
Overview
As
described in more details below, on March 24, 2025, the Company agreed to issue and sell, in a registered offering by the Company directly
to the Buyer (the “Preferred Offering”), (i) 148,250 shares (the “Preferred Shares”) of Series F Preferred Stock,
with a stated value of $1,000 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination,
or other similar recapitalization with respect to the Series F Preferred Stock (the “Stated Value”), and (ii) upon the one-year
anniversary of the issue date of the Preferred Shares, subject to the satisfaction of certain conditions, warrants (the “Warrants”)
to purchase a number of shares of our Common Stock, equal to the quotient of (1) 125% of the Stated Value of all Series F Preferred Stock
held by such holder on the original issuance date, divided by (2) the average of the 10 daily volume-weighted average per share trading
prices of our Common Stock during the 10 trading days prior to the original issuance date. The Preferred Offering also relates to the
offering of the shares of Common Stock issuable upon the conversion of or otherwise pursuant to the terms of the Series F Preferred Stock
(the “Underlying Preferred Stock Shares”). The Preferred Offering closed on March 26, 2025, and the Company received approximately
$139.1 million of net proceeds from the Preferred Offering, after deducting fees and estimated offering expenses payable by the Company.
The
Company’s Common Stock is listed on the Nasdaq Capital Market, and, as such, the Company is subject to the applicable rules of
the Nasdaq Stock Market LLC (“Nasdaq”), including Nasdaq Listing Rules 5635. Nasdaq Listing Rule 5635(d) requires the Company
to obtain stockholder approval prior to certain issuances with respect to Common Stock or securities convertible into Common Stock other
than in a public offering if the price is below the “Minimum Price” (as determined in accordance with Nasdaq rules) in an
amount greater than or equal to 20% of the number of shares of Common Stock outstanding prior to such issuance, regardless of whether
such shares are issued to one person or group or are more widely distributed. The Series F Preferred Stock currently has a conversion
price greater than or equal to the Minimum Price as of the date of the Securities Purchase Agreement. However, the Certificate of Designation
of the Series F Preferred Stock contains certain adjustment provisions as described in this proxy statement that may result in the reduction
of the conversion price thereof, and, at election of the holder of the Series F Preferred Stock, to convert using an alternative conversion
rate, as discussed in details below. The issuance of Common Stock upon the conversion of the Series F Preferred Stock at such a reduced
conversion price or otherwise pursuant to the Certificate of Designation, either alone or together with shares of the Common Stock
issuable upon exercise of the Warrants, if issued, may result in the Company issuing more than 20% of the amount of Common Stock issued
and outstanding prior to the issuance of the Underlying Preferred Stock Shares at a price below the Minimum Price. Accordingly, the Company
needs stockholder approval of the issuance of shares of Common Stock upon any such conversion of the Series F Preferred Stock or otherwise
pursuant to the Certificate of Designation.
Moreover,
pursuant to Nasdaq Listing Rule 5635(b), stockholder approval is required prior to an issuance of securities that could result in a “change
of control” of a listed company, which for Nasdaq purposes, is generally deemed to occur when, as a result of an issuance, an investor
or a group of investors acquires, or has the right to acquire, 20% or more of the outstanding common stock or voting power of the Company
and such ownership or voting power would be the Company’s largest ownership position. As described above, the issuance of shares
of Common Stock upon the conversion of the Series F Preferred Stock at certain conversion price or otherwise pursuant to the Certificate
of Designation may result in the issuance of shares of Common Stock equaling, or exceeding, 20% of the issued and outstanding Common
Stock and it is possible that such issuance, either alone or together with shares of the Common Stock issuable upon exercise of the Warrants,
if issued, and any other shares of Common Stock previously held by the holder of the Series F Preferred Stock, could result in the creation
of a new ownership position that would be deemed a “change of control” under Nasdaq rules. Accordingly, we are also seeking
stockholder approval pursuant to Nasdaq Listing Rule 5635(b).
Because
the conversion price of the Series F Preferred Stock may be adjusted, the number of shares of Common Stock that will actually be issued
upon the conversion of or otherwise pursuant to the terms of shares of the Series F Preferred Stock cannot be ascertained at this time.
In addition, under the terms of the Series F Preferred Stock, a holder may not convert the Series F Preferred Stock if such holder or
any of its affiliates would beneficially own (to the extent that after giving effect to such conversion) a number of shares of Common
Stock which would exceed 4.99% (which may be increased up to 9.99% upon prior notice from a holder of the Series F Preferred Stock to
us) of the shares of Common Stock outstanding immediately after giving effect to such conversion.
Background
Bayswater
Acquisition
On
February 6, 2025, the Company and certain subsidiaries of the Company entered into a Purchase and Sale Agreement (as amended, the “Bayswater
PSA”), with Bayswater Resources LLC, Bayswater Fund III-A, Bayswater Fund III-B, LLC, Bayswater Fund IV-A, LP, Bayswater Fund IV-B,
LP, Bayswater Fund IV-Annex, LP, and Bayswater Exploration and Production, LLC (collectively, “Bayswater”). Pursuant to the
Bayswater PSA, the Company agreed to acquire certain oil gas properties from Bayswater (the “Bayswater Assets”) for a purchase
price of $602.75 million, subject to certain closing price adjustments, payable in cash (the “Cash Consideration”) and 3,656,098
shares of the Common Stock (the “Bayswater Acquisition”). The Company funded a portion of the Cash Consideration with
the proceeds from the offering of the Preferred Shares and proceeds from the concurrent Common Stock offering.
The
Bayswater Acquisition was closed on March 26, 2025, after the consummation of the financing transactions discussed above, including the
offering of Preferred Shares.
Securities
Purchase Agreement
On
March 24, 2025, the Company entered into the Securities Purchase Agreement with the Buyer, pursuant to which the Company agreed to issue
and sell, in a registered offering by the Company, directly to the Buyer, (i) 148,250 shares of Series F Preferred Stock, with a Stated
Value of $1,000 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar
recapitalization with respect to the Series F Preferred Stock, and (ii) upon the one-year anniversary of the issue date of the Preferred
Shares, subject to the satisfaction of certain conditions, Warrants to purchase a number of shares of our Common Stock, equal to the
quotient of (1) 125% of the Stated Value of all Series F Preferred Stock held by such holder on the original issuance date, divided by
(2) the average of the 10 daily volume-weighted average per share trading prices of our Common Stock during the 10 trading days prior
to the original issuance date. The Preferred Offering also relates to the offering of the shares of Common Stock issuable upon the conversion
of or otherwise pursuant to the terms of the Series F Preferred Stock. The Preferred Offering closed on March 26, 2025, and the Company
received approximately $139.1 million of net proceeds from the Preferred Offering, after deducting fees and estimated offering expenses
payable by the Company.
The
terms of the Series F Preferred Stock provide that we will not issues shares of our Common Stock upon conversion of the Series F Preferred
Stock or otherwise pursuant to the Certificate of Designation to the extent that such issuance would require prior stockholder approval
in accordance with Nasdaq rules, unless such stockholder approval has been obtained. We have agreed to seek to obtain stockholder approval
for the issuance of Underlying Preferred Stock Shares and the shares of our Common Stock upon exercise of the Warrants, if issued, as
soon as reasonably practicable (and not later than 45 days if the SEC does not review and provide written comments on the proxy statement
or 60 days if the SEC does review and provide written comments on the proxy statement) following the date of the Securities Purchase
Agreement.
Holders
of our Common Stock owning more than 50% of our issued and outstanding shares of Common Stock have entered into and delivered voting
agreements pursuant to which such holders have agreed to vote their shares of Common Stock in favor of such matters.
Series
F Preferred Stock
The
following is a summary of the material terms and provisions of the Preferred Shares. This summary is subject to and qualified in its
entirety by the Series F Certificate of Designation, attached as Appendix A of this proxy statement, and our second amended and restated
certificate of incorporation (“Charter”).
General
Our
authorized capital stock consists of 500,000,000 shares of Common Stock, of which 42,942,127 shares were issued and outstanding as of
March 31, 2025, and 50,000,000 shares of preferred stock, $0.01 par value per share, of which 5,981.68 shares of Series D Convertible
Preferred Stock, par value $0.01 per share, and 147,250 shares Series F Convertible Preferred Stock were issued and outstanding as of
March 31, 2025.
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 Company 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 Delaware General Corporation Law (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.
Our
Charter authorizes the board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish
and to issue from time to time one or more series of preferred stock, par value $0.01 per share, covering up to an aggregate of 50,000,000
shares of preferred stock. Each series of preferred stock will cover the number of shares and will have the powers, preferences, privileges,
rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend
rights, liquidation preferences, voting rights, whether subject to retirement or sinking funds, conversion rights, preemptive rights
and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock are not entitled
to vote at or receive notice of any meeting of stockholders.
The
Preferred Shares and, when issued, our Common Stock issuable upon conversion of, or issued and paid as a dividend on, the Preferred Shares
will be fully paid and nonassessable. The holders of the Series F Preferred Stock will have no preemptive or preferential rights to purchase
or subscribe for any class of our stock, obligations, warrants or other securities.
The
Preferred Offering closed on March 26, 2025. We sold the Preferred Shares to the Buyer pursuant to the Securities Purchase Agreement
at a price of $1,000 per share.
Ranking
All
payments due under the Series F Certificate of Designation in respect of a share of Series F Preferred Stock shall rank pari passu with
all other shares of Series F Preferred Stock.
Exchange
Listing
There
is no established public trading market for the Series F Preferred Stock, and we do not expect a market to develop. In addition, we do
not intend to list the Series F Preferred Stock on any securities exchange or nationally recognized trading system. Without an active
trading market, the liquidity of the Series F Preferred Stock will be limited.
Voting
Rights
Except
as otherwise provided in the Series F Certificate of Designation or as otherwise required by law, the Series F Preferred Stock will have
no voting rights. However, as long as any shares of Series F Preferred Stock are outstanding, we will not, without the affirmative vote
of the Required Holders, (a) alter or change the powers, preferences or rights given to the Series F Preferred Stock in an adverse manner
or alter or amend the Series F Certificate of Designation in such a manner so as to adversely affect any rights of the holders of the
Series F Preferred Stock, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon
any liquidation, dissolution or winding-up of the Company senior to, or otherwise pari passu with, the Series F Preferred Stock, (c)
amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d)
increase the number of authorized shares of Series F Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
Liquidation
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series F Preferred Stock
will be entitled to receive out of our assets, whether capital or surplus, an amount equal to the Fundamental Change Redemption Price
and any other fees or liquidated damages then due and owing thereon under the Series F Certificate of Designation, for each share of
Series F Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the our assets
shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Series F Preferred Stock
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.
Dividends;
Cash Sweep Payments
Dividends
From
and after the Issue Date, each holder of Series F Preferred Stock will be entitled to receive, on a cumulative basis, whether or not
authorized or declared and whether or not the Company has assets legally available therefor, dividends on each share of Series F Preferred
Stock (the “Stated Dividend”) at a rate per annum equal to the Stated Dividend Rate on the amount equal to the sum of (a)
the Stated Value plus (b) all accrued and unpaid dividends on such share of Series F Preferred Stock (including dividends accrued and
unpaid on previously unpaid dividends). Stated Dividends on each share of Series F Preferred Stock will (i) accrue on the Stated Value
and all accrued and unpaid dividends on such share; (ii) accrue daily and compound quarterly from, and including, the most recent date
to which a Stated Dividend has been paid or duly provided for (or, if no Stated Dividend has theretofore been paid or duly provided for,
the Issue Date) to, but excluding, the date of payment of such Stated Dividend; (iii) be paid to the holder in cash on each March 1,
June 1, September 1 and December 1 of each calendar year, beginning on June 1, 2025 (each, a “Dividend Payment Date”) in
accordance with “-Method of Payment-Cash Payments” below or in shares of Common Stock on each Dividend Payment Date
in accordance with “-Method of Payment-Company’s Election to Pay Stated Dividend in Cash or Common Stock” below;
(iv) be paid to the holder with respect to any shares of Series F Preferred Stock such dividends have accrued on (including dividends
accrued and unpaid on previously unpaid dividends thereon) concurrently on any date on which any such shares of Series F Preferred Stock
are redeemed, converted or otherwise retired (including, without limitation, a Conversion Settlement Date, Company Redemption Date, Fundamental
Change Redemption Date, or any date that a Cash Sweep Payment is paid by the Company to the holder) and (v) be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Cash
Sweep Payments
Concurrently
with the completion of any Equity Issuance resulting in proceeds to the Company (a “Cash Sweep Financing”) or certain dividends
or distributions declared or made, prepayments of indebtedness made, or investments acquired, owned or made pursuant to certain sections
of the Senior Indebtedness Agreement (a “DFCF Action”), we will certify to each holder of Series F Preferred Stock in writing
(i) the amount of the applicable Cash Sweep Financing or DFCF Action, as applicable, and (ii) the calculation of the potential Cash Sweep
Amount with respect to such Cash Sweep Financing or DFCF Action, as applicable (including a certification that such Cash Sweep Amount
was calculated in accordance with the terms of the Series F Certificate of Designation) (such certification, a “Cash Sweep Certification”);
provided, however, that, unless consented to by the holder in writing, in the event that the extent of such Cash Sweep Financing or DFCF
Action, as applicable, and Cash Sweep Amount is such that the information required in such certification would constitute material non-public
information regarding the Company, then we will also concurrently publicly disclose such material non-public information on a Current
Report on Form 8-K or otherwise.
Each
holder has the right to require us, exercisable by delivery of written notice to us of exercise of such right (a “Cash Sweep Notice”)
given within five business days of delivery of a Cash Sweep Certification, to pay to the holder in cash within one business day following
the delivery of such Cash Sweep Notice (regardless of whether we actually deliver a Cash Sweep Certification), all or a portion of the
Cash Sweep Amount with respect to such Cash Sweep Financing or DFCF Action, as applicable, in redemption of a number of shares of Series
F Preferred Stock at a price per share equal to the result (rounded up to the nearest second decimal) of (A) (i) the Repayment Multiplier
multiplied by (ii) the Stated Value of such shares of Series F Preferred Stock, plus (B) the accrued and
unpaid dividends on such shares.
Any
payment made to the holder pursuant to this section is referred to as a “Cash Sweep Payment”.
Method
of Payment
Cash
Payments
We
will pay all cash amounts due under the Series F Certificate of Designation by wire transfer of immediately available funds to the account
of the holder of Series F Preferred Stock as set forth in a written notice of such holder delivered by the holder to us at least one
business day before the date such amount is due.
Company’s
Election to Pay Stated Dividend in Cash or Common Stock
At
least 15 Trading Days (but no more than 20 Trading Days) prior to a Dividend Payment Date, we, if we desire to elect to make a payment
of a Stated Dividend with respect to such Dividend Payment Date, entirely or partially, in shares of Common Stock, will deliver to the
holder of Series F Preferred Stock a written notice of such election stating which portion thereof we have elected to pay in shares of
Common Stock and certifying that the Equity Conditions are satisfied as of such date (a “Stated Dividend Stock Payment Notice”)
(and such election will be irrevocable as to such Dividend Payment Date). Failure to timely deliver a Stated Dividend Stock Payment Notice
to the holder will be deemed an election by us to pay the Stated Dividend with respect to such Dividend Payment Date in cash. With respect
to any Dividend Payment Date for which we have elected to make a payment of a Stated Dividend (or any applicable portion thereof) in
shares of Common Stock in accordance with this section, we will issue to the holder on such Dividend Payment Date a number of validly
issued, fully paid and Freely Tradable shares of Common Stock equal to the quotient (rounded up to the closest whole number) obtained
by dividing such payment of a Stated Dividend (or any applicable portion thereof) by the Market Stock Payment Price as of such Dividend
Payment Date. We will not have the right to, and will not, make any payment of a Stated Dividend (or any applicable portion thereof)
in shares of Common Stock if the Equity Conditions are not satisfied for each VWAP Trading Day occurring between the date of delivery
of the Stated Dividend Stock Payment Notice and the applicable Dividend Payment Date (and we will certify in writing to the holder on
the applicable Dividend Payment Date that the Equity Conditions have continued to have been satisfied during such period), and such Stated
Dividend (or any applicable portion thereof) will instead accrue on each share of Series F Preferred Stock on such Dividend Payment Date
until paid in accordance with the Series F Certificate of Designation, unless such failure of the Equity Conditions to be so satisfied
is waived in writing by the holder, which waiver may be granted or withheld by the holder in its sole discretion.
In
the event we have elected to make any payment of Stated Dividends in shares of Common Stock pursuant to this section or are required
to issue shares of Common Stock pursuant to the provision described in the second paragraph of “-Additional Payments Based on
Conversion Price” but are prohibited from so issuing such shares (or any applicable portion thereof) because it would cause
such holder, together with its attribution parties, to hold in excess of the applicable percentage of the Common Stock as set forth in
the first paragraph under “-Limitations on Conversion”, then such shares shall be held in abeyance for the benefit
of such holder until such time or times as its right thereto would not result in such holder together with its attribution parties exceeding
the applicable percentage in the first paragraph under “-Limitations on Conversion”, at which time or times such holder shall
be issued such shares of Common Stock (and any such shares declared or made on such initial issuance or on any subsequent issuance held
similarly in abeyance) to the same extent as if there had been no such limitation, unless, with respect to shares of Common Stock to
be issued pursuant to this section, the holder delivers written notice to us that the portion of such Stated Dividend should instead
accrue on each share of Series F Preferred Stock on such Dividend Payment Date until paid in accordance with the Series F Certificate
of Designation.
Company’s
Election to Pay Alternative Conversions in Cash
We
may settle Alternative Conversions entirely (but not in part) in cash (an “Alternative Conversion Cash Payment”) on the Conversion
Settlement Dates in respect of such Alternative Conversions if (i) the Market Stock Payment Price on the Trading Day immediately prior
to the applicable Alternative Conversion Date is less than $5.00 per share (subject to proportionate adjustments for certain stock dividends
or distributions, splits and combinations) (such price, the “Floor Price” and such Alternative Conversion, a “Below
Floor Alternative Conversion”) and (ii) we shall have first delivered to the holder of Series F Preferred Stock a written notice
(an “Alternative Conversion Cash Payment Notice”) of such election at least 10 Trading Days prior to any such Alternative
Conversion Date, stating that we have elected to settle all Below Floor Alternative Conversions in cash; provided that we will not be
entitled to (i) deliver more than two Alternative Conversion Cash Payment Notices in any rolling 90 day period or (ii) deliver an Alternative
Conversion Cash Payment Notice at any time during which we would be restricted from redeeming such shares of Series F Preferred Stock
in cash in accordance with the Senior Indebtedness Agreement. Such Alternative Conversion Cash Payment Notice shall remain in effect
until and including the 10th Trading Day following any written revocation of such Alternative Conversion Cash Payment Notice delivered
by us to the holder, which period may be shortened by the holder by providing written notice thereof to us. On the Conversion Settlement
Date with respect to such Below Floor Alternative Conversion, we will pay to the holder the Alternative Conversion Cash Payment Amount
in settlement of such Alternative Conversion Cash Payment. Solely in the event that an Alternative Conversion Cash Payment Notice is
in effect and has not been validly revoked by us, notwithstanding our election to settle a Below Floor Alternative Conversion in cash
pursuant to such notice, the holder may instead elect to convert its shares of Series F Preferred Stock and accrued and unpaid dividends
thereon in a Below Floor Alternative Conversion as described in “-Alternative Conversions”; provided that, in such
circumstance only, the Alternative Conversion Rate referenced in the applicable section of the Series F Certificate of Designation shall
be replaced by the Floor Price Conversion Rate and the Market Stock Payment Price referenced in the applicable section of the Series
F Certificate of Designation shall be replaced by the Floor Price. At any time during the effectiveness of an Alternative Conversion
Cash Payment Notice, if we become restricted from paying cash on account of the Series F Preferred Stock pursuant to the terms of the
Senior Indebtedness Agreement, we will provide written notice to the holder within one business day of the effectiveness of such restriction
and such notice will immediately revoke the effectiveness of the Alternative Conversion Cash Payment Notice.
“Floor
Price Conversion Rate” means a number of shares of Common Stock per share of Series F Preferred Stock equal to the result (rounded
up to the closest whole number) of (A) (i) the Repayment Multiplier multiplied by (ii) the Stated Value of the share of
Series F Preferred Stock subject to the Alternative Conversion divided by (B) the Floor Price; provided, that the Floor Price Conversion
Rate shall be subject to adjustment pursuant to the provisions described in “-Adjustments to Conversion Rate in Connection with
a Triggering Event” below.
Additional
Payments Based on Conversion Price
With
respect to (a) the conversion of each share of Series F Preferred Stock for Standard Conversion Consideration and (b) the redemption
of each share of Series F Preferred Stock at the Company Redemption Price or the Fundamental Change Redemption Price, the holder of such
share will be entitled to receive an additional payment (each, an “Additional Payment”) in an amount equal to (x) $19,875,000
multiplied by (y) a fraction, the numerator of which is the Stated Value of such share of converted or redeemed Series
F Preferred Stock, and the denominator of which is the aggregate Stated Value of all shares of Series F Preferred Stock issued pursuant
to the Securities Purchase Agreement, which Additional Payment, subject to the paragraph below, shall be paid to such holder in cash
on the related Conversion Settlement Date, Company Redemption Date or Fundamental Change Redemption Date; provided, however, that in
no event will the aggregate amount of all Additional Payments exceed $19,875,000.
To
the extent that any cash payment of an Additional Payment would be prohibited by the Senior Indebtedness Agreement, the Company will
provide written notice (e-mail being sufficient) thereof to the applicable holder on the related Conversion Date, Company Redemption
Date or Fundamental Change Redemption Date and, in lieu of such cash payment, the Company will issue such holder an amount of shares
of Common Stock (rounded up to the closest whole number) equal to the Additional Payment divided by the Market Stock Payment Price on
the Trading Day immediately preceding the date such shares of Common Stock are delivered to such holder. Any such shares of Common Stock
delivered to the holder pursuant to this section shall be Freely Tradeable. The holder may elect to receive any shares of Common Stock
issuable to such holder pursuant to this paragraph in one or more portions over multiple Trading Days by specifying a portion of such
Additional Payment to be delivered in shares of Common Stock on any Trading Day. Notwithstanding the foregoing, to the extent that the
Market Stock Payment Price is lower than the Absolute Floor Price, the holder shall, at its option, receive such shares of Common Stock
using the Absolute Floor Price or accrue the value of such Additional Payment on the Stated Value of the shares of Preferred Stock as
an unpaid dividend until paid in accordance with the Series F Certificate of Designation.
Redemption
Redemption
at Our Option
Subject
to terms, conditions and certain exceptions set forth in the Series F Certificate of Designation, we will have the right to redeem all
(but not less than all) of the then-outstanding shares of Series F Preferred Stock (a “Company Redemption”), on a date to
be determined by us in our discretion (any such date, a “Company Redemption Date”), for a cash redemption price per share
of Series F Preferred Stock equal to the Company Redemption Price (as defined below).
“Company
Redemption Price” means a cash amount per share of Series F Preferred Stock equal to the greater of (A) (i) 125% multiplied
by (ii) the Stated Value of a share of Series F Preferred Stock plus (iii) the accrued and unpaid dividends on
such shares of Series F Preferred Stock and (B) (i) 125% multiplied by (ii) (x) the Conversion Rate in effect as of the
Trading Day immediately preceding such Company Redemption Date multiplied by (y) the highest Daily VWAP per share of our
common stock during the period beginning on, and including, the fifth VWAP Trading Day prior to the date that the notice of the Company
Redemption is delivered and ending on, and including, the VWAP Trading Day immediately preceding such Company Redemption Date plus
(iii) the accrued and unpaid dividends on such shares of Series F Preferred Stock.
Redemption
of the Series F Preferred Stock upon a Fundamental Change
If
a Fundamental Change occurs, a holder of Series F Preferred Stock will have the right to require us to redeem all or any portion of the
shares of Series F Preferred Stock owned by such holder for a cash purchase price equal to the Fundamental Change Redemption Price (such
redemption, a “Redemption Upon Fundamental Change”).
A
“Fundamental Change” means any of the following events:
| ● | any
“person” or “group” (within the meaning of Section 13(d)(3) of the
Exchange Act), other than us or our wholly-owned subsidiaries, or our employee benefit plans
or those of our wholly-owned subsidiaries, files any report with the SEC indicating that
such person or group has become the direct or indirect beneficial owner (as determined in
accordance with Rule 13(d)(3) of the Exchange Act) of share of our common equity representing
more than 50% of the voting power of all of our then-outstanding common equity; |
| ● | any
sale, lease or other transfer, in one transaction or a series of transactions, of all or
substantially all of our and our subsidiaries’ assets, taken as a whole, to any person
(other than solely to one or more of our wholly-owned subsidiaries); or any transaction or
series of related transactions in connection with which (whether by means of merger, consolidation,
share exchange, combination, reclassification, recapitalization, acquisition, liquidation
or otherwise) all of our common stock is exchanged for, converted into, acquired for, or
constitutes solely the right to receive, other securities, cash or other property (other
than a subdivision or combination, or solely a change in par value, of our common stock);
provided, however, that any merger, consolidation, share exchange or combination of us pursuant
to which the persons that directly or indirectly beneficially owned all classes of our common
equity immediately before such transaction directly or indirectly beneficially own, immediately
after such transaction, more than 50% of all classes of common equity of the surviving, continuing
or acquiring company or other transferee, as applicable, or the parent thereof, in substantially
the same proportions vis-à-vis each other as immediately before such transaction will
be deemed not to be a Fundamental Change pursuant to this clause; |
| ● | the
approval by our stockholders of a plan or proposal to liquidate or dissolve us; |
| ● | any
breach or default occurs pursuant to the terms of the Senior Indebtedness Agreement or under
any agreement evidencing a Senior Indebtedness Permitted Refinancing, if the effect of such
breach or default is to (i) cause (including following the termination of any waiver or forbearance
in connection with such breach or default) the indebtedness thereunder to become or be declared
due prior to its stated maturity or (ii) permit the holders of such indebtedness to cause
such indebtedness to become or be declared due prior to its stated maturity and the requisite
holders not validly waive or enter into a forbearance in connection with such breach or default
within 60 days (A) from its receipt of notice of such breach or default or (B) to the extent
a waiver or forbearance in connection with such breach or default was previously entered
into and subsequently terminated (and the result of such termination is to permit the holders
of such Indebtedness to cause such indebtedness to become or be declared due prior to its
stated maturity), from such termination; or |
| ● | our
common stock ceases to be listed on any Eligible Exchange. |
The
“Fundamental Change Redemption Price” means, with respect to each share of Series F Preferred Stock upon a
Redemption Upon Fundamental Change, a cash amount equal to the greater of (A) (i) 125% multiplied by (ii) the Stated
Value plus (iii) the accrued and unpaid dividends on such share of Series F Preferred Stock and (B) (i) 125% multiplied
by (ii) (x) the Conversion Rate in effect as of the Trading Day immediately preceding the effective date of such Fundamental
Change multiplied by (y) the highest Daily VWAP per share of Common Stock occurring during the period commencing five
Trading Days prior to the earlier of (a) the effective date of such Fundamental Change and (b) the date that such Fundamental Change
is publicly announced and ending on the date immediately preceding the date as of which shares of Series F Preferred Stock must be
repurchased for cash in connection with a Fundamental Change, as provided in this section (the “Fundamental Change Redemption
Date”) plus (iii) the accrued and unpaid dividends on such share of Series F Preferred Stock.
Conversion
Rights
General
Subject
to the provisions of the Series F Certificate of Designation, the holder of Series F Preferred Stock may, at its option, at any time
and from time to time, convert the shares of Series F Preferred Stock then held by such holder into Conversion Consideration. Subject
to the terms of the Series F Certificate of Designation, a holder may convert less than all of the shares of Series F Preferred Stock
then held by such holder, and provisions of the Series F Certificate of Designation applying to the conversion of such shares of Series
F Preferred Stock in whole will equally apply to conversions of any portion of the shares of Series F Preferred Stock then held by such
holder. However, in no event will any share of Series F Preferred Stock be converted into shares of Common Stock using a Market Stock
Payment Price or Triggering Event Conversion Price that is lower than the Absolute Floor Price, in which case, the Absolute Floor Price
shall be used for such conversion.
“Conversion
Rate” initially means 202.0202 shares of Common Stock per share of Series F Preferred Stock; provided, however, that the Conversion
Rate is subject to adjustment pursuant to the provisions described below under “-Adjustments to Conversion Rate in Connection
with a Triggering Event” and “-Additional Conversion Rate Adjustments”; provided, further, that whenever
the Series F Certificate of Designation refers to the Conversion Rate as of a particular date without setting forth a particular time
on such date, such reference will be deemed to be to the Conversion Rate immediately after 5:00 p.m., New York City time, on such date.
The “Conversion Price” means, as of any time, an amount equal to $1,000 divided by the Conversion Rate
in effect at such time.
The
consideration (the “Standard Conversion Consideration”) due in respect of each share of Series F Preferred Stock to be converted
(other than pursuant to an Alternative Conversion) will, subject to “-Fractional Shares” below, consist of a number
of shares of Common Stock equal to the Conversion Rate in effect on the Conversion Date for such conversion and a number of shares of
Common Stock equal to the quotient (rounded up to the closest whole number) obtained by dividing the aggregate accrued
and unpaid dividends on such share of Series F Preferred Stock to, but excluding, the Conversion Settlement Date by the
Conversion Price.
Alternative
Conversions
If
a holder of Series F Preferred Stock wishes to elect to convert all or a portion of the shares of Series F Preferred Stock then held
by such holder using the Alternative Conversion Rate in lieu of the Conversion Rate (an “Alternative Conversion”), the holder
will indicate such election in the holder conversion notice delivered in accordance with the Series F Certificate of Designation, including
the applicable number of shares of Series F Preferred Stock such holder desires to convert pursuant to such Alternative Conversion.
A
holder may elect to conduct any number of Alternative Conversions during each calendar quarter, with the first such quarter after the
Issue Date ending on March 31, 2025; provided that the aggregate of the Stated Value of the shares of Series F Preferred Stock converted
to Common Stock (or redeemed for cash as described in “-Company’s Election to Pay Alternative Conversions in Cash”
above) during any such calendar quarter pursuant to Alternative Conversions shall not exceed the Alternative Conversion Cap for such
calendar quarter; provided, that (1) the holder and the Company may agree to increase the size of the Alternative Conversion Cap for
any given calendar quarter by mutual written consent and (2) the Alternative Conversion Cap shall not apply on and after any VWAP Trading
Day on which the Daily VWAP per share of Common Stock is less than $3.50 (subject to proportionate adjustments for certain events) through
and including the 20th VWAP Trading Day thereafter. Any Alternative Conversions that occur during any VWAP Trading Day where the Alternative
Conversion Cap does not apply pursuant to this section shall not reduce the amount available under the Alternative Conversion Cap for
such calendar quarter (including for purposes of any rollover pursuant to the section described in the next paragraph).
Any
portion of the Alternative Conversion Cap (including as adjusted pursuant to this section) for any calendar quarter that remains available
for Alternative Conversions upon the expiration of such calendar quarter will be added to and increase the Alternative Conversion Cap
for the subsequent calendar quarter by such available amount.
“Alternative
Conversion Rate” means a number of shares of Common Stock per share of Series F Preferred Stock equal to the result (rounded
up to the closest whole number) of (A) (i) the Repayment Multiplier multiplied by (ii) the Stated Value of the share of
Series F Preferred Stock subject to the Alternative Conversion divided by (B) the Market Stock Payment Price as of an Alternative
Conversion Date; provided, that whenever the Series F Certificate of Designation refers to the Alternative Conversion Rate as of a particular
date without setting forth a particular time on such date, such reference will be deemed to be to the Alternative Conversion Rate immediately
after 5:00 p.m., New York City time, on such date; provided, further, that the Alternative Conversion Rate shall be subject to adjustment
pursuant to the provisions described in “-Adjustments to Conversion Rate in Connection with a Triggering Event” below.
Subject
to the provisions described in “-Company’s Election to Pay Alternative Conversions in Cash” above, the consideration
(the “Alternative Conversion Consideration” and, together with the Standard Conversion Consideration, the “Conversion
Consideration”) due in respect of each share of Series F Preferred Stock to be converted pursuant to an Alternative Conversion
will, subject to “-Fractional Shares” below, consist of a number of shares of Common Stock equal to the Alternative
Conversion Rate in effect on the Alternative Conversion Date for such conversion and a number of shares of Common Stock equal to the
quotient (rounded up to the closest whole number) obtained by dividing the aggregate accrued and unpaid dividends on such
share of Series F Preferred Stock to, but excluding, the Conversion Settlement Date by the Market Stock Payment Price.
Fractional
Shares
The
total number of shares of Common Stock due in respect of any conversion of the shares of Series F Preferred Stock pursuant to the Series
F Certificate of Designation will be determined on the basis of the total number of shares of Series F Preferred Stock to be converted
with the same Conversion Date or Alternative Conversion Date; provided, however, that if such number of shares of Common Stock is not
a whole number, then such number will be rounded up to the nearest whole number.
Adjustments
to Conversion Rate in Connection with a Triggering Event
If
a Triggering Event occurs and the Conversion Date or Alternative Conversion Date, as applicable, for the conversion of any shares of
Series F Preferred Stock occurs during the related the period beginning on, and including, the date such Triggering Event occurs, then,
subject to the limitations described under “-Limitations on Conversion” below, the Conversion Rate or Alternative
Conversion Rate applicable to such conversion will be increased by a number of shares equal to the Triggering Event Additional Shares.
Additional
Conversion Rate Adjustments
The
Conversion Rate, as provided in the Series F Certificate of Designation, is subject to adjustment as a result of the following events:
| ● | our
distribution of a Common Stock dividend or distribution on all or substantially all shares
of our Common Stock, or our splitting or combining of shares of Common Stock; |
| ● | our
issuance to all or substantially all holders of our Common Stock of rights, Options or warrants
(other than rights issued or otherwise distributed pursuant to a stockholder rights plan),
entitling the holder, for a period of not more than 60 days after the record date of such
distribution, to purchase shares of our Common Stock at a price less than the average of
the Last Reported Sale Price per share for the 10 consecutive Trading Days ending on the
Trading Day immediately before such distribution is announced; |
| ● | our
distribution of Capital Stock, evidence of indebtedness or other assets or property of ours,
or other rights, Options or warrants to acquire Capital Stock or other securities of ours,
to all or substantially all holders of our common stock, subject to certain exceptions set
forth in the Series F Certificate of Designation; |
| ● | our
distribution or dividend of Capital Stock or a similar equity interest, which is listed or
quoted on a U.S. national securities exchange, as a result of the spinning off of a subsidiary,
affiliate or other business unit to all or substantially all holders of our Common Stock; |
| ● | our
distribution of cash dividends to all or substantially all holders of our common stock; or |
| ● | our
payment in respect of a tender or exchange offer for shares of our Common Stock and the value
(determined as of the time such tender offer expires by our board of directors) of the cash
and other consideration paid per share of Common Stock in such tender or exchange offer exceeds
the Last Reported Sale Price per share of Common Stock on the Trading Day immediately after
the last date on which tenders or exchanges may be made pursuant to such tender or exchange
offer. |
The
Conversion Consideration, as provided in the Preferred Shares, is also subject to adjustment as a result of the following events:
| ● | certain
recapitalizations, reclassifications or changes of our Common Stock; |
| ● | certain
consolidations, mergers, combinations or binding or statutory share exchanges involving us; |
| ● | the
sale, lease or other transfer of all or substantially all of our assets; or |
Limitations
on Conversion
No
party may convert any shares of Series F Preferred Stock or otherwise issue shares on account of such shares of Series F Preferred Stock
if, as a result of the conversion or issuance, a holder and its affiliates would beneficially own in excess of 4.99% of the shares of
our Common Stock. However, upon 61 days’ advance notice to us, a holder may increase the limit of beneficially owned shares of
our Common Stock from 4.99% to any amount up 9.99% of the shares of our Common Stock. In the event that the issuance of shares of Common
Stock to a holder upon conversion of, or otherwise on account, the shares of Series F Preferred Stock results in such holder and its
affiliates being deemed to beneficially own, in the aggregate, more than the maximum percentage described in the preceding sentence of
the number of outstanding shares of our Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so
issued by which the holder’s and its affiliates’ aggregate beneficial ownership exceeds such maximum percentage will be deemed
null and void and will be cancelled ab initio, and the holder will not have the power to vote or to transfer such excess shares.
Until
the Requisite Stockholder Approval is obtained, in no event will the sum of (A) the number of shares of Common Stock issuable upon conversion
or otherwise on account of the shares of Series F Preferred Stock, including (for the avoidance of doubt) any portion constituting a
payment of a Stated Dividend, plus (B) 3,656,098 shares exceed 5,392,757 shares in the aggregate. If any one or more shares
of Common Stock are not delivered as a result of the operation of the preceding sentence (such shares, the “Withheld Shares”),
then (1) on the date such shares of Common Stock are issuable hereunder (after giving effect to any limitations imposed under the immediately
preceding paragraph), we will pay to the holder, in addition to the Conversion Consideration otherwise due upon such conversion or shares
otherwise due to the holder under the Series F Certificate of Designation, cash in an amount equal to the product of (x) the number of
such Withheld Shares; and (y) the Daily VWAP per share of Common Stock on the applicable Stock Payment Determination Date; and (2) to
the extent the holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in settlement of a sale
by the holder of such Withheld Shares, we will reimburse the holder for (x) any brokerage commissions and other out-of-pocket expenses,
if any, of the holder incurred in connection with such purchases and (y) the excess, if any, of (A) the aggregate purchase price of such
purchases over (B) the product of (I) the number of such Withheld Shares purchased by the holder; and (II) the Daily VWAP per share of
Common Stock on the applicable Stock Payment Determination Date; provided, that to the extent that any such cash payment would be prohibited
by the Senior Indebtedness Agreement, such cash payment shall be paid on the first business day after the date such cash payment is no
longer prohibited.
Certain
Covenants
Financial
Covenants
The
Company will not, as of the last day of any fiscal quarter commencing with the fiscal quarter ending March 31, 2025, permit the Net Leverage
Ratio to be greater than 2.50 to 1.00.
The
Company will not permit, as of the last day of any fiscal quarter commencing with the fiscal quarter ending March 31, 2025, the Current
Ratio as of such date to be less than 1.00 to 1.00.
Limitation
on Indebtedness
The
Series F Certificate of Designation requires that we do not and do not permit any of our subsidiaries to:
| ● | create,
incur, assume, guarantee or be or remain liable with respect to any indebtedness, other than
Permitted Indebtedness; |
| ● | prepay
any indebtedness (other than in respect of Senior Indebtedness) except as permitted under
Section 9.04(b)(i)(A) through (D) of the Senior Indebtedness Agreement (in each case of such
sections of the Senior Indebtedness Agreement, as such sections are in effect as of the Issue
Date); provided that any such prepayment made pursuant to Section 9.04(b)(i)(D) shall be
subject to the section described in “Dividends; Cash Sweep Payments-Cash Sweep Payments”
above. |
| ● | amend
or modify the terms of any indebtedness (other than the Senior Indebtedness Agreement in
accordance with the definition thereof (as in effect on the Issue Date)); or |
| ● | incur
any indebtedness (other than the Senior Indebtedness in accordance with terms of the Senior
Indebtedness Agreement (as in effect on the Issue Date)) that would cause a breach or Triggering
Event under the Series F Certificate of Designation or prohibit or restrict the performance
of our obligations under the Series F Certificate of Designation, including without limitation,
the payment of dividends and redemption amounts in respect of the Series F Preferred Stock. |
We
will not (i) incur indebtedness under the Senior Indebtedness Agreement or under any agreement evidencing a Senior Indebtedness Permitted
Refinancing in a principal amount in excess of the Borrowing Base in existence under the Senior Indebtedness Agreement in effect on the
Issue Date, or (ii) amend the Senior Indebtedness Agreement or enter into any agreement evidencing a Senior Indebtedness Permitted Refinancing
in a manner that requires the payment of any prepayment premium, make-whole amount or other similar fee to repay all principal plus accrued
and unpaid interest obligations thereunder (other than, in respect of this clause (ii), customary breakage reimbursement fees substantially
similar to those set forth in the Senior Indebtedness Agreement in effect on the Issue Date), in each case, without the prior written
consent of the Required Holders.
“Permitted
Indebtedness” means (A) Senior Indebtedness; and (B) indebtedness permitted to be created, incurred, assumed, guaranteed or
to be or remain liable with respect to any indebtedness, in each case, under Section 9.02 of the Senior Indebtedness Agreement as in
effect on the Issue Date (other than with respect to Section 9.02(e), (g) and (m) thereof (in each case of such sections of the Senior
Indebtedness Agreement, as such sections are in effect as of the Issue Date)).
Limitation
on Liens
The
Series F Certificate of Designation requires that we will not, and will not permit our subsidiaries to, directly or indirectly, create,
incur, assume, permit or suffer to exist any lien of any kind on any asset owned as of the date of the Series F Certificate of Designation
or thereafter acquired, other than the following “Permitted Liens”:
| ● | liens
securing obligations permitted under clause (A) of the definition of Permitted Indebtedness
and (ii) liens actually disclosed pursuant to the Securities Purchase Agreement as in effect
as of the Issue Date; and |
| ● | liens
permitted to be created, incurred, assumed, permitted or suffered to exist, in each case,
under Section 9.03 of the Senior Indebtedness Agreement as in effect on the Issue Date (other
than with respect to Section 9.03(h) thereof (as in effect as of the Issue Date)). |
Limitation
on Investments
The
Series F Certificate of Designation requires that we do not directly or indirectly acquire or own, or make any investment in or to any
person, or permit any of our subsidiaries to do so, other than the following permitted investments (each, a “Permitted Investment”):
| ● | investments
actually disclosed pursuant to the Securities Purchase Agreement; and |
| ● | investments
permitted to be acquired, owned or made, in each case, under Section 9.05 of the Senior Indebtedness
Agreement as in effect on the Issue Date (other than with respect to investments permitted
pursuant to (w) Section 9.05(b)(iii), (x) Section 9.05(h), provided that the maximum amount
applicable thereto shall be an aggregate of $500,000, (y) Section 9.05(i), provided that
the maximum amount applicable thereto shall be $250,000) and (z) Section 9.05(l), provided
that the maximum amount applicable thereto shall be $500,000, in each case of such sections
of the Senior Indebtedness Agreement, as such sections are in effect as of the Issue Date);
provided that any such investments made pursuant to Section 9.05(g) thereof shall be subject
to the section described in “Dividends; Cash Sweep Payments-Cash Sweep Payments”
above. |
In
addition, the Series F Certificate of Designation will not permit us to make any investment (including a Permitted Investment), or to
permit any of our subsidiaries to make any investment (including a Permitted Investment) if (i) any Triggering Event has occurred under
the Series F Certificate of Designation and has not been waived by the Required Holders, or (ii) any event or circumstance has occurred
and is continuing which, with the giving of notice or passage of time or both, could constitute a Triggering Event with respect to the
second, fourth, sixth, ninth, tenth or eleventh bullet points of the definition thereof.
Limitation
on Distributions
The
Series F Certificate of Designation requires that we do not, and do not permit any subsidiary to:
| ● | repurchase
or redeem any class of stock or other Equity Interest other than pursuant to (i) the Series
F Certificate of Designation or (ii) employee, director or consultant repurchase plans or
similar agreements provided under plans approved by our board of directors, provided, however,
in each case of the foregoing clause (ii), the repurchase or redemption price does not exceed
the original consideration paid for such stock or Equity Interest; |
| ● | declare
or pay any cash dividend or make a cash distribution on any class of stock or other Equity
Interest, other than pursuant to (i) the Series F Certificate of Designation or (ii) the
declaration or payment of dividends or distributions permitted to be made under Section 9.04(a)
of the Senior Indebtedness Agreement (as in effect on the Issue Date); provided that (x)
no such declaration or payment shall be made until all accrued and unpaid dividends owing
on the Series F Preferred Stock have been paid, (y) no such declarations or payments shall
be made unless all dividends paid on the Series F Preferred Stock on each of the two preceding
Dividend Payment Dates were paid in cash and (z) any such declaration or payment shall be
subject to the section described in “Dividends; Cash Sweep Payments-Cash Sweep Payments”
above; or |
| ● | lend
money to any employees, officers or directors (except as permitted under the definition of
Permitted Investment), or guarantee the payment of any such loans granted by a third party
in each case, other than as permitted under Section 9.05(i) of the Senior Indebtedness Agreement
(as in effect on the Issue Date), provided that the maximum amount applicable thereto shall
be $250,000. |
If
there are dividends or distributions made by us or any subsidiary (other than a subsidiary of ours paying dividends or making distributions
to us or a parent company that is a direct or indirect wholly owned subsidiary of us), within one business day following the date on
which we file an Annual Report on Form 10-K or Quarterly Report on Form 10-Q with the SEC, we will provide the holder with a written
notice setting forth the aggregate amount of dividends or distributions made by us or any subsidiary pursuant to the distributions covenant
for the period covered by such Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable.
Notwithstanding
the foregoing, we will not be permitted to, nor allow any of our subsidiaries to, declare or pay any cash dividend or make a cash distribution
on any class of stock or other Equity Interest (other than pursuant to the Series F Certificate of Designation) if (A) any Triggering
Event has occurred and has not been waived by the Required Holders or (B) any event or circumstance has occurred and is continuing which,
with the giving of notice or passage of time or both, could constitute a Triggering Event with respect to the second, fourth, eighth,
sixth, ninth, tenth or eleventh bullet points of the definition thereof, other than a subsidiary of our paying dividends or making distributions
to us or a parent company that is a direct or indirect wholly owned subsidiary of us.
Limitation
on Transfers
The
Series F Certificate of Designation requires that we do not, nor permit our subsidiaries to, voluntarily or involuntarily, transfer,
sell, lease, license, lend or in any other manner convey any equitable, beneficial or legal interest in any material portion of our and
our subsidiaries’ assets (taken as a whole), other than Permitted Transfers and Permitted Investments.
“Permitted
Transfers” means transfers, sales, leases, licenses, lending or other conveyances, in each case, permitted under Section 9.12
of the Senior Indebtedness Agreement as in effect on the Issue Date (other than with respect to such transactions permitted pursuant
to Section 9.12(d), (e) and (l) and clause (i) of the last paragraph thereto (in each case of such sections of the Senior Indebtedness
Agreement, as such sections are in effect as of the Issue Date), in an aggregate amount in excess of $5,000,000).
Limitation
on Transactions with Affiliates
The
Preferred Shares require that we and our subsidiaries do not enter into, renew, extend, or be a party to, any transaction or series of
related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind
or the rendering of services of any kind) with any affiliate (other than us or any of our wholly owned subsidiaries), except transactions
(i) that are disclosed pursuant to the Securities Purchase Agreement, or (ii) as permitted to be entered into, renewed, extended or to
be a party to pursuant to Section 9.14 of the Senior Indebtedness Agreement as in effect on the Issue Date (other than pursuant to Section
9.14(c), (d) and (f) (in each case of such sections of the Senior Indebtedness Agreement, as such sections are in effect as of the Issue
Date)).
Executive
Compensation
We
will maintain an independent compensation committee comprised entirely of independent directors and who will retain the services of a
reputable third-party compensation consultant for the purposes of informing themselves regarding compensation practices among our peer
group companies and of the market generally. We have agreed that once the 2025 Planned Compensation Adjustments are made and for so long
as any shares of Series F Preferred Stock are outstanding, neither we, nor any of our subsidiaries, will increase the total annual cash
compensation of any executive officer or director of us or our subsidiaries by more than 5% on an annual basis, unless the Daily VWAP
on each of the 20 consecutive VWAP Trading Days ending on and including the VWAP Trading Day immediately prior to the date of such annual
increase in total annual compensation exceeds 150% of the Conversion Price. We will be permitted to (i) issue equity compensation in
the form of restricted stock units (“RSU’s”) and performance stock units (“PSU’s”) to executives
officers and directors as approved by the compensation committee; provided, that (A) all such PSU’s issued to executive officers
will be subject to the achievement of the company’s Key Performance Indicators that are established by the compensation committee
annually (the “KPIs”), and all such current and new RSU’s and PSU’s awarded to executive officers will be subject
to the lockup agreements entered into by such executive officers, (ii) issue stock options to executive officers pursuant to our equity
incentive plan; provided that such stock options will not have a strike prices less than the value of a share of Common Stock implied
by the Conversion Price, and (iii) enter into compensation arrangements with newly hired executive officers or newly elected or appointed
directors to the extent approved by the board of directors; provided, that, following the establishment of such newly hired executive
officer’s or newly elected or appointed director’s compensation in connection with their initial retention, any changes to
the compensation of such newly hired executive officer or newly elected or appointed director will be subject to the terms of this section,
and each such newly hired executive officer or newly elected or appointed director will execute a lock up agreement substantially in
the form of the lock-up agreements entered into in connection with this offering. Following the occurrence of a Triggering Event until
the date that no shares of Series F Preferred Stock are outstanding, base salary (without any increase) shall be the only cash compensation
of such executive officers and directors of the Company, and we will not issue Capital Stock of the Company (including, for the avoidance
of doubt, RSU’s or PSU’s) to such executive officers or directors. The term “2025 Planned Compensation Adjustments”
means adjustments and changes to the compensation of our executive officers as set forth in the written compensation report provided
to the Purchaser prior to the date of the Series F Certificate of Designation; provided that any RSUs or PSUs granted as part of such
2025 Planned Compensation Adjustments are subject to the lockup agreements entered into in connection with this offering.
Limitation
on Issuances
The
Preferred Shares require that neither we nor our subsidiaries, directly or indirectly, without the prior written consent of the Required
Holders, (i) issue any shares of Series F Preferred Stock (other than as contemplated by the Securities Purchase Agreement or the Series
F Certificate of Designation) or (ii) issue any other securities or incur any indebtedness, in each case, that would cause a breach or
Trigger under the Series F Certificate of Designation, or that by its terms would prohibit or restrict the performance of any of our
or our subsidiaries’ obligations under the Series F Certificate of Designation including, without limitation, the payment of dividends
and redemption amounts in respect of the Series F Preferred Stock.
Required
Funding Programs
We
are required to (i) at all times from and after September 1, 2025 have an agreement providing for an “at-the-market” offering
within the meaning of Rule 415(a)(4) of the Securities Act (an “ATM Sales Agreement”) in place pursuant to which the Company
may issue and sell shares of Common Stock from time to time and (ii) ensure that the aggregate amount of Common Stock that is available
to be issued and sold under the ATM Sales Agreement at all times equals or exceeds $25,000,000.
Merger,
Consolidation and Sale of Assets
We
will not consolidate with or merge with or into, or (directly, or indirectly through one or more of our subsidiaries) sell, lease or
otherwise transfer, in one transaction or a series of transactions, all or substantially all of our and our subsidiaries’ assets,
taken as a whole, to another person, other than a holder of a Note or any of its affiliates (a “Business Combination Event”),
unless:
| ● | the
resulting, surviving or transferee person either (x) is us or (y) if not us, is a corporation
(the “Successor Corporation”) duly organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia that expressly assumes
(by executing and delivering to the holders, at or before the effective time of such Business
Combination Event, a supplement to the Preferred Shares) all of the our obligations under
the Series F Certificate of Designation (including, without limitation, by way of incorporating
the terms thereunder into the organizational documents of such Successor Corporation); and |
| ● | immediately
after giving effect to such Business Combination Event, no Triggering Event will have occurred
that has not been waived and no Trigger will have occurred and be continuing which has not
been waived. |
Other
Covenants
We
are also required, among other covenants, to:
| ● | maintain
our corporate existence and our rights, licenses and franchises, as well as the rights, licenses
and franchises of our subsidiaries; |
| ● | file
all income and other material tax returns and reports required to have been filed (taking
into account ordinary course extensions) and pay prior to delinquency all income and other
material taxes, fees or other related charges of any nature whatsoever, subject to certain
exceptions, and cause our subsidiaries to do the same; |
| ● | not,
and cause each of our subsidiaries to not, directly or indirectly, allow any material change
to be made in the character of its business as an independent oil and gas exploration and
production company; |
| ● | not
modify, and not allow our subsidiaries to modify, our or their corporate structure or purpose; |
| ● | maintain
and preserve all of our properties which are necessary or useful in the proper conduct of
our business in good working order and condition, and comply in all material respects with
the provisions of all leases to which we or our subsidiaries are a party as lessee or under
which we or our subsidiaries occupy property, so as to prevent any loss or forfeiture thereof
or thereunder, and cause our subsidiaries to do the same; |
| ● | take
all action necessary or advisable to maintain and preserve all of our intellectual property
rights that are necessary or material to the conduct of our business in full force and effect
and cause our subsidiaries to do the same; |
| ● | maintain
insurance with responsible and reputable insurance companies or associations with respect
to our properties and business in such amounts covering such risks as is required by any
governmental agency having jurisdiction over us or as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar locations; |
| ● | make
certain regulatory filings required under applicable antitrust laws at the request of the
holder and to the extent required in connection with the exercise of any of the holder’s
rights with respect to the Series F Preferred Stock or the Warrants; |
| ● | on
a monthly basis, and immediately in the event certain Triggering Events occur, we will be
required to deliver compliance certifications to the holders of the Series F Preferred Stock
certifying as to our satisfaction of certain specified covenants for the period since the
previously submitted compliance certificate; |
| ● | provide
the holder with certain information rights and reimburse the holder for certain documented
out of pocket expenses |
| ● | so
long as any shares of Series F Preferred Stock remain outstanding, at all times have no less than a number of shares of authorized
but unissued Common Stock reserved for any issuance equal to the greater of an amount equal to the product of 350,000,000 multiplied
by a fraction, the numerator of which is the aggregate number of shares of Series F Preferred Stock outstanding as of such
date and the denominator of which is the number of shares of Series F Preferred Stock issued pursuant to the Purchase Agreement,
(ii) 200% of a fraction, the numerator of which shall be the aggregate Stated Value with respect to all outstanding shares of Series
F Preferred Stock as of such date, plus all remaining unpaid dividends payable on the Series F Preferred Stock through
and including the date that is six months after the maturity date of the Senior Indebtedness Agreement, plus the
maximum number of shares of Common Stock exercisable pursuant to the Warrants, and the denominator of which shall be the Triggering
Event Conversion Price and (iii) 100% of a fraction, the numerator of which shall be the aggregate Stated Value with respect to all
outstanding shares of Series F Preferred Stock as of such date, plus all remaining unpaid dividends payable on the
Series F Preferred Stock through and including the date that is six months after the maturity date of the Senior Indebtedness
Agreement, plus the maximum number of shares of Common Stock exercisable pursuant to the Warrants, and the denominator
of which shall be the Conversion Price. |
Triggering
Events
A
“Trigger” means any event that is (or, after notice, passage of time or both, would be) a Triggering Event.
A
“Triggering Event” means the occurrence of any of the following:
| ● | any
failure to pay in full when due any cash payment required pursuant to the Series F Certificate
of Designation, including, without limitation, any Alternative Conversion Cash Payment, Cash
Sweep Payment, Company Redemption Price, Additional Payment, or Fundamental Change Redemption
Price; |
| ● | any
failure for two business days in the payment when due of any dividends on the Series F Preferred
Stock (to the extent not accrued pursuant to the terms of the Series F Certificate of Designation); |
| ● | any
failure in the execution of our obligation to issue shares pursuant to the Series F Certificate
of Designation in accordance with the covenants described above under “-Method of
Payment” or “-Conversion Rights”; |
| ● | any
failure in the execution of our obligation to timely deliver a written notice of a Fundamental
Change pursuant to the applicable section of the Series F Certificate of Designation,
Cash Sweep Certification in accordance with the requirements described in “Dividends;
Cash Sweep Payments-Cash Sweep Payments” above, or compliance certification required
by the Series F Certificate of Designation and such failure continues for three business
days, or the delivery of a materially false or inaccurate written notice of a Fundamental
Change, Cash Sweep Certification, notice of a Company Redemption or compliance certification
required by the Series F Certificate of Designation; |
| ● | any
failure to timely deliver written notice of a Triggering Event or any delivery of a materially
false or inaccurate certification (including a false or inaccurate deemed certification)
by us (A) that the Equity Conditions or Company Redemption Equity Conditions, as applicable,
are satisfied or (B) as to whether any Triggering Event has occurred; |
| ● | certain
failures in the execution of our obligations or agreements under the Series F Certificate
of Designation or the other transaction documents related to the Preferred Shares, or a breach
of any representation or warranty in any material respect (other than representations or
warranties subject to material adverse effect or materiality, which may not be breached in
any respect) of any transaction document as of the date when made (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specific date); provided, however, that if such failure or breach can be cured, then such
failure or breach will not be a Triggering Event unless we have failed to cure such failure
or breach within 10 days after its occurrence; |
| ● | any
provision of any transaction document related to the Preferred Shares at any time for any
reason (other than pursuant to the express terms thereof) ceases to be valid and binding
on or enforceable against the parties thereto, or the validity or enforceability thereof
is contested, directly or indirectly, by us or any of our subsidiaries, or a proceeding is
commenced by us or any of our subsidiaries or any governmental authority having jurisdiction
over any of them, seeking to establish the invalidity or unenforceability thereof; |
| ● | we
fail to comply with certain specified covenants; |
| ● | the
suspension from trading or failure of our Common Stock to be trading or listed on our primary
Eligible Exchange (measured in terms of trading volume for our Common Stock) on which our
Common Stock is traded for a period of three consecutive Trading Days; |
| ● | (i)
our failure or the failure of any of our subsidiaries to pay when due or within any applicable
grace period any of our or such subsidiary’s indebtedness having an individual principal
amount in excess of at least $1,000,000 (or its foreign currency equivalent) in the aggregate;
(ii) the occurrence of any breach or default under any terms or provisions of any of our
or any of our subsidiaries’ other indebtedness of at least $1,000,000 (or its foreign
currency equivalent) in the aggregate, if the effect of such failure or occurrence is to
cause or to permit the holder or holders of any such indebtedness, to cause, indebtedness
having an individual principal amount in excess of $1,000,000 to become or be declared due
prior to its stated maturity (whether or not such breach or default has been waived by the
holders of such indebtedness or otherwise cured) we effect any amendment, amendment and restatement
or other modification to the Senior Indebtedness Agreement or effect any refinancing, refunding,
renewal or extension of the Senior Indebtedness that has, in the reasonable determination
of the holder, an adverse effect on such holder; |
| ● | one
or more final judgments, orders or awards (or any settlement of any litigation or other proceeding
that, if breached, could result in a judgment, order or award) for the payment of at least
$1,000,000 (or its foreign currency equivalent) in the aggregate (excluding any amounts covered
by insurance pursuant to which the insurer has been notified and has not denied coverage),
is rendered against us or the subsidiaries and remains unsatisfied and (i) enforcement proceedings
shall have been commenced by any creditor upon any such judgment, order, award or settlement
or (ii) there shall be a period of 10 consecutive days after entry thereof during which (A)
a stay of enforcement thereof is not in effect or (B) the same is not vacated, discharged,
stayed or bonded pending appeal; |
| ● | (A)
we fail to timely file our quarterly reports on Form 10-Q or its annual reports on Form 10-K
with the SEC in the manner and within the time periods required by the Exchange Act, (B)
we withdraw or restate any such quarterly report or annual report previously filed with the
SEC or (C) we at any time cease to satisfy the eligibility requirements set forth under Section
I.A of the General Instructions to Form S-3; |
| ● | at
any time any shares of our Common Stock issuable pursuant to the Series F Certificate of
Designation are not Freely Tradable; |
| ● | we
or any of our significant subsidiaries, pursuant to or within the meaning of any Bankruptcy
Law, either: |
| ○ | commences
a voluntary case or proceeding; |
| ○ | consents
to the entry of an order for relief against us or it in an involuntary case or proceeding; |
| ○ | consents
to the appointment of a custodian of us or it or for any substantial part of our or its property; |
| ○ | makes
a general assignment for the benefit of our creditors; |
| ○ | takes
any comparable action under any foreign Bankruptcy Law; or |
| ○ | generally
is not paying its debts as they become due; |
| ● | a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that either: |
| ○ | is
for relief against us or any of our significant subsidiaries in an involuntary case or proceeding; |
| ○ | appoints
a custodian of us or any of our significant subsidiaries, or for any substantial part of
our property or any of our significant subsidiaries; |
| ○ | orders
the winding up or liquidation of us or any of our significant subsidiaries; or |
| ○ | grants
any similar relief with respect to us or any of its Significant Subsidiaries under any foreign
Bankruptcy Law; or |
| ● | our
stockholders approve any plan for our liquidation or dissolution. |
Trigger
Dividends
If
a Trigger or a Triggering Event occurs, then in each case, each holder of Series F Preferred Stock will be entitled to receive, on a
cumulative basis, whether or not authorized or declared and whether or not we have assets legally available therefor, dividends (in addition
to the Stated Dividends) on each share of Series F Preferred Stock (the “Trigger Dividend”) at a rate per annum equal to
22% less the then current Stated Dividend Rate on the amount equal to the sum of (a) the Stated Value plus
(b) all accrued and unpaid dividends on such share of Series F Preferred Stock (including dividends accrued and unpaid on
previously unpaid dividends, but excluding any dividends accruing and not yet due). Such Trigger Dividends will automatically accrue
daily and compound quarterly from, and including, the date of such Trigger or Triggering Event, as applicable, to, but excluding, the
date such Trigger is cured and all outstanding Trigger Dividends have been paid. Trigger Dividends will be computed on the basis of a
360-day year comprised of twelve 30-day months and will be payable in arrears on the earlier of (i) the first day of each calendar month,
(ii) the date such Trigger is cured, and (iii) the date on which any shares of Series F Preferred Stock on which such Trigger Dividends
have accrued (including dividends accrued and unpaid on previously unpaid dividends thereon) are redeemed, converted or otherwise retired
(including, without limitation, a Conversion Settlement Date, Company Redemption Date, Fundamental Change Redemption Date, or any date
that a Cash Sweep Payment is paid by the Company to the holder).
Senior
Credit Step-In Rights
If
at any time following the Issue Date, the trading price of a share of Common Stock on the principal U.S. national or regional securities
exchange on which the Common Stock is then listed is below (x) $2.00 at any time during a Trading Day for three consecutive Trading Days
or (y) $1.50 at any time during a Trading Day, then from and after such time, the holder (or any affiliate of the holder to which the
holder has assigned its rights under this section) will have the right to make a loan to us secured by all assets of the Company and
in an amount necessary to, and to require us to use the proceeds thereof to, effect Payment in Full (as defined in the Senior Indebtedness
Agreement or any equivalent term set forth in any agreement evidencing Senior Indebtedness Permitted Refinancing) (including, in respect
of any Letters of Credit, Secured Swap Agreements and Bank Products (each, as defined in the Senior Indebtedness Agreement as in effect
on the Issue Date) then extant, cash collateralizing or otherwise entering into arrangements satisfactory to the applicable parties in
accordance with the Senior Indebtedness Agreement as in effect on the Issue Date), with the documentation for such secured loan being
substantially in the form of the Senior Indebtedness Agreement and the applicable Loan Documents (as defined in the Senior Indebtedness
Agreement), in each case, as in effect on the Issue Date (other than removing any letter of credit facility therefrom) (collectively,
the “Mirror Credit Facility”). Concurrently with the closing of such Mirror Credit Facility and the making of such secured
loan by holder to us or at any time thereafter (at the option of the Holder), we agree to (A) amend the Mirror Credit Facility so that
the lien on the Collateral (as defined in the Mirror Credit Facility) pursuant to the Mirror Credit Facility shall also secure, on a
pari passu basis, our payment obligations under the Series F Certificate of Designation, (B) enter into a new senior secured credit agreement
or any other agreement evidencing indebtedness with the holder (including, without limitation, by exchange of the Series F Preferred
Stock for senior secured convertible notes at the holder’s option), the terms of which shall be substantially similar to the terms
of the Series F Preferred Stock, and use the proceeds paid by the holder thereunder to redeem the shares of Series F Preferred Stock
or (C) any combination of the foregoing clauses (A) and (B).
Special
Meeting of Stockholders and Voting Agreement
The
terms of the Series F Preferred Stock provide that we will not issues shares of our Common Stock upon conversion of the Series F Preferred
Stock to the extent that such issuance would require prior stockholder approval in accordance with Nasdaq rules, unless such stockholder
approval has been obtained. We have agreed to seek to obtain stockholder approval for the issuance of our shares of Common Stock upon
conversion of the Series F Preferred Stock and upon exercise of the Warrants, if issued, as soon as reasonably practicable (and not later
than 45 days if the SEC does not review and provide written comments on the proxy statement or 60 days if the SEC does review and provide
written comments on the proxy statement) following the date of the Purchase Agreement. Holders of our Common Stock owning more than 50%
of our issued and outstanding shares of Common Stock have entered into and delivered voting agreements pursuant to which such holders
have agreed to vote their shares of Common Stock in favor of such matters.
Certain
Definitions
“Absolute
Floor Price” means $1.15 per share.
“Alternative
Conversion Cap” means, for any calendar quarter, and subject to increase by any rollover from the prior calendar quarters pursuant
to Section 7(D)(iii) of the Series F Certificate of Designation, the greater of (i) 10% of the aggregate dollar trading volume (as reported
by Bloomberg function “PROP <US EQUITY> HP” (or its equivalent successor ticker)) of the Common Stock in a given calendar
quarter, beginning with the calendar quarter ending June 30, 2025, and (ii) $20,000,000.
“Alternative
Conversion Cash Payment Amount” means, for any Alternative Conversion Cash Payment, an amount in cash equal to the result
(rounded up to the nearest second decimal place) of (i) (a) 112.5% multiplied by (b) the Repayment Multiplier multiplied
by (c) the Stated Value of the shares of Series F Preferred Stock subject to the Alternative Conversion Cash Payment plus
(ii) the accrued and unpaid dividends on such shares of Series F Preferred Stock.
“Alternative
Conversion Date” means the first business day on which the requirements set forth in Section 7(D)(i) of the Series F Certificate
of Designation to convert shares of Series F Preferred Stock are satisfied.
“Bankruptcy
Law” means Title 11, United States Code, or any similar U.S. federal or state or non-U.S. law for the relief of debtors.
“Capital
Stock” of any person means any and all shares of, interests in, rights to purchase, warrants or options for, participations
in, or other equivalents of, in each case however designated, the equity of such person, but excluding any debt securities convertible
into such equity.
“Cash
Sweep Amount” means, (a) with respect to any Cash Sweep Financing, 25% of the net proceeds from such financing and (b) with
respect to any DFCF Action, 25% of the amount of such dividend, distribution, prepayment or investment, as applicable.
“Company
Redemption Equity Conditions” will be deemed to be satisfied as of any date if all of the following conditions are satisfied:
as of such date and on each of the 20 previous Trading Days: (A) the shares issuable pursuant to the Series F Certificate of Designation
are Freely Tradable; (B) the holder is not in possession of any material non-public information; (C) such shares will be newly issued
or treasury shares and will be duly and validly issued, fully paid, non-assessable, free from preemptive rights and free of any lien
or adverse claim, and will satisfy certain conditions set forth in the Series F Certificate of Designation; (D) the Company is not in
possession of any material non-public information and neither the Company, nor any director, executive officer or employee of the Company,
is otherwise restricted from trading the Company’s Capital Stock pursuant to the Company’s insider trading policy or other
corporate governance policies; and (E) no pending, proposed or intended Fundamental Change has occurred that has not been abandoned,
terminated or consummated.
“Conversion
Date” means the first business day on which the requirements set forth in Section 7(C)(i) of the Series F Certificate of Designation
to convert shares of Series F Preferred Stock are satisfied.
“Conversion
Settlement Date” means the first business day (or, if earlier, the standard settlement period for the primary Eligible Exchange
(measured in terms of trading volume for its Common Stock) on which the Common Stock is traded) immediately after the Conversion Date
or Alternative Conversion Date for such conversion.
“Convertible
Securities” means any Capital Stock or other security (other than Options) that is at any time and under any circumstances,
directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire,
any shares of Common Stock.
“Current
Ratio” has the meaning set forth in, and shall be calculated in all respects (including with respect to when such calculations
shall be made for any given fiscal quarter) in accordance with, the Senior Indebtedness Agreement as in effect as of the Issue Date;
provided that no curative actions taken in accordance with Section 9.01(c) of the Senior Indebtedness Agreement (as in effect as of the
Issue Date) shall be taken into account when calculating Current Ratio under the Series F Certificate of Designation.
“Daily
VWAP” means, for any VWAP Trading Day, the per share volume-weighted average price of the Common Stock on The Nasdaq Capital
Market (or the principal, in terms of volume, Eligible Exchange on which the Common Stock is listed for trading) as displayed under the
heading “Bloomberg VWAP” on Bloomberg page “PROP <EQUITY> VAP” (or, if such page is not available, its
equivalent successor page) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary
trading session on such VWAP Trading Day (or, if such volume-weighted average price is unavailable, the market value of one share of
Common Stock on such VWAP Trading Day, determined, using a volume-weighted average price method, by a nationally recognized independent
investment banking firm selected by the Company). The Daily VWAP will be determined without regard to after-hours trading or any other
trading outside of the regular trading session.
“Eligible
Exchange” means any of The New York Stock Exchange, The NYSE American LLC, The Nasdaq Stock Market, The Nasdaq Capital Market,
The Nasdaq Global Market or The Nasdaq Global Select Market (or any of their respective successors).
“Equity
Conditions” will be deemed to be satisfied as of any date if all of the following conditions are satisfied: as of such date
and on each of the 20 previous Trading Days: (A) the shares issuable pursuant to the Series F Certificate of Designation are Freely Tradable;
(B) the holder is not in possession of any material non-public information concerning the Company; (C) the issuance of such shares will
not be limited as provided under the second paragraph under “-Limitations on Conversion”; (D) such shares will be
newly issued or treasury shares and will be duly and validly issued, fully paid, non-assessable, free from preemptive rights and free
of any lien or adverse claim, and will satisfy certain conditions set forth in the Series F Certificate of Designation; (E) no pending,
proposed or intended Fundamental Change has occurred that has not been abandoned, terminated or consummated; (F) the Daily VWAP per share
of the Common Stock on The Nasdaq Capital Market is not less than $1.00 (subject to proportionate adjustments for certain stock dividends
or distributions, splits and combinations); (G) the daily dollar trading volume (as reported on Bloomberg) of our common stock on The
Nasdaq Capital Market is not less than $500,000; (H) no delisting or suspension by the principal, in terms of volume, Eligible Exchange
on which the Company is then listed or traded has been threatened (with a reasonable prospect of delisting or suspension occurring after
giving effect to all applicable notice, appeal, compliance and hearing periods) or is reasonably likely to occur or pending as evidenced
by (x) a writing by such Eligible Exchange or (y) the Company falling below the minimum listing maintenance requirements, if applicable,
of such Eligible Exchange; (I) no Triggering Event will have occurred that has not been waived and no Trigger will have occurred and
be continuing which has not been waived and (J) the Market Stock Payment Price is equal to or greater than the Absolute Floor Price.
“Equity
Interest” shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including
preferred stock or membership interests (however designated, whether voting or non-voting), of equity of such person, including, if such
person is a partnership, partnership interests (whether general or limited) and including, without limitation, any “equity security”
(as that term is defined under Rule 405 promulgated under the Securities Act), and any other interest or participation that confers on
a person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.
“Equity
Issuance” shall mean (a) any issuance or sale by the Company or any of its subsidiaries of any Equity Interests (including
any Equity Interests issued upon exercise or conversion of any Equity Rights and the issuance of any Equity Interests pursuant to any
“at-the-market” offering (within the meaning of Rule 415(a)(4) of the Securities Act) or equity line of credit or any Equity
Rights, or (b) the receipt by the Company or any of its subsidiaries of any capital contribution (whether or not evidenced by any Equity
Interest issued by the recipient of such contribution), in each case for bona fide capital-raising purposes and other than (i) any issuance
of Equity Interests upon the exercise of any Equity Rights outstanding as of the date of the Series F Certificate of Designation provided,
that such issuance is made pursuant to the terms of such Equity Rights in effect on the date of the Series F Certificate of Designation
and such Equity Rights are not amended to increase the number of such Equity Interests or to decrease the exercise price, exchange price
or conversion price of Equity Rights, (ii) Equity Interests issuable pursuant to an Approved Stock Plan (as defined in the Purchase Agreement)
or upon the exercise of any Equity Rights or upon the lapse of forfeiture restrictions on awards made pursuant to an Approved Stock Plan
(including Equity Interests withheld by the Company for the purpose of paying on behalf of the holder thereof the exercise price of Options
or for paying taxes due as a result of such exercise or lapse of forfeiture restrictions) or (iii) Common Stock issuable upon the exercise
of Options or upon the lapse of forfeiture restrictions on awards made pursuant to, any stock option exchange program of the Company
that is approved by the Company’s board of directors or the compensation committee thereof or the Company’s stockholders,
whether now in effect or hereafter implemented.
“Equity
Rights” shall mean, with respect to any person, any then-outstanding subscriptions, Options, warrants, commitments, preemptive
rights, convertible debt, or other equity-linked securities or agreements of any kind for the issuance or sale, of any additional Equity
Interests of any class, or partnership or other ownership interests of any type in, such person.
“Freely
Tradable” means, with respect to any shares of Common Stock issued or issuable pursuant to the Series F Certification of Designation,
that (A) such shares are (or when issued, will be) issued by us pursuant to an effective registration statement and would not constitute
“restricted securities” within the meaning of Rule 144, or would be eligible to be offered, sold or otherwise transferred
by the holder pursuant to Rule 144, without any requirements as to volume, manner of sale, availability of current public information
(whether or not satisfied) or notice under the Securities Act and without any requirement for registration under any state securities
or “blue sky” laws; (B) such shares are (or, when issued, will be) (i) represented by book-entries at DTC and identified
therein by an “unrestricted” CUSIP number; (ii) not represented by any certificate that bears a legend referring to transfer
restrictions under the Securities Act or other securities laws; and (iii) listed and admitted for trading, without suspension or material
limitation on trading, on an Eligible Exchange; and (C) no delisting or suspension by such Eligible Exchange is pending or has been threatened
(with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods)
or reasonably likely to occur or pending as evidenced by (x) a writing by such Eligible Exchange or (y) the Company falling below the
minimum listing maintenance requirements of such Eligible Exchange.
“Issue
Date” means the Closing Date.
“Junior
Securities” means the Common Stock and all other Convertible Securities of the Company other than those securities which are
explicitly senior to or pari passu with the Series F Preferred Stock in dividend rights or liquidation preference.
“Last
Reported Sale Price” of the shares of our common stock for any Trading Day means the closing sale price per share (or, if no
closing sale price is reported, the average of the last bid price and the last ask price per share or, if more than one in either case,
the average of the average last bid prices and the average last ask prices per share) of our common stock on such Trading Day as reported
in composite transactions for the principal U.S. national or regional securities exchange on which the shares of common stock are then
listed. If our common stock is not listed on a U.S. national or regional securities exchange on such Trading Day, then the Last Reported
Sale Price will be the last quoted bid price per share of our common stock on such Trading Day in the over-the-counter market as reported
by OTC Markets Group Inc. or a similar organization. If our common stock is not so quoted on such Trading Day, then the Last Reported
Sale Price will be the average of the mid-point of the last bid price and the last ask price per share of our common stock on such Trading
Day from a nationally recognized independent investment banking firm selected by us.
“Market
Disruption Event” means, with respect to any date, the occurrence or existence, during the one-half hour period ending at the
scheduled close of trading on such date on the principal, in terms of volume, Eligible Exchange on which our common stock is listed for
trading or trades, of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted
by the relevant exchange or otherwise) in our common stock or in any options contracts or futures contracts relating to our common stock.
“Market
Stock Payment Price” means, with respect to any Dividend Payment Date or Alternative Conversion Date, as applicable, an amount
equal to 87.5% of the lesser of (a) the Daily VWAP on the VWAP Trading Day immediately prior to such Dividend Payment Date or Alternative
Conversion Date, as applicable, and (b) the average of the two lowest Daily VWAPs during the five VWAP Trading Day period ending on and
including the VWAP Trading Day immediately prior to such Dividend Payment Date or Alternative Conversion Date, as applicable (the lesser
of clauses (a) and (b), the “Stock Price”); provided, however, that with respect to any Stated Dividend paid in shares of
Common Stock on or after the twelve month anniversary of the Issue Date, if the Stock Price for such Dividend Payment Date is less than
115% of the Conversion Price, the Market Stock Payment Price for such Dividend Payment Date shall be equal to 81% of the Stock Price.
“Net
Leverage Ratio” has the meaning set forth in, and shall be calculated in all respects (including with respect to when such
calculations shall be made for any given fiscal quarter) in accordance with, the Senior Indebtedness Agreement as in effect as of the
Issue Date; provided that no curative actions taken in accordance with Section 9.01(c) of the Senior Indebtedness Agreement (as in effect
as of the Issue Date) shall be taken into account when calculating Net Leverage Ratio under the Series F Certificate of Designation.
“Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
“Permitted
Intellectual Property Licenses” means (A) intellectual property licenses actually disclosed pursuant to the Purchase Agreement
as in effect on the Issue Date and (B) non-perpetual intellectual property licenses granted in the ordinary course of business on arm’s
length terms consisting of the licensing of technology, the development of technology or the providing of technical support which may
include licenses with unlimited renewal options solely to the extent such options require mutual consent for renewal or are subject to
financial or other conditions as to the ability of licensee to perform under the license; provided such license was not entered into
during a Triggering Event.
“Repayment
Multiplier” means, as of any date, an amount equal to 106.25% plus 6.25% on each one year anniversary of the Issue Date. For
example, on and after the one-year anniversary of the Issue Date but before the two-year anniversary of the Issue Date, the Repayment
Multiplier will be equal to 112.5%.
“Required
Holders” means (I) prior to the Closing Date, each Purchaser entitled to purchase Series F Purchased Preferred Stock at the
closing of this offering, and (II) on or after the Closing Date, holders of a majority of the Underlying Shares in the aggregate as of
such time issued or issuable under the Purchase Agreement or pursuant to the Preferred Shares or Warrants, as applicable; provided that
such majority must include the Purchaser, so long as the Purchaser or any of its affiliates hold any Preferred Shares or Warrants.
“Requisite
Stockholder Approval” means the stockholder approval contemplated by Nasdaq Listing Rule 5635(d) (or similar rule of the principal,
in terms of volume, Eligible Exchange on which the Common Stock is listed for trading) with respect to the issuance of shares of Common
Stock upon conversion of the shares of Series F Preferred Stock and exercise of the Warrants in excess of the limitations imposed by
such rule; provided, however, that the Requisite Stockholder Approval will be deemed to be obtained if, due to any amendment or binding
change in the interpretation of the applicable listing standards of the Nasdaq Capital Market (or of the principal, in terms of volume,
Eligible Exchange on which the Common Stock is listed for trading), such stockholder approval is no longer required for the Company to
settle all conversions of Series F Preferred Stock by delivering shares of Common Stock without limitation pursuant to the Series F Certificate
of Designation.
“Senior
Indebtedness” means indebtedness incurred pursuant to the Senior Indebtedness Agreement, together with any Senior Indebtedness
Permitted Refinancing.
“Senior
Indebtedness Agreement” means the Company’s Amended and Restated Credit Agreement with Citibank, N.A. as administrative
agent and the lenders thereto, as such agreement may be amended, amended and restated, or otherwise modified; provided such amendment,
amendment and restatement, or modification shall not (i) amend the maturity to a date earlier than the Senior Indebtedness Maturity Date
or (ii) otherwise have, in the reasonable determination of the holder of Series F Preferred Stock, an adverse effect on such holder.
“Senior
Indebtedness Maturity Date” means the earlier of (i) March 26, 2029 and (ii) the date the obligations for borrowed money under
the Senior Indebtedness Agreement have been repaid in full.
“Senior
Indebtedness Permitted Refinancing” means any refinancing, refunding, renewal or extension of the Senior Indebtedness; provided
such refinancing, refunding, renewal or extension (i) shall not provide for any amortization payment, mandatory redemption payment, sinking
fund, final maturity date or other repurchase or repayment of principal on an earlier date than required under the Senior Indebtedness
Agreement as in effect on the Issue Date, (ii) does not have any covenants that are more restrictive on the Company in any material respect
than the covenants set forth in the Senior Indebtedness Agreement as in effect on the Issue Date unless the Company makes a bona fide
offer to provide the holders of Series F Preferred Stock a correspondingly more restrictive covenant, (iii) does not have, in the reasonable
determination of the holder, an adverse effect on such holder and (iv) is on customary terms for a conforming borrowing base revolving
credit facility, based on usual and customary oil and gas lending criteria as they exist at such time for reserve-based, secured oil
and gas loan transactions in the United States, which may include customary mechanisms for semi-annual scheduled redeterminations thereof
and customary adjustments for asset sales and terminations of hedging agreements.
“Stated
Dividend Rate” means, as of any date, a rate per annum equal to 12%; provided that, from, including and after the date that
is the six-month anniversary of the Senior Indebtedness Maturity Date, the Stated Dividend Rate shall mean 25%.
“Stated
Value” means, with respect to any share of Series F Preferred Stock, $1,000 (subject to appropriate adjustment in the event
of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series F Preferred Stock).
“Stock
Payment Determination Date” means (i) with respect to a payment of a Stated Dividend in shares of Common Stock in accordance
with the provisions described “-Method of Payment-Company’s Election to Pay Stated Dividend in Cash or Common Stock”
above, the related Dividend Payment Date, and (ii) with respect to the delivery of Conversion Consideration, the related Conversion Date
or Alternative Conversion Date.
“Trading
Day” means any day on which (A) trading in our common stock generally occurs on the principal U.S. national or regional securities
exchange on which our common stock is then listed or, if our common stock is not then listed on a U.S. national or regional securities
exchange, on the principal, in terms of volume, Eligible Exchange on which our common stock is listed for trading; and (B) there is no
Market Disruption Event, provided that the holder, by written notice to us, may waive any such Market Disruption Event. If our common
stock is not so listed or traded, then “Trading Day” means a business day.
“Triggering
Event Additional Shares” means, with respect to the conversion of a share of Series F Preferred Stock, an amount equal to the
excess, if any, of (A) the Triggering Event Conversion Rate applicable to such conversion over (B) the Conversion Rate, Alternative Conversion
Rate or Floor Price Conversion Rate, as applicable, that would otherwise apply to such conversion without giving effect to the provisions
described in “-Adjustments to Conversion Rate in Connection with a Triggering Event” above. For the avoidance of doubt,
the Triggering Event Additional Shares cannot be a negative number.
“Triggering
Event Conversion Price” means, with respect to the conversion of a share of Series F Preferred Stock, the lesser of: (A) the
Conversion Price that would be in effect immediately after 5:00 p.m., New York City time, on the Conversion Date or Alternative Conversion
Date, as applicable, for such conversion, without giving effect to the provisions described in “-Adjustments to Conversion Rate
in Connection with a Triggering Event” above; and (B) 70% of the lowest Daily VWAP per share of Common Stock during the 10
consecutive VWAP Trading Days ending on, and including, such Conversion Date or Alternative Conversion Date, as applicable (or, if such
Conversion Date or Alternative Conversion Date is not a VWAP Trading Day, the immediately preceding VWAP Trading Day).
“Triggering
Event Conversion Rate” means, with respect to the conversion of a share of Series F Preferred Stock, an amount (rounded to
the nearest 1/10,000th of a share of Common Stock (with 5/100,000ths rounded upward)) equal to (A) (i) the Repayment Multiplier multiplied
by (ii) the Stated Value divided by (B) the Triggering Event Conversion Price applicable to such conversion.
“Underlying
Shares” means such underlying shares of Common Stock issuable upon exercise of a Warrant, together with such underlying shares
of Common Stock issuable pursuant to the terms of the Series F Preferred Stock.
“VWAP
Market Disruption Event” means, with respect to any date, (A) the failure by the principal U.S. national or regional securities
exchange on which our common stock is then listed, or, if our common stock is not then listed on a U.S. national or regional securities
exchange, the principal, in terms of volume, Eligible Exchange on which our common stock is then traded, to open for trading during its
regular trading session on such date; or (B) the occurrence or existence, for more than one half hour period in the aggregate, of any
suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant exchange or otherwise)
in our common stock or in any options contracts or futures contracts relating to our common stock, and such suspension or limitation
occurs or exists at any time before 1:00 p.m., New York City time, on such date.
“VWAP
Trading Day” means a day on which (A) there is no VWAP Market Disruption Event, provided that the holder, by written notice
to us, may waive any such VWAP Market Disruption Event; and (B) trading in our common stock generally occurs on the principal U.S. national
or regional securities exchange on which our common stock is then listed or, if our common stock is not then listed on a U.S. national
or regional securities exchange, on the principal, in terms of volume, Eligible Exchange on which our common stock is then traded. If
our common stock is not so listed or traded, then “VWAP Trading Day” means a business day.
Reasons
for Seeking Stockholder Approval
Our
Common Stock is currently listed on the Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. The Company is
restricted from issuing all shares of Common Stock that are otherwise issuable upon the conversion of or otherwise pursuant to the terms
of the shares of Series F Preferred Stock under the Certificate of Designation and the Securities Purchase Agreement (without regard
to any limitations set forth thereon) by Nasdaq Listing Rule 5635.
In
connection with the execution of the Securities Purchase Agreement, we agreed to hold a meeting of stockholders to obtain the consent of the stockholders of the Company pursuant to Nasdaq Listing Rule 5635 for the issuance of all shares of our Common
Stock that are issuable pursuant to the Certificate of Designation and the Securities Purchase Agreement (without regard to any limitations
set forth thereon).
Our
Board is not seeking the approval of our stockholders to authorize our entry into the Securities Purchase Agreement. The issuance and
sale of the Preferred Shares have already occurred. The Preferred Shares will continue to be outstanding, and the terms of the Securities
Purchase Agreement, the Preferred Shares and Warrants will remain outstanding obligations of ours in favor of the holders of such securities.
In addition, the stockholder approval will not result in the increase of number of shares of Common Stock to be issued or issuable upon
the conversion of or otherwise pursuant to the terms of the shares of the Series F Preferred Stock or upon exercise of the Warrants.
Our
Board has determined that the Securities Purchase Agreement, and the Common Stock that may be issued upon the conversion of or otherwise
pursuant to the terms of the shares of the Series F Preferred Stock, are in the best interests of the Company and its stockholders because
of the corresponding capital obtained by the Company under the terms of the Securities Purchase Agreement. The Company used all net proceeds
from the Preferred Offering, together with the net proceeds from Concurrent Common Stock Offering, to fund a portion of the purchase
price for the Bayswater Acquisition.
We
cannot predict if, or how many shares the holders of the Series F Preferred Stock will convert their holdings into Common Stock. The
issuance of Common Stock upon the conversion of the Series F Preferred Stock at an adjusted, reduced conversion price otherwise pursuant
to the Certificate of Designation, either alone or together with shares of the Common Stock issuable upon exercise of the Warrants, if
issued, may result in the Company issuing more than 20% of the amount of Common Stock issued and outstanding prior to such issuance
at a price below the Minimum Price. And such issuance and any other shares of Common Stock previously held by the holder of the Series
F Preferred Stock could result in the creation of a new ownership position that would be deemed a “change of control” under
Nasdaq rules.
Therefore,
we are seeking stockholder approval under this Proposal 1 to fully issue all shares of Common Stock that are issuable upon the conversion
of or otherwise pursuant to the terms of the shares of Series F Preferred Stock under the Certificate of Designation and the Securities
Purchase Agreement (without regard to any limitations set forth thereon). Stockholder approval of this Proposal 1 will constitute stockholder
approval for purposes of Nasdaq Listing Rule 5635.
Voting
Agreements
As
discussed above, in connection with the execution of the Securities Purchase Agreement, holders of our Common Stock owning more than
50% of our issued and outstanding shares of Common Stock have entered into and delivered voting agreements pursuant to which such holders
have agreed to vote their shares of Common Stock in favor of the Proposal 1.
Risks
Relating to the Series F Preferred Stock and the Issuance of the Common Stock Upon Conversion
The
issuance of our Common Stock in connection with the conversion of the Series F Preferred Stock will cause substantial dilution, which
may materially affect the trading price of our common stock and earnings per share. Moreover, holders also have the option to convert
all or a portion of the shares of Series F Preferred Stock then held by such holder using an alternative conversion rate in lieu of the
conversion rate, subject to an alternative conversion cap for each quarter, as described above under “-Series F Preferred Stock-Conversion
Rights-Alternative Conversions.” We may settle such alternative conversions entirely (but not in part) in cash in certain circumstances
as described above under “-Series F Preferred Stock-Method Of Payment-Company’s Election to Pay Alternative Conversions
in Cash.”
Whether
or not the Company has sufficient funds to pay required amounts under the Series F Preferred Stock, a required repayment in cash could
have a material adverse effect on the Company, including its financial condition, results of operations, liquidity, prospects, and cash
flows. In addition, while the Company expects to obtain substantial economic and other benefits in connection with the issuance of the
Series F Preferred Stock, if the Company defaults on any terms or obligations relating to the Series F Preferred Stock, the Company’s
financial condition, results of operations, liquidity, prospects, and cash flows would be materiality and adversely impacted.
Interests
of Directors, Officers, and Affiliates
None
of our current directors, officers or affiliates has an interest in the Series F Preferred Stock issued under the Securities Purchase
Agreement.
Consequences
of Non-Approval
If
our stockholders do not approve this Proposal 1, we may be prevented from issuing the Underlying Preferred Stock Shares, upon conversion
of the Series F Preferred Stock by the holder thereof or otherwise pursuant to the terms thereof, in a manner that complies with Nasdaq
Rule 5635. Failure to obtain such approval may discourage future investors from engaging in future financings with us. If these consequences
occur, we may have difficulty finding alternative sources of capital to fund our operations in the future on terms favorable to us or
at all. We can provide no assurance that we would be successful in raising funds pursuant to additional equity or debt financings or
that such funds could be raised at prices that would not create substantial dilution for our existing stockholders. The Company will
also be obligated to incur additional management resources and expenses to call and hold a special meeting of the stockholders every
ninety (90) days thereafter to seek such stockholder approval until the date such stockholder approval is obtained.
Accordingly,
our Board believes that providing the Company the flexibility to fully issue shares of Common Stock that are issuable upon the conversion
of or otherwise pursuant to the terms of the shares of Series F Preferred Stock under the Certificate of Designation and the Securities
Purchase Agreement (without regard to any limitations set forth thereon) is in the best interest of the Company.
Effect
on Current Stockholders
The
issuance of shares of Common Stock as contemplate by this Proposal 1 would result in an increase in the number of shares of Common Stock
outstanding, and our stockholders will incur dilution of their percentage ownership. In addition, the sale into the public market of
the Underlying Preferred Stock Shares could adversely affect the market price of our Common Stock.
If
this proposal is approved, existing stockholders will suffer dilution in ownership interests and voting rights as a result of the issuance
of shares of Common Stock upon the conversion of or otherwise pursuant to the terms of the shares of Series F Preferred Stock. Because
the conversion price of the Series F Preferred Stock may be adjusted, the number of shares of Common Stock that will actually be issued
upon the conversion of or otherwise pursuant to the terms of shares of the Series F Preferred Stock cannot be ascertained at this time.
The ownership interest of the existing stockholders would be correspondingly reduced. The dilution described
above does not give effect to (i) the potential future issuance of additional shares of Common Stock due to potential future anti-dilution
adjustments on the Series F Preferred Stock, (ii) the potential future issuance of shares of Common Stock pursuant to other outstanding
options and warrants, or (iii) any other potential future issuances of Common Stock. The sale into the public market of these shares
also could materially and adversely affect the market price of the Common Stock.
If
this proposal is approved, the issuance of the Common Stock could have an anti-takeover effect because such issuance would make it more
difficult for, or discourage an attempt by, a party to obtain control of the Company by tender offer or other means. The issuance of
the Common Stock will increase the number of shares entitled to vote, increase the number of votes required to approve a change of control
of the Company, and dilute the interest of a party attempting to obtain control of the Company. The Board does not have any current knowledge
of any effort by any third party to accumulate the Company’s securities or obtain control of the Company by any means.
Required
Vote and Recommendation of Board of Directors
Approval
of Proposal 1 requires the affirmative vote (“FOR”) of the majority of votes cast at the Special Meeting. Abstentions and “broker non-votes,” if any, will have no effect on the outcome of this proposal.
THE
BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF, PURSUANT TO NASDAQ RULE 5635, THE ISSUANCE OF SHARES OF THE COMPANY’S
COMMON STOCK UPON THE CONVERSION OF OR OTHERWISE PURSUANT TO THE TERMS OF THE SHARES OF SERIES F PREFERRED STOCK, ISSUED PURSUANT TO
THE SECURITIES PURCHASE AGREEMENT AND THE CORRESPONDING CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES F
CONVERTIBLE PREFERRED STOCK (without regard to any limitations thereon set forth in the Securities Purchase Agreement or the Certificate
of Designation).
PROPOSAL
2
NASDAQ
STOCK ISSUANCE PROPOSAL (WARRANTS)
We
are seeking approval of the issuance of shares of Common Stock upon the exercise of the warrants (the “Warrants”) to purchase
the Common Stock, issued pursuant to the Securities Purchase Agreement in accordance with Nasdaq Rule 5635. None of the other proposals
are conditioned upon the approval of this Proposal 2.
WARRANTS
As
further described above under “Proposal 1 Nasdaq Stock Issuance Proposal (Preferred Stock) – Securities Purchase
Agreement,” on March 24, 2025, the Company entered into the Securities Purchase Agreement with Buyer, pursuant to which the
Company agreed to issue and sell, in a registered offering by the Company directly to the Buyer, (i) 148,250 shares of Series F Preferred
Stock, with a Stated Value of $1,000 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination,
or other similar recapitalization with respect to the Series F Preferred Stock, and (ii) upon the one-year anniversary of the issue date
of the Preferred Shares, subject to the satisfaction of certain conditions, the Warrants to purchase a number of shares of our Common
Stock, equal to the quotient of (1) 125% of the Stated Value of all Series F Preferred Stock held by such holder on the original issuance
date, divided by (2) the average of the 10 daily volume-weighted average per share trading prices of our Common Stock during the 10 trading
days prior to the original issuance date. The Preferred Offering closed on March 26, 2025.
The
following is a summary of the material terms and provisions of the Warrants. This summary is subject to and qualified in its entirety
by (i) the Securities Purchase Agreement, filed as Exhibit 10.1 to our current report on Form 8-K filed on March 26, 2025, and (ii) the
form of Warrant to Purchase Shares of Common Stock, attached hereto as Appendix B to this proxy statement.
Issuance
If
on the one-year anniversary of the Closing Date (or if such date is not a Trading Day (as defined above), then the immediately preceding
Trading Day) (the “Original Issuance Date”) (i) any Preferred Shares are outstanding and (ii) the Last Reported Sale Price
(as defined above) during any Trading Day in the 20 Trading Day period ending on and including such date was less than 115% of the Conversion
Price (as defined above), then the Company will on such date issue the Warrants to the Purchaser for no additional consideration. The
Warrants will be exercisable for a number of shares of Common Stock equal to the quotient of (i) 125% of the Stated Value (as defined
above) of all Series F Preferred Stock held by such holder on the Original Issuance Date, divided by (ii) the average of
the 10 Daily VWAPs (as defined above) during the 10 VWAP Trading Day (as defined above) period prior to the Original Issuance Date.
Duration
and Exercise Price
Each
Warrant offered hereby will have an initial exercise price per share equal to 110% of the average of the 10 Daily VWAPs during the 10
VWAP Trading Day period prior to the Original Issuance Date. If issued, the Warrants will be immediately exercisable and will expire
on the fifth anniversary of the Original Issuance Date (the “Termination Date”). The exercise price and number of shares
of our Common Stock issuable upon exercise is subject to appropriate adjustment in the event of certain stock dividends and distributions,
stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets,
including cash, stock or other property to our stockholders.
Exercisability
The
Warrants are exercisable, at the option of each holder, in whole or in part, at any time or times on or after the Original Issuance Date
and on or before the Termination Date, by delivering to us a duly executed notice of exercise. Within the earlier of (i) one Trading
Day and (ii) the number of Trading Days comprising the Standard Settlement Period following the date of exercise, the holder of the Warrant
shall deliver the aggregate exercise price for the shares of Common Stock specified in the applicable notice of exercise by wire transfer
or cashier’s check drawn on a United States bank unless the cashless exercise procedure described in “-Cashless Exercise”
below is specified in the applicable notice of exercise. A holder may not exercise any portion of the Warrant to the extent that the
holder (together with its affiliates, any other persons acting as a group together with the holder or any of the holder’s affiliates,
and any other persons whose beneficial ownership of the shares of Common Stock would or could be aggregated with the holder’s for
purposes of Section 13(d) of the Exchange Act) would own more than 4.99% of the outstanding Common Stock immediately after exercise,
except that upon prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising
the holder’s Warrants up to 9.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the
exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. No fractional shares of our Common
Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, we will, at our election, either pay
a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price or round up
to the next whole share.
Cashless
Exercise
If,
at the time a holder exercises its Warrants, there is no effective registration statement registering, or the prospectus contained therein
is not available for the issuance of the shares of Common Stock underlying the Warrant to the holder or the resale of such shares by
the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate
exercise price, the holder may elect instead to receive upon such exercise the net number of shares of our Common Stock determined according
to a formula set forth in the Warrants.
Transferability
Subject
to applicable laws, Warrants in physical form may be transferred upon notice to us in writing and surrender of the Warrant to us together
with the appropriate instruments of transfer.
Exchange
Listing
There
is no established public trading market for the Warrants, and we do not expect a market to develop. In addition, we do not intend to
list the Warrants on any securities exchange or nationally recognized trading system. Without an active trading market, the liquidity
of the Warrants will be limited.
Right
as a Stockholder
Except
as otherwise provided in the Warrants or by virtue of such holder’s ownership of shares of our Common Stock, the holders of the
Warrants do not have the rights or privileges of holders of our Common Stock, including any voting rights, until they exercise their
Warrants.
Fundamental
Transaction
In
the event of a fundamental transaction, as described in the form of Warrant, and generally including any reorganization, recapitalization
or reclassification of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets,
our consolidation or merger with or into another person, the acquisition of at least 50% of our outstanding Common Stock, or any person
or group becoming the beneficial owner of at least 50% of the voting power represented by our outstanding Common Stock, the holders of
the Warrants will be entitled to receive upon exercise of the Warrants the kind and amount of securities, cash or other property that
the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction.
Certain
Definitions
“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 (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 Common Stock is not then listed or quoted on a Trading Market and
if the Common Stock is listed or quoted for trading on OTCQB or OTCQX (or any successors to either of the foregoing), 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 on The Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of 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 Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.
“Standard
Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary
Trading Market with respect to the Common Stock as in effect on the date of delivery of the notice of exercise.
“Trading
Market” means any of the following markets or exchanges on which the shares of Common Stock are listed or quoted for trading
on the date in question: the NYSE American, the Nasdaq Stock Market LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
Reasons
for Seeking Stockholder Approval
Our
Common Stock is currently listed on the Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. As discussed
in further details under Proposal 1, the Company is restricted from issuing all shares of Common Stock that are otherwise issuable upon
the exercise of the Warrants, if issued, pursuant to the Securities Purchase Agreement and the Warrants (without regard to any limitations
set forth thereon) by Nasdaq Listing Rule 5635.
In
connection with the execution of the Securities Purchase Agreement, we agreed to hold a meeting of stockholders to obtain the
consent of the stockholders of the Company pursuant to Nasdaq Listing Rule 5635 for the issuance of all shares of our Common Stock
that are issuable pursuant to the Certificate of Designation and the Securities Purchase Agreement (without regard to any
limitations set forth thereon).
Stockholder
approval of this Proposal 2 will constitute stockholder approval for purposes of Nasdaq Listing Rule 5635.
Our
Board has determined that the Securities Purchase Agreement, and the Common Stock that may be issued upon the exercise of the Warrants,
are in the best interests of the Company and its stockholders because of the corresponding capital obtained by the Company under the
terms of the Securities Purchase Agreement. The Company used all net proceeds from the Preferred Offering, together with the net proceeds
from Concurrent Common Stock Offering, to fund a portion of the purchase price for the Bayswater Acquisition.
We
cannot predict if the holder of the Warrants, if issued, will exercise the Warrants, or how many of such Warrants will be exercised,
in exchange for Common Stock. The issuance of Common Stock upon the exercise of the Warrants, either alone or together with shares
of the Common Stock issuable upon conversion of the Preferred Shares, may result in the Company issuing more than 20% of the amount of
Common Stock issued and outstanding prior to such exercise. And such issuance and any other shares of Common Stock previously
held by the holder of the Warrants could result in the creation of a new ownership position that would be deemed a “change of
control” under Nasdaq rules.
Therefore,
we are seeking stockholder approval under this Proposal 2 to fully issue all shares of Common Stock that are issuable upon the exercise
of the Warrants pursuant to the Securities Purchase Agreement and the Warrants (without regard to any limitations set forth thereon).
Voting
Agreements
As
discussed above, in connection with the execution of the Securities Purchase Agreement, holders of our Common Stock owning more than
50% of our issued and outstanding shares of Common Stock have entered into and delivered voting agreements pursuant to which such holders
have agreed to vote their shares of Common Stock in favor of the Proposal 2.
Consequences
of Non-Approval
If
we do not receive the approval contemplated in this Proposal 2, we will be contractually required to bring this matter for a shareholder
vote every ninety (90) days thereafter until such stockholder approval has been obtained, incurring cost and expense. It may also discourage
future investors from engaging in future financings with us. See the “Consequences of Non-Approval” under Proposal 1 for
more detailed discussion.
Effect
on Current Stockholders
The
issuance of shares of Common Stock as contemplate by this Proposal 2 would result in an increase in the number of shares of Common Stock
outstanding, and our stockholders will incur dilution of their percentage ownership. In addition, the sale into the public market of
the shares of Common Stock issuable upon such exercise could adversely affect the market price of our Common Stock.
Required
Vote and Recommendation of Board of Directors
Approval
of Proposal 2 requires the affirmative vote (“FOR”) of the majority of votes cast at the Special Meeting. Abstentions and “broker non-votes,” if any, will have no effect on the outcome of this proposal.
THE
BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF, PURSUANT TO NASDAQ RULE 5635, THE ISSUANCE OF SHARES OF THE COMMON
STOCK UPON THE EXERCISE OF THE WARRANTS, ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT (without regard to any limitations thereon
set forth in the Securities Purchase Agreement or the Warrants).
DESCRIPTION
OF CAPITAL STOCK
The
following summary sets forth the material terms of our securities including capital stock. The following summary is not intended to be
a complete summary of the rights and preferences of such securities, and is qualified by reference to our Second Amended and Restated
Certificate of Incorporation (including any certificate of designation relating to any series of the Company’s preferred stock)
(“Charter”) and our Amended and Restated Bylaws (“Bylaws”), which are filed with the Securities Exchange
Commission or are included as exhibits to the proxy statement. We urge you to read such documents in their entirety for a complete description
of the rights and preferences of our securities.
Authorized
and Outstanding Stock
Our
authorized capital stock consists of 500,000,000 shares of Common Stock, of which 42,942,127 shares were issued and outstanding as of
March 31, 2025, and 50,000,000 shares of preferred stock, $0.01 par value per share, of which 5,981.68 shares of Series D Convertible
Preferred Stock, par value $0.01 per share, and 147,250 shares Series F Convertible Preferred Stock were issued and outstanding as of
March 31, 2025.
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 Company 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 Delaware General Corporation Law (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.
Common
Stock
Voting
Power
Except
as provided by law or in a preferred stock designation, holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders and will have the exclusive right to vote for the election of directors. Except
as otherwise required by law, holders of Common Stock are not entitled to vote on any amendment to our Charter (including any certificate
of designation relating to any series of preferred stock) that relates solely to the terms of any 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 series,
to vote thereon pursuant to our Charter (including any certificate of designation relating to any series of preferred stock) or pursuant
to the DGCL.
Dividends
Subject
to prior rights and preferences that may be applicable to any outstanding shares or series of preferred stock, holders of Common Stock
are entitled to receive ratably in proportion to the shares of Common Stock held by them such dividends (payable in cash, stock or otherwise),
if any, as may be declared from time to time by our Board out of funds legally available for dividend payments. The payment of cash dividends
in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition.
Liquidation
Subject
to the rights and preferences of any holders of any shares of any outstanding series of our preferred stock, in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the funds and assets of the Company that may be legally distributed
to our stockholders shall be distributed among the holders of the then outstanding the Common Stock pro rata in accordance with the number
of shares of the Common Stock held by each such holder, after payment or provision for payment of all of our debts and obligations and
after distribution in full of preferential amounts to be distributed to holders of outstanding shares of preferred stock, if any.
Preemptive
or Other Rights
The
holders of Common Stock have no preferences or rights of conversion, exchange, preemption, or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock.
Preferred
Stock
Our
Charter authorizes our Board, subject to any limitations prescribed by law, without further stockholder approval, to establish and to
issue from time to time one or more series of preferred stock, par value $0.01 per share, covering up to an aggregate of 50,000,000 shares
of preferred stock. Each series of preferred stock will cover the number of shares and will have the powers, preferences, privileges,
rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend
rights, liquidation preferences, voting rights, whether subject to retirement or sinking funds, conversion rights, preemptive rights
and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock are not entitled
to vote at or receive notice of any meeting of stockholders.
The
Company has designated 50,000 shares of Series D Convertible Preferred Stock, 50,000 shares of Series E Convertible Preferred Stock,
and upon closing of the Preferred Offering, 148,250 shares of Series F Convertible Preferred Stock. See Proposal 1 for a detailed description
of the Series F Convertible Preferred Stock.
The
ability for our Board to authorize undesignated preferred stock makes it possible for our Board to issue, without stockholder approval,
preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These
and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.
Limitations
on Liability and Indemnification of Officers and Directors
Our
Charter limits the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except for liability
that cannot be eliminated under the DGCL. Delaware law provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duty as directors, except for liabilities:
| ● | for
any breach of their duty of loyalty to us or our stockholders; |
| ● | for
acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; |
| ● | for
unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under
Section 174 of the DGCL; or |
| ● | for
any transaction from which the director derived an improper personal benefit. |
Any
amendment, repeal, or modification of these provisions will be prospective only and would not affect any limitation on liability of a
director for acts or omissions that occurred prior to any such amendment, repeal, or modification.
Our
Charter and Bylaws also provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Our
Charter and Bylaws also permit us to purchase insurance on behalf of any officer, director, employee, or other agent for any liability
arising out of that person’s actions as our officer, director, employee, or agent, regardless of whether Delaware law would permit
indemnification. We have obtained directors’ and officers’ insurance to cover our directors, officers, and some of our employees
for certain liabilities. We have entered into indemnification agreements with each of our current directors and officers and intend to
enter into indemnification agreements with each of our future directors and officers. These agreements require us to indemnify these
individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us, and
to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation
of liability provision in our Charter and the indemnification agreements facilitate our ability to continue to attract and retain qualified
individuals to serve as directors and officers.
Advance
Notice of Director Nominations and New Business
Our
Bylaws establishes advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election
as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals
must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be
timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary
date of the annual meeting for the preceding year. Our Bylaws specify the requirements as to form and content of all stockholders’
notices. These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting.
Special
Meetings
Our
Charter and Bylaws provides that, except as otherwise required by applicable law and subject to the rights of the holders of preferred
stock, special meetings of our stockholders may be called only by the Chairman (or any Co-Chairman) of the board of directors or the
board of directors pursuant to a written request by a majority of the total number of directors then in office. These provisions
may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control or management of the Company.
Supermajority
Voting for Amendments to Our Governing Documents
The
Charter provides that the Board is expressly authorized to adopt, amend or repeal the Bylaws and that our stockholders can amend or repeal
our 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. These provisions make it more difficult for stockholders
to change the Bylaws and may, therefore, defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to
amend the Bylaws or otherwise attempting to influence or obtain control of the Company.
No
Cumulative Voting
Except
as provided by law or in a preferred stock designation, holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders, will have the exclusive right to vote for the election of directors and do not
have cumulative voting rights. The prohibition on cumulative voting has the effect of making it more difficult for stockholders to change
the composition of the Board.
Annual
Elections
The
Company does not have a classified board, as all directors are elected annually.
Removal
of Directors; Vacancies
The
Charter and Bylaws provide that, subject to the rights of the holders of preferred stock, if any, to elect or remove additional directors
pursuant to our Charter (including any certificate of designation relating to any series of preferred stock), 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. Therefore, because stockholders cannot call a special meeting of stockholders, as discussed above, stockholders
may only submit a stockholder proposal for the purpose of removing a director at an annual meeting. The Charter and Bylaws provide that
the authorized number of directors may be changed only by resolution of the board of directors, and all vacancies, including newly created
directorships, may, except as otherwise required by law or, if applicable, the rights of holders of preferred stock, be filled by the
affirmative vote of a majority of directors then in office, even if less than a quorum. Therefore, while stockholders may remove a director,
stockholders are not able to elect new directors to fill any resulting vacancies that may be created as a result of such removal.
Stockholder
Action by Written Consent
The
DGCL permits any action required to be taken at any annual or special meeting of the stockholders to be taken without a meeting, without
prior notice and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares
of stock entitled to vote thereon were present and voted, unless the certificate of incorporation provides otherwise. 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, the Charter
and Bylaws preclude stockholder action by written consent. This prohibition, combined with the fact stockholders cannot call a special
meeting, as discussed above, means that stockholders are limited in the manner in which they can bring proposals and nominations for
stockholder consideration, making it more difficult to effect change in our governing documents and the Board.
Certain
Anti-Takeover Provisions of Delaware Law; Charter and Bylaws
Certain
provisions of our Charter and Bylaws, which are summarized in the following paragraphs, may have the effect of discouraging potential
acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider
favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular,
our Charter, our Bylaws and Delaware law, as applicable, among other things:
| ● | provide
our board of directors with the ability to alter our Bylaws without stockholder approval
(subject to rights of the holders of our preferred stock); |
| ● | provide
that, subject to the rights of the holders of preferred stock, special meetings of our stockholders
may be called only by the Chairman (or any Co-Chairman) of the board of directors or the
board of directors pursuant to a resolution adopted by a majority of the total number of
directors then in office; and |
| ● | provide
that, subject to the rights of the holders of preferred stock, vacancies on our board of
directors may be filled by a majority of directors in office, although less than a quorum,
or by a sole remaining director. |
These
provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of us to first negotiate with our Board. These provisions may delay or prevent someone from acquiring
or merging with us, which may cause the market price of our Common Stock to decline.
Advance
Notice Bylaws. Our Bylaws contain an advance notice procedure for stockholder proposals to be brought before any meeting of stockholders,
including proposed nominations of persons for election to our board of directors. Stockholders at any meeting will only be able to consider
proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors
or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who
has given our corporate secretary timely written notice, in proper form, of the stockholder’s intention to bring that business
before the meeting. Although our Bylaws do not give our board of directors the power to approve or disapprove stockholder nominations
of candidates or proposals regarding other business to be conducted at a special or annual meeting, our Bylaws may have the effect of
precluding the conduct of certain business at a meeting if the proper procedures are not followed, or may discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of us.
Interested
Stockholder Transactions. We may become subject to Section 203 of the DGCL, which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation and an “interested stockholder,” which is generally defined
as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period
following the date that such stockholder became an interested stockholder.
Forum
Selection
Our
Charter and Bylaws provide that unless we consent 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)
will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for:
| ● | any
derivative action or proceeding brought on our behalf; |
| ● | any
action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers,
employees, or agents to us or our stockholders; |
| ● | 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; and |
| ● | any
action asserting a claim against us that is governed by the internal affairs doctrine, |
in
each such case subject to such Court of Chancery of the State of Delaware having personal jurisdiction over the indispensable parties
named as defendants therein.
Our
Charter and Bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district
courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of
action under the Securities Act. The provisions in our Charter and Bylaws do not apply to complaints asserting a cause of action under
the Exchange Act. A stockholder may not waive compliance with the federal securities laws and the rules and regulations thereunder.
Our
Charter and Bylaws also provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock
will be deemed to have notice of and to have consented to this forum selection provisions. However, it is possible that a court could
find our forum selection provisions to be inapplicable or unenforceable.
PROPOSAL
3
ADJOURNMENT
PROPOSAL
Overview
In
the Adjournment Proposal, we are asking stockholders to authorize the holder of any proxy solicited by the Board to vote in favor of
adjourning the Special Meeting or any adjournment or postponement thereof. If our stockholders approve this Proposal 3, we could adjourn
the Special Meeting, and any adjourned session of the Special Meeting, to use the additional time to solicit additional proxies in favor
of the other proposals contained in this Proxy Statement.
Required
Vote and Recommendation of Board of Directors
Approval
of Proposal 3 requires the affirmative vote (“FOR”) of the majority of the voting power of the shares of common stock present
at the Special Meeting, in person or by proxy, and entitled to vote thereon. Abstentions are considered to be “present” and
“entitled to vote” at the Special Meeting, and as a result, abstentions will have the same effect as a vote against this
proposal. Broker non-votes will have no effect on the outcome of this proposal.
The
Board of Directors believes that, if the number of voting shares voting in favor of any of the Proposals presented at the Special Meeting
is insufficient to approve a Proposal, it is in the best interests of our stockholders to enable the Board of Directors, for a limited
period of time, to continue to seek to obtain a sufficient number of additional votes in favor of the Proposal. Any signed proxies received
by us in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. The
time and place of the adjourned meeting will be announced at the time the adjournment is taken. Any adjournment of the Special Meeting
for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at
any time prior to their use at the Special Meeting as adjourned.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO A LATER DATE
OR DATES, IF NECESSARY OR APPROPRIATE, TO PERMIT FURTHER SOLICITATION AND VOTE OF PROXIES IN THE EVENT THAT THERE ARE INSUFFICIENT VOTES
FOR, OR OTHERWISE IN CONNECTION WITH, ONE OR MORE OF THE OTHER PROPOSALS TO BE VOTED ON AT THE SPECIAL MEETING.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth information with respect to the beneficial ownership of our common stock as of March 31, 2025 by:
| ● | each
person to be known by us to be the beneficial owner of more than 5% of our outstanding shares
of common stock; |
| ● | each
of our named executive officers; |
| ● | each
of our directors; and |
| ● | all
of our directors and executive officers as a group. |
As
of March 31, 2025, approximately 42,942,127 shares of our common stock were outstanding. Unless otherwise noted, the mailing address
of each person or entity named in the table below is c/o Prairie Operating Co., 55 Waugh Street, Suite 400, Houston, Texas 77007.
| Name and Address of Beneficial Owner (1) | |
Number of Shares | | |
Percent of Class | |
| 5% Stockholder: | |
| | | |
| | |
| Narrogal Nominees Pty Ltd ATF Gregory K. O’Neill Family Trust (2) | |
| 18,039,614 | | |
| 36.86 | % |
| Bristol Investment Fund, Ltd. (3) | |
| 4,895,598 | | |
| 11.12 | % |
| Bayswater Exploration & Production, LLC (4) | |
| 3,656,099 | | |
| 8.51 | % |
| Directors and Named Executive Officers: | |
| | | |
| | |
| Gary C. Hanna (5) | |
| 3,513,253 | | |
| 7.76 | % |
| Edward Kovalik (6) | |
| 3,513,242 | | |
| 7.76 | % |
| Richard Frommer | |
| 7,898 | | |
| * | |
| Gizman Abbas | |
| 4,286 | | |
| * | |
| Stephen Lee | |
| 4,286 | | |
| * | |
| Jonathan H. Gray (7) | |
| 397,021 | | |
| * | |
| Erik Thoresen | |
| 4,286 | | |
| * | |
| Craig Owen | |
| 111,272 | | |
| * | |
| All directors and named executive officers as a group (8 individuals) | |
| 2,946,266 | | |
| 7.26 | % |
*
Less than 1%
(1)
Unless otherwise noted, the business address of each of the officers and directors is 55 Waugh Drive, Suite 400, Houston, Texas 77007.
(2)
Narrogal Nominees Pty Ltd ATF Gregory K. O’Neill Family Trust (“O’Neill Trust”) is managed by Narrogal
Nominees Pty Ltd (“Narrogal Nominees”), as trustee. Gregory K. O’Neill, managing director and sole shareholder of Narrogal
Nominees, has voting or investment control over the shares held by O’Neill Trust. The address of each of O’Neill Trust, Narrogal
Nominees and Mr. O’Neill is Level 27, 60 City Road Southbank, Melbourne, Australia. The O’Neill Trust owns 12,039,614 shares
of common stock held in book-entry form, Series D A Warrants to purchase 2,000,000 shares of common stock, and Series E A Warrants to
purchase 4,000,000 shares of common stock. The shares reported herein include 12,039,614 shares of common stock and 6,000,000 shares
of common stock issuable upon exercise of the warrants or conversion of the Company’s preferred stock (“Preferred
Stock”). As previously disclosed on our current report on Form 8-K filed with the SEC on August 20, 2024, on August 15, 2024, the
Company entered into a Consent & Agreement (the “Consent & Agreement”) with O’Neill Trust, pursuant
to which the Company and O’Neill Trust agreed, among others, 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) with consent of 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%; and (iii)
amend Section 2(e) of each of O’Neill Trust’s Series D A Warrant and Series E A Warrant and Section 2(d) of O’Neill
Trust’s Series E B Warrant to increase the beneficial ownership limitation ceiling from 25% to 49.9%.
(3)
According to a Schedule 13D/A filed with the SEC on February 14, 2025 on behalf of Bristol Investment Fund, Ltd. (“Bristol Investment
Fund”), Bristol Capital, LLC (“Bristol Capital”), Paul Kessler and Bristol Capital Advisors Profit Sharing Plan (“BCA
PSP”, and together with Bristol Investment Fund, Mr. Kessler and Bristol Capital, “Bristol”), and taking into
account the exercise of certain non-compensatory options by Bristol on March 31, 2025, (i) Bristol Investment Fund holds 1,105,183 shares
of common stock, (ii) Bristol Capital holds 363,461 shares of common stock, (iii) Mr. Kessler holds 3,113 shares of common stock, (iv)
BCA PSP holds 963 shares of common stock, (v) Bristol Investment Fund holds 797,072 shares of common stock issuable upon the conversion
of Series D preferred stock and (vi) Bristol Investment Fund holds 292,472 shares of common stock issuable upon the exercise of Series
D A warrants. The shares reported herein include, (i) the 3,806,054 shares of common stock collectively held by Bristol Investment Fund,
Bristol Capital, Mr. Kessler and BCA PSP, (ii) 797,072 shares of common stock issuable upon the conversion of Series D preferred stock
and (iii) the 292,472 shares of common stock issuable upon the exercise of the Series D A warrants. On April 8, 2024, Bristol Investment
Fund entered into an agreement with the Company pursuant to which it amended the terms of its Series D PIPE Warrants to increase the
beneficial ownership limitation from 9.99% to 19.99% and gave notice to the Company that it was increasing its beneficial ownership limitation
to 19.99% with respect to each of its remaining warrants. Such beneficial ownership limitation may only be modified, amended or waived
with the written consent of both the Company and Bristol Investment Fund. Bristol Investment Fund is a privately held fund that invests
primarily in publicly traded companies through the purchase of securities in private placement and/or open market transactions. The address
of Bristol Investment Fund’s registered office is Citco Trustees (Cayman) Limited, 89 Nexus Way, Camana Bay, PO Box 311063, Grand
Cayman KY1-1205, Cayman Islands. Bristol Capital Advisors, LLC, an entity organized under the laws of the State of Delaware (“Bristol
Capital Advisors”), is the investment advisor to Bristol Investment Fund. Paul Kessler is manager of Bristol Capital Advisors and
as such has voting and dispositive power over the securities held by Bristol Investment Fund. Bristol Capital is a privately held limited
liability company that engages from time to time in investing in publicly traded companies through the purchase of securities in private
placement and/or open market transactions. Paul Kessler is the sole manager of Bristol Capital and therefore has voting and dispositive
power over the securities held by Bristol Capital. BCA PSP is a plan established by Bristol Capital Advisors which invests in various
securities for the benefit of its employees. Mr. Kessler has voting and dispositive power over the securities held by BCA PSP. The address
of the principal office for Bristol Capital Advisors, Bristol Capital, Mr. Kessler and BCA PSP is 555 Marin Street, Suite 140, Thousand
Oaks, CA 91360.
(4)
According to a Schedule 13G filed with the SEC on April 2, 2025 on behalf of Bayswater Exploration & Production, LLC (“Bayswater
E&P”) and Bayswater Management Company LP (“Bayswater Management”). The shares reported herein include 3,656,099
shares (the “Shares”) of Common Stock issued by the Company to Bayswater E&P on March 26, 2025, pursuant to that certain
Purchase and Sale Agreement, dated as of February 6, 2025, by and among the Company, Otter Holdings, LLC, Prairie SWD Co., LLC, Prairie
Gathering I, LLC, Bayswater Resources LLC, Bayswater Fund III-A, LLC, Bayswater Fund III-B, LLC, Bayswater Fund IV-A, LP, Bayswater Fund
IV-B, LP, Bayswater Fund IV-Annex, LP and Bayswater E&P (the “PSA”). As the record holder of the Shares, Bayswater E&P
may be deemed to beneficially own the Shares. Pursuant to the PSA, Bayswater E&P was designated by the Sellers as the Sellers’
Representative (in each case, as defined in the PSA) to whom the Shares were to be issued by the Company. Because Bayswater Management
is the manager or general partner of, or that controls, each entity that sold assets to the Company pursuant to the PSA, Bayswater Management
may be deemed to beneficially own the Shares that are held by Bayswater E&P. The address of the principal office for Bayswater E&P
and Bayswater Management is 730 17th Street, Suite 500, Denver, Colorado 80202.
(5)
Includes 1,148,834 shares issued to Gary C. Hanna as consideration pursuant to the Merger Agreement, 2,333,333 shares exercisable pursuant
to a non-compensatory option agreement and 31,086 shares resulting from the vesting of a restricted stock unit award.
(6)
Includes 1,148,834 shares issued to Edward Kovalik as consideration pursuant to the Merger Agreement, 2,333,333 shares exercisable pursuant
to a non-compensatory option agreement and 31,075 shares resulting from the vesting of a restricted stock unit award.
(7)
The shares reported herein reflect shares held directly by First Idea Ventures LLC, First Idea International Ltd., and Mr. Gray. First
Idea Ventures LLC holds 230,159 shares of common stock. In addition, First Idea Ventures LLC also holds (i) Series D PIPE Warrants to
purchase 150,000 shares of common stock and (ii) Subordinated Note Warrants to purchase 913,242 shares of common stock. First Idea International
Ltd. holds 159,999 shares of common stock, in addition to (i) Series D PIPE Warrants to purchase 50,975 shares of common stock and (ii)
Subordinated Note Warrants to purchase 228,310 shares of common stock. The shares reported herein include the 230,159 shares of common
stock held directly by First Idea Ventures LLC, 159,999 shares of common stock held directly by First Idea International Ltd. and 6,863
shares of common stock held directly by Mr. Gray. Additionally, it includes 1,551,115 shares of common stock issuable upon the exercise
of the Series D PIPE Warrants and Subordinated Note Warrants. Jonathan H. Gray holds 50% and his spouse, Chloe Gray, holds 50% of the
interests of First Idea Ventures LLC and each share voting and investment power over the securities held by First Idea Ventures LLC.
The address of First Idea Ventures LLC is c/o Jade Fiducial, 1925 Century Park East, Suite 1700, Los Angeles, CA 90067. First Idea International
Ltd. is a limited company. Jonathan Gray has voting or investment control over the shares held by First Idea Ventures LLC. Mr. Gray is
a director of the Company. The address of First Idea International Ltd. is 1 Duchess Street, Suite 1, First Floor, London W1W 6AN, United
Kingdom.
Stockholder
Proposals
Pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, shareholder proposals intended for inclusion in our 2026 proxy statement and acted
upon at our 2026 Annual Meeting must be received by us at our executive offices no less than 120 calendar days before the anniversary
date of the proxy statement for the prior year’s Annual Meeting was made available to shareholders (i.e., December 23, 2025), assuming
the Company’s proxy materials for the 2025 annual meeting of stockholders are mailed on April 22, 2025, to be considered for inclusion
in the proxy statement and form of proxy relating to that meeting. Under the Company’s Amended and Restated Bylaws, shareholder
proposals intended to be presented at the 2026 Annual Meeting must be received by the Company no earlier than 120 days and no later than
90 days before the anniversary of the prior year’s Annual Meeting (i.e., no earlier than February 4, 2026 and no later than March
6, 2026) to be properly brought before the 2026 Annual Meeting. Such proposals should be mailed to, Daniel T. Sweeney, Executive Vice
President, General Counsel and Corporate Secretary, at our principal executive offices, 55 Waugh Drive, Suite 400, Houston, Texas 77007.
Nominations
of directors by shareholders must be received in writing by the Secretary at the principal executive offices of the Company at 55 Waugh
Drive, Suite 400, Houston, Texas 77007 no earlier than 120 days and no later than 90 days before the anniversary of the prior year’s
Annual Meeting (i.e., no earlier than February 4, 2026 and no later than March 6, 2026) to be properly nominated before the 2026 Annual
Meeting.
Communications
with Our Board
Stockholders
and other interested parties may communicate with our directors, including our non-management directors, individually or as a group,
by writing to Daniel T. Sweeney, Executive Vice President, General Counsel and Corporate Secretary, at our principal executive offices,
55 Waugh Drive, Suite 400, Houston, Texas 77007. Stockholders and other interested parties may submit such communications on a confidential
or anonymous basis by sending the communication in a sealed envelope marked “Communication with Directors” and clearly identify
the intended recipient(s) of the communication.
The
Company’s General Counsel will review each communication and will forward the communication, as expeditiously as reasonably practicable,
to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted by the Board relating to
the subject matter of the communication; and (2) the communication falls within the scope of matters generally considered by the Board.
To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an
executive officer of the Company, then the Company’s General Counsel may forward the communication to the executive officer or
chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the
Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting
the communications.
Information
may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity
of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s
policy is not to take any adverse action, and not to tolerate any retaliation, against any person for asking questions or making good
faith reports of possible violations of law, the Company’s policies or its Code of Conduct.
Householding
of Proxy Materials
Some
banks, brokers and other record holders have begun the practice of “householding” proxy statements and annual reports. “Householding”
is the term used to describe the practice of delivering a single copy of this Proxy Statement to any household at which two or more stockholders
share an address. This procedure reduces the volume of duplicative information and our printing and mailing costs. We will deliver promptly,
upon written or oral request, a separate copy of this Proxy Statement to a stockholder at a shared address to which a single copy of
such documents was delivered. Any stockholder who would like to receive a separate copy of the Proxy Statement, now or in the future,
should submit this request to Daniel T. Sweeney, Executive Vice President, General Counsel and Corporate Secretary, at our principal
executive offices, 55 Waugh Drive, Suite 400, Houston, Texas 77007. Beneficial owners sharing an address who receive multiple copies
of this Proxy Statement and who would like to receive a single copy of such materials in the future will need to contact their broker,
bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the
future.
Solicitation
of Proxies
The
Company will bear the costs of soliciting proxies from the Company’s stockholders. In addition to the use of the mails, proxies
may be solicited by the Company’s directors, officers and employees by personal interview, telephone or telegram. Such directors,
officers and employees will not be additionally compensated for such solicitation, but may be reimbursed for out-of-pocket expenses incurred
in connection therewith. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the Common Stock held of record by such persons, and the Company will
reimburse such brokerage houses, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred in connection therewith.
Where
You Can Find More Information
This
Proxy Statement is available free of charge on our internet website, www.prairieopco.com in the “SEC Filings” subsection
of the “Investor Relations” section. On our website, we make available our Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information and any amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such materials
with, or furnish them to, the SEC. Such information will also be available at www.sec.gov. This reference to our website is for
the convenience of investors as required by the SEC and shall not be deemed to incorporate any information on, or accessible through,
our website into this Proxy Statement.
We
will provide without charge to any person from whom a proxy is solicited by the Board of Directors, upon the written request of such
person, a copy of our most recent Annual Report on Form 10-K, including the financial statements and schedules thereto (as well as exhibits
thereto, if specifically requested), our Quarterly Reports on Form 10-Q, and other information and any amendments to those reports. Written
requests for such information should be directed to Daniel T. Sweeney, Executive Vice President, General Counsel and Corporate Secretary,
at our principal executive offices, 55 Waugh Drive, Suite 400, Houston, Texas 77007.
You
should rely only on the information contained in this Proxy Statement. We have not authorized anyone to provide you with information
different from that contained in this Proxy Statement.
OTHER
MATTERS
In
accordance with the Company’s Amended and Restated Bylaws, the business transacted at the Special Meeting will be limited to the
matters set forth in the Notice of Special Meeting of Stockholders and this Proxy Statement.
Appendix
A
PRAIRIE
OPERATING CO.
CERTIFICATE
OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES F 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 “Company”).
2. The
Company is authorized to issue 50,000,000 shares of preferred stock, of which 5,981.68 have been issued.
3. The
following resolutions were duly adopted by the board of directors of the Company:
WHEREAS,
the certificate of incorporation of the Company 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 Securities Purchase
Agreement, up to 148,250 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
“2025
Planned Compensation Adjustments” means adjustments and changes to the compensation of the executive officers of the Company
as set forth in the written compensation report provided to Buyer prior to the date hereof; provided that any RSUs or PSUs granted as
part of such 2025 Planned Compensation Adjustments are subject to the Lockup Agreements.
“Absolute
Floor Price” means $1.15 per share.
“Additional
Payment” has the meaning set forth in Section 5(E)(i).
“Affiliate”
has the meaning set forth in Rule 144 under the Securities Act.
“Alternative
Conversion” has the meaning set forth in Section 7(D)(i).
“Alternative
Conversion Cap” means, for any calendar quarter, and subject to increase by any rollover from the prior calendar quarters pursuant
to Section 7(D)(iii), the greater of (i) ten percent (10%) of the aggregate dollar trading volume (as reported by Bloomberg function
“PROP <US EQUITY> HP” (or its equivalent successor ticker)) of the Common Stock in a given calendar quarter, beginning
with the calendar quarter ending June 30, 2025, and (ii) Twenty Million dollars ($20,000,000).
“Alternative
Conversion Cash Payment” has the meaning set forth in Section 5(C).
“Alternative
Conversion Cash Payment Amount” means, for any Alternative Conversion Cash Payment, an amount in cash equal to the result (rounded
up to the nearest second decimal place) of (i) (a) one hundred twelve and one half percent (112.5%) multiplied by (b) the
Repayment Multiplier multiplied by (c) the Stated Value of the shares of Preferred Stock subject to the Alternative Conversion
Cash Payment plus (ii) the accrued and unpaid dividends on such shares of Preferred Stock.
“Alternative
Conversion Cash Payment Notice” has the meaning set forth in Section 5(C).
“Alternative
Conversion Consideration” has the meaning set forth in Section 7(E)(ii).
“Alternative
Conversion Date” means the first Business Day on which the requirements set forth in Section 7(D)(i) to convert shares
of Preferred Stock are satisfied.
“Alternative
Conversion Rate” means a number of shares of Common Stock per share of Preferred Stock equal to the result (rounded up to the
closest whole number) of (A) (i) the Repayment Multiplier multiplied by (ii) the Stated Value of the share of Preferred
Stock subject to the Alternative Conversion divided by (B) the Market Stock Payment Price as of an Alternative Conversion
Date; provided, that whenever this Certificate of Designation refers to the Alternative Conversion Rate as of a particular date
without setting forth a particular time on such date, such reference will be deemed to be to the Alternative Conversion Rate immediately
after the Close of Business on such date; provided, further, that the Alternative Conversion Rate shall be subject to adjustment
pursuant to Section 7(K).
“Anniversary
Warrants” has the meaning ascribed to it in the Securities Purchase Agreement.
“Antitrust
Laws” means the HSR Act and any applicable antitrust, competition or merger control laws or regulations.
“Antitrust
Restrictions” has the meaning set forth in Section 8(T).
“ATM
Sales Agreement” has the meaning set forth in Section 8(R).
“Attribution
Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder
funds or managed accounts, currently, or from time to time after the Issue Date, directly or indirectly managed or advised by the Holder’s
investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing,
(iii) any Person acting or who could be deemed to be acting as a “group” (within the meaning of Section 13(d)(3) of the Exchange
Act) together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Common Stock would
or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For
clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
“Bankruptcy
Law” means Title 11, United States Code, or any similar U.S. federal or state or non-U.S. law for the relief of debtors.
“Bayswater
PSA” has the meaning given to such term in the Securities Purchase Agreement.
“Below
Floor Alternative Conversion” has the meaning set forth in Section 5(C).
“Board
of Directors” means the board of directors of the Company or a committee of such board duly authorized to act on behalf of
such board.
“Business
Combination Event” has the meaning set forth in Section 9.
“Business
Day” means any day other than a Saturday, a Sunday or any day on which commercial banks in The City of New York are authorized
or required by law or executive order to close or be closed; provided, however, for clarification, commercial banks in
The City of New York shall not be deemed to be authorized or required by law or executive order to close or be closed due to “stay
at home,” “shelter-in-place,” “non-essential employee” or any other similar orders or restrictions or the
closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems
(including for wire transfers) of commercial banks in The City of New York are open for use by customers on such day.
“Capital
Lease” means, with respect to any Person, any leasing or similar arrangement conveying the right to use any property, whether
real or personal property, or a combination thereof, by that Person as lessee that, in conformity with GAAP, is required to be accounted
for as a capital lease on the balance sheet of such Person.
“Capital
Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a Capital Lease
that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease
may be prepaid by the lessee without payment of a penalty.
“Capital
Stock” of any Person means any and all shares of, interests in, rights to purchase, warrants or options for, participations
in, or other equivalents of, in each case however designated, the equity of such Person, but excluding any debt securities convertible
into such equity.
“Cash”
means all cash and liquid funds.
“Cash
Equivalents” means, as of any date of determination, any of the following: (A) marketable securities (i) issued or directly
and unconditionally guaranteed as to interest and principal by the United States Government, or (ii) issued by any agency of the United
States Government, the obligations of which are backed by the full faith and credit of the United States, in each case maturing within
one (1) year after such date; (B) marketable direct obligations issued by any state of the United States or any political subdivision
of any such state or any public instrumentality thereof, in each case maturing within one (1) year after such date and having, at the
time of the acquisition thereof, a rating of at least A-1 from Standard & Poor’s Corporation or at least P-1 from Moody’s
Investors Service; (C) commercial paper maturing no more than one (1) year from the date of creation thereof and having, at the time
of the acquisition thereof, a rating of at least A-1 from Standard & Poor’s Corporation or at least P-1 from Moody’s
Investors Service; (D) certificates of deposit or bankers’ acceptances maturing within one (1) year after such date and issued
or accepted by any commercial bank organized under the laws of the United States or any state thereof, or the District of Columbia that
(i) is at least “adequately capitalized” (as defined in the regulations of its primary federal banking regulator), and (ii)
has Tier 1 capital (as defined in such regulations) of not less than $5,000,000,000; and (E) shares of any money market mutual fund that
(i) has substantially all of its assets invested continuously in the types of investments referred to in clauses (A) and (B)
above, (ii) has net assets of not less than $5,000,000,000, and (iii) has the highest rating obtainable from either Standard &
Poor’s Corporation or Moody’s Investors Service.
“Cash
Sweep Amount” means, (a) with respect to any Cash Sweep Financing, twenty five percent (25%) of the net proceeds from such
financing and (b) with respect to any DFCF Action, twenty five percent (25%) of the amount of such dividend, distribution, prepayment
or Investment, as applicable.
“Cash
Sweep Certification” has the meaning set forth in Section 4(B)(ii).
“Cash
Sweep Financing” means any Equity Issuance resulting in proceeds to the Company.
“Cash
Sweep Notice” has the meaning set forth in Section 4(B)(iii).
“Cash
Sweep Payment” has the meaning set forth in Section 4(B)(i).
“Close
of Business” means 5:00 p.m., New York City time.
“Code”
means the United States Internal Revenue Code of 1986, as amended.
“Commission”
means the U.S. Securities and Exchange Commission.
“Common
Stock” means the common stock, par value $0.01 per share, of the Company, subject to Section 7(I).
“Common
Stock Change Event” has the meaning set forth in Section 7(I)(i).
“Company
Redemption Date” has the meaning set forth in Section 4(C).
“Company
Redemption Equity Conditions” will be deemed to be satisfied as of any date if all of the following conditions are satisfied
as of such date and on each of the twenty (20) previous Trading Days: (A) the shares issuable pursuant to this Certificate of Designation
are Freely Tradable; (B) the Holder is not in possession of any material non-public information; (C) such shares will satisfy Section
7(F)(i); (D) the Company is not in possession of any material non-public information and neither the Company, nor any director, executive
officer or employee of the Company, is otherwise restricted from trading the Company’s Capital Stock pursuant to the Company’s
insider trading policy or other corporate governance policies and (E) no pending, proposed or intended Fundamental Change has occurred
that has not been abandoned, terminated or consummated.
“Company
Redemption Equity Conditions Period” has the meaning set forth in Section 4(C)(iii).
“Company
Redemption Notice” has the meaning set forth in Section 4(C).
“Company
Redemption Price” means, a cash amount per share of Preferred Stock equal to the greater of (A) (i) one hundred twenty five
percent (125%) multiplied by (ii) the Stated Value of a share of Preferred Stock plus (iii) the accrued and
unpaid dividends on such share of Preferred Stock and (B) (i) one hundred twenty five percent (125%) multiplied by (ii)
(x) the Conversion Rate in effect as of the Trading Day immediately preceding such Company Redemption Date multiplied by
(y) the highest Daily VWAP per share of Common Stock during the period beginning on, and including, the fifth VWAP Trading Day prior
to the date that the Company Redemption Notice is delivered and ending on, and including, the VWAP Trading Day immediately preceding
such Company Redemption Date plus (iii) the accrued and unpaid dividends on such share of Preferred Stock.
“Company
Vendor Contract” means a contract or other agreement between the Company or any of its Subsidiaries and a vendor, contractor
or other service provider that is providing services to the Company or any of its Subsidiaries at a Company- or Subsidiary-operated drilling
or production site, excluding contracts with Persons providing midstream or other transportation or processing services.
“Compensation
Committee” has the meaning set forth in Section 8(O).
“Compliance
Certification” has the meaning set forth in Section 8(U).
“Contingent
Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with
respect to (A) any Indebtedness or other obligations of another Person, including any such obligation directly or indirectly guaranteed,
endorsed, co-made, discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly
liable; (B) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account
of that Person; and (C) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates,
currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements
for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided,
however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“Conversion
Consideration” has the meaning set forth in Section 7(E)(ii).
“Conversion
Date” means the first Business Day on which the requirements set forth in Section 7(C)(i) to convert shares of Preferred
Stock are satisfied.
“Conversion
Price” means, as of any time, an amount equal to (A) one thousand dollars ($1,000) divided by (B) the Conversion Rate
in effect at such time.
“Conversion
Rate” initially means 202.0202 shares of Common Stock per share of Preferred Stock; provided, however, that the
Conversion Rate is subject to adjustment pursuant to Section 7; provided, further, that whenever this Certificate
of Designation refers to the Conversion Rate as of a particular date without setting forth a particular time on such date, such reference
will be deemed to be to the Conversion Rate immediately after the Close of Business on such date.
“Conversion
Settlement Date” has the meaning set forth in Section 7(E)(iv).
“Convertible
Securities” means any Capital Stock or other security (other than Options) that is at any time and under any circumstances,
directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire,
any shares of Common Stock.
“Copyright
License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter
acquired by the Company or in which the Company now holds or hereafter acquires any interest.
“Copyrights”
means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or of any
other country.
“Covering
Price” has the meaning set forth in Section 7(E)(v)(1).
“Covering
Price Excess” has the meaning set forth in Section 7(E)(v)(2).
“Current
Ratio” has the meaning set forth in, and shall be calculated in all respects (including with respect to when such calculations
shall be made for any given fiscal quarter) in accordance with, the Senior Indebtedness Agreement as in effect as of the Issue Date;
provided that no curative actions taken in accordance with Section 9.01(c) of the Senior Indebtedness Agreement (as in effect as of the
Issue Date) shall be taken into account when calculating Current Ratio hereunder.
“Daily
VWAP” means, for any VWAP Trading Day, the per share volume-weighted average price of the Common Stock on The Nasdaq Capital
Market (or the principal, in terms of volume, Eligible Exchange on which the Common Stock is listed for trading) as displayed under the
heading “Bloomberg VWAP” on Bloomberg page “PROP <EQUITY> VAP” (or, if such page is not available, its
equivalent successor page) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary
trading session on such VWAP Trading Day (or, if such volume-weighted average price is unavailable, the market value of one share of
Common Stock on such VWAP Trading Day, determined, using a volume-weighted average price method, by a nationally recognized independent
investment banking firm selected by the Company). The Daily VWAP will be determined without regard to after-hours trading or any other
trading outside of the regular trading session.
“DFCF
Action” means (i) any dividend or distribution declared or made pursuant to Section 9.04(a)(iii) of the Senior Indebtedness
Agreement, (ii) any prepayment of Indebtedness made pursuant to Section 9.04(b)(i)(D) of the Senior Indebtedness Agreement or (iii) any
Investment acquired, owned or made pursuant to Section 9.05(g) of the Senior Indebtedness Agreement (in each case of such sections of
the Senior Indebtedness Agreement, as such sections are in effect as of the Issue Date).
“Disqualified
Stock” means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:
(A) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;
(B) is
convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the
option of the Company or a Subsidiary of the Company; provided that any such conversion or exchange will be deemed an incurrence of Indebtedness
or Disqualified Stock, as applicable); or
(C) is
redeemable at the option of the holder thereof, in whole or in part,
(D) in
the case of each of clauses (A), (B) and (C), at any point prior to the one hundred eighty-first (181st) day after
the redemption of all shares of Preferred Stock.
“Dividend
Payment Date” means each March 1, June 1, September 1 and December 1 of each calendar year, beginning on June 1, 2025.
“DTC”
means The Depository Trust Company.
“Eligible
Exchange” means any of The New York Stock Exchange, The NYSE American LLC, The Nasdaq Stock Market, The Nasdaq Capital Market,
The Nasdaq Global Market or The Nasdaq Global Select Market (or any of their respective successors).
“Equity
Conditions” will be deemed to be satisfied as of any date if all of the following conditions are satisfied as of such date
and on each of the twenty (20) previous Trading Days: (A) the shares issuable pursuant to this Certificate of Designation are Freely
Tradable; (B) the Holder is not in possession of any material non-public information concerning the Company; (C) the issuance of such
shares will not be limited by Section 7(J)(ii); (D) such shares will satisfy Section 7(F)(i); (E) no pending, proposed
or intended Fundamental Change has occurred that has not been abandoned, terminated or consummated; (F) the Daily VWAP per share of the
Common Stock on The Nasdaq Capital Market is not less than one dollar ($1.00) (subject to proportionate adjustments for events of the
type set forth in Section 7(G)(i)(1)); (G) the daily dollar trading volume (as reported on Bloomberg) of the Common Stock on The
Nasdaq Capital Market is not less than five hundred thousand dollars ($500,000); (H) no delisting or suspension by the principal, in
terms of volume, Eligible Exchange on which the Company is then listed or traded has been threatened (with a reasonable prospect of delisting
or suspension occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or is reasonably likely
to occur or pending as evidenced by (x) a writing by such Eligible Exchange or (y) the Company falling below the minimum listing maintenance
requirements, if applicable, of such Eligible Exchange; (I) no Triggering Event will have occurred that has not been waived and no Trigger
will have occurred and be continuing which has not been waived and (J) the Market Stock Payment Price is equal to or greater than the
Absolute Floor Price.
“Equity
Interest” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents, including
preferred stock or membership interests (however designated, whether voting or non-voting), of equity of such Person, including, if such
Person is a partnership, partnership interests (whether general or limited) and including, without limitation, any “equity security”
(as that term is defined under Rule 405 promulgated under the Securities Act), and any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.
“Equity
Issuance” shall mean (a) any issuance or sale by the Company or any of its Subsidiaries of any Equity Interests (including
any Equity Interests issued upon exercise or conversion of any Equity Rights and the issuance of any Equity Interests pursuant to any
“at-the-market” offering (within the meaning of Rule 415(a)(4) of the Securities Act)) or equity line of credit or any Equity
Rights, or (b) the receipt by the Company or any of its Subsidiaries of any capital contribution (whether or not evidenced by any Equity
Interest issued by the recipient of such contribution), in each case for bona fide capital-raising purposes and other than (i) any issuance
of Equity Interests upon the exercise of any Equity Rights outstanding as of the date hereof provided, that such issuance is made pursuant
to the terms of such Equity Rights in effect on the date hereof and such Equity Rights are not amended to increase the number of such
Equity Interests or to decrease the exercise price, exchange price or conversion price of Equity Rights, (ii) Equity Interests issuable
pursuant to an Approved Stock Plan (as defined in the Securities Purchase Agreement) or upon the exercise of any Equity Rights or upon
the lapse of forfeiture restrictions on awards made pursuant to an Approved Stock Plan (including Equity Interests withheld by the Company
for the purpose of paying on behalf of the holder thereof the exercise price of Options or for paying taxes due as a result of such exercise
or lapse of forfeiture restrictions) or (iii) Common Stock issuable upon the exercise of Options or upon the lapse of forfeiture restrictions
on awards made pursuant to, any stock option exchange program of the Company that is approved by the Board of Directors or the Compensation
Committee thereof or the Company’s stockholders, whether now in effect or hereafter implemented.
“Equity
Rights” shall mean, with respect to any Person, any then-outstanding subscriptions, Options, warrants, commitments, preemptive
rights, convertible debt, or other equity-linked securities or agreements of any kind for the issuance or sale, of any additional Equity
Interests of any class, or partnership or other ownership interests of any type in, such Person.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“Ex-Dividend
Date” means, with respect to an issuance, dividend or distribution on the Common Stock, the first date on which shares of Common
Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend
or distribution (including pursuant to due bills or similar arrangements required by the relevant stock exchange). For the avoidance
of doubt, any alternative trading convention on the applicable exchange or market in respect of the Common Stock under a separate ticker
symbol or CUSIP number will not be considered “regular way” for this purpose.
“Exercise
Transactions” has the meaning set forth in Section 8(T).
“Excess
Shares” has the meaning set forth in Section 7(J)(i).
“Exchange
Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Expiration
Date” has the meaning set forth in Section 7(G)(i)(5).
“Expiration
Time” has the meaning set forth in Section 7(G)(i)(5).
“Floor
Price” has the meaning set forth in Section 5(C).
“Floor
Price Conversion Rate” means a number of shares of Common Stock per share of Preferred Stock equal to the result (rounded up
to the closest whole number) of (A) (i) the Repayment Multiplier multiplied by (ii) the Stated Value of the share of Preferred
Stock subject to the Alternative Conversion divided by (B) the Floor Price; provided, that the Floor Price Conversion
Rate shall be subject to adjustment pursuant to Section 7(K).
“Freely
Tradable” means, with respect to any shares of Common Stock issued or issuable pursuant to this Certificate of Designation,
that (A) such shares are (or when issued, will be) issued by the Company pursuant to an effective registration statement and would not
constitute “restricted securities” within the meaning of Rule 144, or would be eligible to be offered, sold or otherwise
transferred by the Holder pursuant to Rule 144, without any requirements as to volume, manner of sale, availability of current public
information (whether or not then satisfied) or notice under the Securities Act and without any requirement for registration under any
state securities or “blue sky” laws; (B) such shares are (or, when issued, will be) (i) represented by book-entries at DTC
and identified therein by an “unrestricted” CUSIP number; (ii) not represented by any certificate that bears a legend referring
to transfer restrictions under the Securities Act or other securities laws; and (iii) listed and admitted for trading, without suspension
or material limitation on trading, on an Eligible Exchange; and (C) no delisting or suspension by such Eligible Exchange is pending or
has been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance
and hearing periods) or reasonably likely to occur or pending as evidenced by (x) a writing by such Eligible Exchange or (y) the Company
falling below the minimum listing maintenance requirements of such Eligible Exchange.
“Fundamental
Change” means any of the following events:
(A) a
“person” or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than the Company or its
Wholly Owned Subsidiaries, or the employee benefit plans of the Company or its Wholly Owned Subsidiaries, files any report with the Commission
indicating that such person or group has become the direct or indirect “beneficial owner” (as defined below) of shares of
the Company’s common equity representing more than fifty percent (50%) of the voting power of all of the Company’s then-outstanding
common equity;
(B) the
consummation of (i) any sale, lease or other transfer, in one transaction or a series of transactions, of all or substantially all of
the assets of the Company and its Subsidiaries, taken as a whole, to any Person (other than solely to one or more of the Company’s
Wholly Owned Subsidiaries); or (ii) any transaction or series of related transactions in connection with which (whether by means of merger,
consolidation, share exchange, combination, reclassification, recapitalization, acquisition, liquidation or otherwise) all of the Common
Stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive, other securities, cash or other property
(other than a subdivision or combination, or solely a change in par value, of the Common Stock); provided, however, that
any merger, consolidation, share exchange or combination of the Company pursuant to which the Persons that directly or indirectly “beneficially
owned” (as defined below) all classes of the Company’s common equity immediately before such transaction directly or indirectly
“beneficially own,” immediately after such transaction, more than fifty percent (50%) of all classes of common equity of
the surviving, continuing or acquiring company or other transferee, as applicable, or the parent thereof, in substantially the same proportions
vis-à-vis each other as immediately before such transaction will be deemed not to be a Fundamental Change pursuant to this clause
(B);
(C) the
Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company;
(D) any
breach or default occurs pursuant to the terms of the Senior Indebtedness Agreement or under any agreement evidencing a Senior Indebtedness
Permitted Refinancing, if the effect of such breach or default is to (i) cause (including following the termination of any waiver or
forbearance in connection with such breach or default) the Indebtedness thereunder to become or be declared due prior to its stated maturity
or (ii) permit the holders of such Indebtedness to cause such Indebtedness to become or be declared due prior to its stated maturity
and the requisite holders do not validly waive or enter into a forbearance in connection with such breach or default within sixty (60)
days (A) from its receipt of notice of such breach or default or (B) to the extent a waiver or forbearance in connection with such breach
or default was previously entered into and subsequently terminated (and the result of such termination is to permit the holders of such
Indebtedness to cause such Indebtedness to become or be declared due prior to its stated maturity), from such termination; or
(E) the
Common Stock ceases to be listed on any Eligible Exchange.
For
purposes of this definition, (x) any transaction or event described in both clause (A) and in clause
(B) above (without regard to the proviso in clause (B)) will be deemed to occur solely pursuant to clause
(B) above (subject to such proviso); and (y) whether a Person is a “beneficial owner” and whether
shares are “beneficially owned” will be determined in accordance with Rule 13d-3 under the Exchange Act.
“Fundamental
Change Notice” has the meaning set forth in Section 6(A)(iii).
“Fundamental
Change Redemption Date” means the date as of which shares of Preferred Stock must be repurchased for cash in connection with
a Fundamental Change, as provided in Section 6(A)(ii).
“Fundamental
Change Redemption Price” means, with respect to each share of Preferred Stock upon a Redemption Upon Fundamental Change, a
cash amount equal to the greater of (A) (i) one hundred twenty five percent (125%) multiplied by (ii) the Stated Value
plus (iii) the accrued and unpaid dividends on such share of Preferred Stock and (B) (i) one hundred twenty five percent
(125%) multiplied by (ii) (x) the Conversion Rate in effect as of the Trading Day immediately preceding the effective date
of such Fundamental Change multiplied by (y) the highest Daily VWAP per share of Common Stock occurring during the period
commencing five (5) Trading Days prior to the earlier of (a) the effective date of such Fundamental Change and (b) the date that such
Fundamental Change is publicly announced and ending on the date immediately preceding the Fundamental Change Redemption Date plus
(iii) the accrued and unpaid dividends on such share of Preferred Stock.
“GAAP”
means generally accepted accounting principles in the United States of America, as in effect from time to time; provided the definitions
set forth in this Certificate of Designation and any financial calculations required thereby shall be computed to exclude any change
to lease accounting rules from those in effect pursuant to Financial Accounting Standards Board Accounting Standards Codification 840
(Leases) and other related lease accounting guidance as in effect on the date hereof.
“Governmental
Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Holder”
means any person in whose name the shares of Preferred Stock are registered on the books of the Company, which initially is the Initial
Holder.
The
term “including” means “including without limitation,” unless the context provides otherwise.
“Holder
Conversion Notice” has the meaning set forth in Section 7(C)(i).
“HSR
Act” has the meaning set forth in Section 8(T).
“Indebtedness”
means, indebtedness of any kind, including, without duplication (A) all indebtedness for borrowed money or the deferred purchase price
of property or services, including reimbursement and other obligations with respect to surety bonds and letters of credit, (B) all obligations
evidenced by notes, bonds, debentures or similar instruments, (C) all Capital Lease Obligations, (D) all Contingent Obligations, and
(E) Disqualified Stock.
“Independent
Investigator” has the meaning set forth in Section 8(S).
“Initial
Holder” means Hudson Bay PH XIX LLC.
“Intellectual
Property” means all of the Company’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; mask works;
the Company’s applications therefor and reissues, extensions or renewals thereof; and the Company’s goodwill associated with
any of the foregoing, together with the Company’s rights to sue for past, present and future infringement of Intellectual Property
and the goodwill associated therewith.
“Investment”
means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan,
advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person or the
purchase of any assets of another Person for greater than the fair market value of such assets to solely the extent of the amount in
excess of the fair market value.
“Issue
Date” means March 26, 2025.
“Junior
Securities” means the Common Stock and all other Convertible Securities of the Company other than those securities which are
explicitly senior to or pari passu with the Preferred Stock in dividend rights or liquidation preference.
“KPIs”
has the meaning set forth in Section 8(O).
“Last
Reported Sale Price” of the shares of Common Stock for any Trading Day means the closing sale price per share (or, if no closing
sale price is reported, the average of the last bid price and the last ask price per share or, if more than one in either case, the average
of the average last bid prices and the average last ask prices per share) of Common Stock on such Trading Day as reported in composite
transactions for the principal U.S. national or regional securities exchange on which the shares of Common Stock are then listed. If
the Common Stock is not listed on a U.S. national or regional securities exchange on such Trading Day, then the Last Reported Sale Price
will be the last quoted bid price per share of Common Stock on such Trading Day in the over-the-counter market as reported by OTC Markets
Group Inc. or a similar organization. If the Common Stock is not so quoted on such Trading Day, then the Last Reported Sale Price will
be the average of the mid-point of the last bid price and the last ask price per share of Common Stock on such Trading Day from a nationally
recognized independent investment banking firm selected by the Company.
“License”
means any Copyright License, Patent License, Trademark License or other license of rights or interests.
“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge
of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or
other title retention agreement, and any lease in the nature of a security interest; provided, that for the avoidance of doubt, licenses,
strain escrows and similar provisions in collaboration agreements, research and development agreements that do not create or purport
to create a security interest, encumbrance, levy, lien or charge of any kind shall not be deemed to be Liens for purposes of this Certificate
of Designation.
“Market
Disruption Event” means, with respect to any date, the occurrence or existence, during the one-half hour period ending at the
scheduled close of trading on such date on the principal, in terms of volume, Eligible Exchange on which the Common Stock is listed for
trading or trades, of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted
by the relevant exchange or otherwise) in the Common Stock or in any options contracts or futures contracts relating to the Common Stock.
“Market
Stock Payment Price” means, with respect to any Dividend Payment Date or Alternative Conversion Date, as applicable, an amount
equal to eighty seven and one half percent (87.5%) of the lesser of (a) the Daily VWAP on the VWAP Trading Day immediately prior to such
Dividend Payment Date or Alternative Conversion Date, as applicable, and (b) the average of the two (2) lowest Daily VWAPs during the
five (5) VWAP Trading Day period ending on and including the VWAP Trading Day immediately prior to such Dividend Payment Date or Alternative
Conversion Date, as applicable (the lesser of clauses (a) and (b), the “Stock Price”); provided,
however, that with respect to any Stated Dividend paid in shares of Common Stock on or after the twelve (12) month anniversary of the
Issue Date, if the Stock Price for such Dividend Payment Date is less than one hundred fifteen percent (115%) of the Conversion Price,
the Market Stock Payment Price for such Dividend Payment Date shall be equal to eighty one percent (81%) of the Stock Price.
“Maximum
Percentage” has the meaning set forth in Section 7(J)(i).
“Mirror
Credit Facility” has the meaning set forth in Section 11.
“MSA
Subordination Provision” means a provision substantially in the form of the provision set forth in Schedule 4(cc)(2) of the
Securities Purchase Agreement.
“Net
Leverage Ratio” has the meaning set forth in, and shall be calculated in all respects (including with respect to when such
calculations shall be made for any given fiscal quarter) in accordance with, the Senior Indebtedness Agreement as in effect as of the
Issue Date; provided that no curative actions taken in accordance with Section 9.01(c) of the Senior Indebtedness Agreement (as in effect
as of the Issue Date) shall be taken into account when calculating Net Leverage Ratio hereunder.
“Open
of Business” means 9:00 a.m., New York City time.
“Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
The
term “or” is not exclusive, unless the context expressly provides otherwise.
“Other
Holder” means any person in whose name any Other Preferred Stock is registered on the books of the Company.
“Other
Preferred Stock” means, when describing the shares of Preferred Stock held by a Person other than a given Holder, any shares
of Preferred Stock that are of the same class of the Preferred Stock owned by such Holder and that are represented by one or more certificates
other than the certificate representing the Preferred Stock owned by such Holder.
“Patent
License” means any written agreement granting any right with respect to any invention covered by a Patent that is in existence
or a Patent application that is pending, in which agreement the Company now holds or hereafter acquires any interest.
“Patents”
means all letters patent of, or rights corresponding thereto, in the United States or in any other country, all registrations and recordings
thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States or any other country.
“Permitted
Indebtedness” means (A) Senior Indebtedness; and (B) Indebtedness permitted to be created, incurred, assumed, guaranteed or
to be or remain liable with respect to any Indebtedness, in each case, under Section 9.02 of the Senior Indebtedness Agreement as in
effect on the Issue Date (other than with respect to Section 9.02(e), (g) and (m) thereof (in each case of such sections of the Senior
Indebtedness Agreement, as such sections are in effect as of the Issue Date)).
“Permitted
Intellectual Property Licenses” means (A) Intellectual Property licenses actually disclosed pursuant to the Securities Purchase
Agreement as in effect on the Issue Date, and (B) non-perpetual Intellectual Property licenses granted in the ordinary course of business
on arm’s length terms consisting of the licensing of technology, the development of technology or the providing of technical support
which may include licenses with unlimited renewal options solely to the extent such options require mutual consent for renewal or are
subject to financial or other conditions as to the ability of licensee to perform under the license; provided such license was not entered
into during a Triggering Event.
“Permitted
Investment” means: (A) Investments actually disclosed pursuant to the Securities Purchase Agreement, as in effect as of the
Issue Date; and (B) Investments permitted to be acquired, owned or made, in each case, under Section 9.05 of the Senior Indebtedness
Agreement as in effect on the Issue Date (other than with respect to Investments permitted pursuant to (w) Section 9.05(b)(iii), (x)
Section 9.05(h), provided that the maximum amount applicable thereto shall be an aggregate of five hundred thousand dollars ($500,000),
(y) Section 9.05(i), provided that the maximum amount applicable thereto shall be two hundred fifty thousand dollars ($250,000) and (z)
Section 9.05(l), provided that the maximum amount applicable thereto shall be five hundred thousand dollars ($500,000), in each case
of such sections of the Senior Indebtedness Agreement, as such sections are in effect as of the Issue Date); provided that any such Investments
made pursuant to Section 9.05(g) thereof shall be subject to Section 4(B) hereof.
“Permitted
Liens” means any and all of the following: (A) (i) Liens securing obligations permitted under clause (A) of the definition
of Permitted Indebtedness and (ii) Liens actually disclosed pursuant to the Securities Purchase Agreement as in effect as of the Issue
Date; and (B) Liens permitted to be created, incurred, assumed, permitted or suffered to exist, in each case, under Section 9.03 of the
Senior Indebtedness Agreement as in effect on the Issue Date (other than with respect to Section 9.03(h) thereof (as in effect as of
the Issue Date)).
“Permitted
Transfers” means transfers, sales, leases, licenses, lending or other conveyances, in each case, permitted under Section 9.12
of the Senior Indebtedness Agreement as in effect on the Issue Date (other than with respect to such transactions permitted pursuant
to Section 9.12(d), (e) and (l) and clause (i) of the last paragraph thereto (in each case of such sections of the Senior Indebtedness
Agreement, as such sections are in effect as of the Issue Date), in an aggregate amount in excess of five million dollars ($5,000,000)).
“Person”
or “person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, company,
trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“PSU’s”
has the meaning set forth in Section 8(O).
“Redemption
Upon Fundamental Change” means the repurchase of any shares of Preferred Stock by the Company pursuant to Section 6(A).
“Reference
Property” has the meaning set forth in Section 7(I)(i)(4).
“Reference
Property Unit” has the meaning set forth in Section 7(I)(i)(4).
“Repayment
Multiplier” means, as of any date, an amount equal to one hundred six and one quarter percent (106.25%) plus
six and one quarter percent (6.25%) on each one (1) year anniversary of the Issue Date. For example, on and after the one-year anniversary
of the Issue Date but before the two-year anniversary of the Issue Date, the Repayment Multiplier will be equal to one hundred twelve
and one half percent (112.5%).
“Reported
Outstanding Share Number” has the meaning set forth in Section 7(J)(i).
“Required
Holders” has the meaning set forth in the Securities Purchase Agreement.
“Required
Reserve Amount” has the meaning in Section 8(Q).
“Requisite
Stockholder Approval” means the stockholder approval contemplated by Nasdaq Listing Rule 5635(d) (or similar rule of the principal,
in terms of volume, Eligible Exchange on which the Common Stock is listed for trading) with respect to the issuance of shares of Common
Stock upon conversion of the shares of Preferred Stock and exercise of the Anniversary Warrants in excess of the limitations imposed
by such rule; provided, however, that the Requisite Stockholder Approval will be deemed to be obtained if, due to any amendment
or binding change in the interpretation of the applicable listing standards of the Nasdaq Capital Market (or of the principal, in terms
of volume, Eligible Exchange on which the Common Stock is listed for trading), such stockholder approval is no longer required for the
Company to settle all conversions of Preferred Stock by delivering shares of Common Stock without limitation pursuant to this Certificate
of Designation.
“RSU’s”
has the meaning set forth in Section 8(O).
“Rule
144” means Rule 144 promulgated under the Securities Act.
“Scheduled
Trading Day” means any day that is scheduled to be a Trading Day on the principal U.S. national or regional securities exchange
on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities exchange,
on the principal, in terms of volume, Eligible Exchange on which the Common Stock is listed for trading. If the Common Stock is not so
listed or traded, then “Scheduled Trading Day” means a Business Day.
“Securities
Act” means the U.S. Securities Act of 1933, as amended.
“Securities
Purchase Agreement” means that certain Securities Purchase Agreement, dated as of March 24, 2025 between the Company and the
Initial Holder, providing for the issuance of the Preferred Stock.
“Senior
Indebtedness” means Indebtedness incurred pursuant to the Senior Indebtedness Agreement, together with any Senior Indebtedness
Permitted Refinancing.
“Senior
Indebtedness Agreement” means that certain agreement evidencing Indebtedness of the Company set forth on Exhibit F of the Securities
Purchase Agreement, as such agreement may be amended, amended and restated, or otherwise modified; provided such amendment, amendment
and restatement, or modification shall not (i) amend the maturity to a date earlier than the Senior Indebtedness Maturity Date or (ii)
otherwise have, in the reasonable determination of the Holder, an adverse effect on such Holder.
“Senior
Indebtedness Maturity Date” means the earlier of (i) March 26, 2029 and (ii) the date the obligations for borrowed money under
the Senior Indebtedness Agreement have been repaid in full.
“Senior
Indebtedness Permitted Refinancing” means any refinancing, refunding, renewal or extension of the Senior Indebtedness; provided
such refinancing, refunding, renewal or extension (i) shall not provide for any amortization payment, mandatory redemption payment, sinking
fund, final maturity date or other repurchase or repayment of principal on an earlier date than required under the Senior Indebtedness
Agreement as in effect on the Issue Date, (ii) does not have any covenants that are more restrictive on the Company in any material respect
than the covenants set forth in the Senior Indebtedness Agreement as in effect on the Issue Date unless the Company makes a bona fide
offer to provide the Holders a correspondingly more restrictive covenant, (iii) does not have, in the reasonable determination of the
Holder, an adverse effect on such Holder and (iv) is on customary terms for a conforming borrowing base revolving credit facility, based
on usual and customary oil and gas lending criteria as they exist at such time for reserve-based, secured oil and gas loan transactions
in the United States, which may include customary mechanisms for semi-annual scheduled redeterminations thereof and customary adjustments
for asset sales and terminations of hedging agreements.
“Share
Delivery Date” means any (i) Dividend Payment Date on which the Company makes a payment of Stated Dividend in Common Stock
in accordance with Section 5(B) or (ii) Conversion Settlement Date.
“Significant
Subsidiary” means, with respect to any Person, any Subsidiary of such Person that constitutes a “significant subsidiary”
(as defined in Rule 1-02(w) of Regulation S-X under the Exchange Act) of such Person.
“Spin-Off”
has the meaning set forth in Section 7(G)(i)(3)(b).
“Spin-Off
Valuation Period” has the meaning set forth in Section 7(G)(i)(3)(b).
“Standard
Conversion Consideration” has the meaning set forth in Section 7(E)(i).
“Stated
Dividend” has the meaning set forth in Section 4(A).
“Stated
Dividend Rate” means, as of any date, a rate per annum equal to twelve percent (12%); provided that, from, including and after
the date that is the six (6) month anniversary of the Senior Indebtedness Maturity Date, the Stated Dividend Rate shall mean twenty five
percent (25%).
“Stated
Dividend Stock Payment Notice” has the meaning set forth in Section 5(B).
“Stated
Value” means, with respect to any share of Preferred Stock, $1,000 (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination, or other similar recapitalization with respect to the Preferred Stock).
“Stock
Payment Determination Date” means (i) with respect to a payment of a Stated Dividend in shares of Common Stock in accordance
with Section 5(B), the related Dividend Payment Date, and (ii) with respect to the delivery of Conversion Consideration, the related
Conversion Date or Alternative Conversion Date.
“Subsidiary”
means, with respect to any Person, (A) any corporation, association or other business entity (other than a partnership or limited liability
company) of which more than fifty percent (50%) of the total voting power of the Capital Stock entitled (without regard to the occurrence
of any contingency, but after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting
power) to vote in the election of directors, managers or trustees, as applicable, of such corporation, association or other business
entity is owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person; and (B)
any partnership or limited liability company where (i) more than fifty percent (50%) of the capital accounts, distribution rights, equity
and voting interests, or of the general and limited partnership interests, as applicable, of such partnership or limited liability company
are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person, whether in the
form of membership, general, special or limited partnership or limited liability company interests or otherwise; and (ii) such Person
or any one or more of the other Subsidiaries of such Person is a controlling general partner of, or otherwise controls, such partnership
or limited liability company.
“Successor
Corporation” has the meaning set forth in Section 9(A).
“Successor
Person” has the meaning set forth in Section 7(I)(i).
“Taxes”
means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees
or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.
“Tender/Exchange
Offer Valuation Period” has the meaning set forth in Section 7(G)(i)(5).
“Trademark
License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter
acquired by the Company or in which the Company now holds or hereafter acquires any interest.
“Trademarks”
means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings
and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof.
“Trading
Day” means any day on which (A) trading in the Common Stock generally occurs on the principal U.S. national or regional securities
exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities
exchange, on the principal, in terms of volume, Eligible Exchange on which the Common Stock is listed for trading; and (B) there is no
Market Disruption Event, provided that the Holder, by written notice to the Company, may waive any such Market Disruption Event. If the
Common Stock is not so listed or traded, then “Trading Day” means a Business Day.
“Transaction
Documents” has the meaning set forth in the Securities Purchase Agreement.
“Trigger”
means any event that is (or, after notice, passage of time or both, would be) a Triggering Event.
“Triggering
Event” has the meaning set forth in Section 10(A).
“Triggering
Event Additional Shares” means, with respect to the conversion of a share of Preferred Stock, an amount equal to the excess,
if any, of (A) the Triggering Event Conversion Rate applicable to such conversion over (B) the Conversion Rate, Alternative Conversion
Rate or Floor Price Conversion Rate, as applicable, that would otherwise apply to such conversion without giving effect to Section
7(K). For the avoidance of doubt, the Triggering Event Additional Shares cannot be a negative number.
“Triggering
Event Conversion Period” means, with respect to a Triggering Event, the period beginning on, and including, the date such Triggering
Event occurs.
“Triggering
Event Conversion Price” means, with respect to the conversion of a share of Preferred Stock, the lesser of: (A) the Conversion
Price that would be in effect immediately after the Close of Business on the Conversion Date or Alternative Conversion Date, as applicable,
for such conversion, without giving effect to Section 7(K); and (B) seventy percent (70%) of the lowest Daily VWAP per share of
Common Stock during the ten (10) consecutive VWAP Trading Days ending on, and including, such Conversion Date or Alternative Conversion
Date, as applicable (or, if such Conversion Date or Alternative Conversion Date is not a VWAP Trading Day, the immediately preceding
VWAP Trading Day).
“Triggering
Event Conversion Rate” means, with respect to the conversion of a share of Preferred Stock, an amount (rounded to the nearest
1/10,000th of a share of Common Stock (with 5/100,000ths rounded upward)) equal to (A) (i) the Repayment Multiplier multiplied
by (ii) the Stated Value divided by (B) the Triggering Event Conversion Price applicable to such conversion.
“Triggering
Event Notice” has the meaning set forth in Section 10(B).
“UCC”
means the Uniform Commercial Code as the same is, from time to time, in effect in the State of New York.
“Undelivered
Shares” has the meaning set forth in Section 7(E)(v).
“VWAP
Market Disruption Event” means, with respect to any date, (A) the failure by the principal U.S. national or regional securities
exchange on which the Common Stock is then listed, or, if the Common Stock is not then listed on a U.S. national or regional securities
exchange, the principal, in terms of volume, Eligible Exchange on which the Common Stock is then traded, to open for trading during its
regular trading session on such date; or (B) the occurrence or existence, for more than one half hour period in the aggregate, of any
suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant exchange or otherwise)
in the Common Stock or in any options contracts or futures contracts relating to the Common Stock, and such suspension or limitation
occurs or exists at any time before 1:00 p.m., New York City time, on such date.
“VWAP
Trading Day” means a day on which (A) there is no VWAP Market Disruption Event; provided that the Holder, by written notice
to the Company, may waive any such VWAP Market Disruption Event; and (B) trading in the Common Stock generally occurs on the principal
U.S. national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on
a U.S. national or regional securities exchange, on the principal, in terms of volume, Eligible Exchange on which the Common Stock is
then traded. If the Common Stock is not so listed or traded, then “VWAP Trading Day” means a Business Day.
“Wholly
Owned Subsidiary” of a Person means any Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors’ qualifying shares) are owned by such Person or one or more Wholly Owned Subsidiaries of such Person.
“Withheld
Shares” has the meaning set forth in Section 7(J)(ii).
| Section
2. |
Designation,
Amount and Par Value. |
The
series of preferred stock shall be designated as its Series F Convertible Preferred Stock (the “Preferred Stock”)
and the number of shares so designated shall be up to 148,250. Each share of Preferred Stock shall have a par value of $0.01 per share
and a stated value equal to the Stated Value.
| Section
3. |
Rights
and Preferences of the Preferred Stock. |
(A) 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 Company shall not, without the affirmative vote of the Required Holders,
(a) alter or change the powers, preferences or rights given to the Preferred Stock in an adverse manner or alter or amend this Certificate
of Designation in such a manner so as to 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 any liquidation, dissolution or winding-up of the Company senior to, or otherwise
pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that 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.
(B) Liquidation.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders shall be entitled to receive
out of the assets, whether capital or surplus, of the Company an amount equal to the Fundamental Change Redemption Price 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 Company 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
4. |
Dividends;
Cash Sweep Payments; Company Redemption Election. |
(A) Dividends.
From and after the Issue Date, each Holder will be entitled to receive, on a cumulative basis, whether or not authorized or declared
and whether or not the Company has assets legally available therefor, dividends on each share of Preferred Stock (the “Stated
Dividend”) at a rate per annum equal to the Stated Dividend Rate on the amount equal to the sum of (a) the Stated Value plus
(b) all accrued and unpaid dividends on such share of Preferred Stock (including dividends accrued and unpaid on previously unpaid dividends).
Stated Dividends on each share of Preferred Stock will (i) accrue on the Stated Value and all accrued and unpaid dividends on such share;
(ii) accrue daily and compound quarterly from, and including, the most recent date to which a Stated Dividend has been paid or duly provided
for (or, if no Stated Dividend has theretofore been paid or duly provided for, the Issue Date) to, but excluding, the date of payment
of such Stated Dividend; (iii) be paid to Holder in cash on each Dividend Payment Date in accordance with Section 5(A) or in shares
of Common Stock on each Dividend Payment Date in accordance with Section 5(B); (iv) be paid to Holder with respect to any shares
of Preferred Stock such dividends have accrued on (including dividends accrued and unpaid on previously unpaid dividends thereon) concurrently
on any date on which any such shares of Preferred Stock are redeemed, converted or otherwise retired (including, without limitation,
a Conversion Settlement Date, Company Redemption Date, Fundamental Change Redemption Date, or any date that a Cash Sweep Payment is paid
by the Company to the Holder) and (v) be computed on the basis of a 360-day year comprised of twelve 30-day months.
(B) Cash
Sweep Payments.
(i) For
purposes of this Certificate of Designation, any payment made to the Holder pursuant to this Section 4(B) shall be referred to
as a “Cash Sweep Payment”.
(ii) Concurrently
with the completion of any Cash Sweep Financing or DFCF Action, the Company shall certify to each Holder in writing (i) the amount of
the applicable Cash Sweep Financing or DFCF Action, as applicable, and (ii) the calculation of the potential Cash Sweep Amount with respect
to such Cash Sweep Financing or DFCF Action, as applicable (including a certification that such Cash Sweep Amount was calculated in accordance
with the terms hereof) (such certification a “Cash Sweep Certification”); provided, however, that, unless consented
to by the Holder in writing, in the event that the extent of such Cash Sweep Financing or DFCF Action, as applicable, and Cash Sweep
Amount is such that the information required in such certification would constitute material non-public information regarding the Company,
then the Company shall also concurrently publicly disclose such material non-public information on a Current Report on Form 8-K or otherwise.
(iii) Each
Holder shall have the right to require the Company, exercisable by delivery of written notice to the Company of exercise of such right
(a “Cash Sweep Notice”) given within five (5) Business Days of delivery of a Cash Sweep Certification, to pay to the
Holder in cash within one (1) Business Day following the delivery of such Cash Sweep Notice (regardless of whether the Company actually
delivers a Cash Sweep Certification), all or a portion of the Cash Sweep Amount with respect to such Cash Sweep Financing or DFCF Action,
as applicable, in redemption of a number of shares of Preferred Stock at a price per share equal to the result (rounded up to the nearest
second decimal) of (A) (i) the Repayment Multiplier multiplied by (ii) the Stated Value of such shares of Preferred Stock,
plus (B) the accrued and unpaid dividends on such shares.
(C) Company
Redemption Election.
(i) The
Company may redeem all (but not less than all) of the then outstanding shares of Preferred Stock (a “Company Redemption”)
on a date to be determined by the Company in its discretion (any such date a “Company Redemption Date”), for a cash
redemption price per share of Preferred Stock equal to the Company Redemption Price; provided, that the Company must provide written
notice of a Company Redemption, which notice shall state the Company Redemption Date and the number of shares of Preferred Stock to be
redeemed (which, for the avoidance of doubt, shall not be less than all of the then outstanding shares of Preferred Stock) (a “Company
Redemption Notice”) at least twenty (20) Trading Days’ prior to such Company Redemption Date and the Company must have,
on or prior to 8:30 a.m., New York City time, on the Trading Day on which such Company Redemption Notice is delivered, publicly disclosed
any material, non-public information regarding the Company (including the fact that the Company is redeeming the Preferred Stock) on
a Form 8-K or otherwise, unless otherwise consented to by the Holder in writing. Each Holder may convert any number of shares of Preferred
Stock held by such Holder prior to the time the Company has made payment of the Company Redemption Price.
(ii) If
any share of Preferred Stock is to be redeemed pursuant to this Section 4(C) then, from and after the date the related Company
Redemption Price is paid in full, such share will cease to be outstanding.
(iii) Notwithstanding
anything herein to the contrary, the Company will not have the right to, and will not, make any Company Redemption pursuant to this Section
4(C) if (x) the Company is in possession of material non-public information or (y) the Company Redemption Equity Conditions are not
satisfied on each Trading Day during the period commencing on the date the Company Redemption Notice is delivered to the Holder and ending
on, and including the Company Redemption Date (such period, the “Company Redemption Equity Conditions Period”) (and
the Company shall certify in writing to each Holder (A) on the date of the Company Redemption Notice, within such notice, that the Company
Redemption Equity Conditions were satisfied as of the date of the Company Redemption Notice and (B) on the Company Redemption Date that
the Company Redemption Equity Conditions have continued to have been satisfied on each Trading Day during the remainder of the Company
Redemption Equity Conditions Period), unless such failure of the Company Redemption Equity Conditions to be so satisfied is waived in
writing by the Holder, which waiver may be granted or withheld by the Holder in its sole discretion.
(iv) Other
than as set forth in this Section 4(C), the Company may not redeem any shares of Preferred Stock or the shares of Common Stock
issued upon conversion thereof without the prior written consent of the Holder.
| Section
5. |
Method
of Payment; When Payment Date is Not a Business Day. |
(A) Method
of Payment. The Company will pay all cash amounts due under this Certificate of Designation by wire transfer of immediately available
funds to the account of the Holder as set forth in a written notice of such Holder delivered by the Holder to the Company at least one
(1) Business Day before the date such amount is due.
(B) Company’s
Election to Pay Stated Dividend in Cash or Common Stock. At least fifteen (15) Trading Days (but no more than twenty (20) Trading
Days) prior to a Dividend Payment Date, the Company, if it desires to elect to make a payment of a Stated Dividend with respect to such
Dividend Payment Date, entirely or partially, in shares of Common Stock, shall deliver to the Holder a written notice of such election
stating which portion thereof the Company has elected to pay in shares of Common Stock and certifying that the Equity Conditions are
satisfied as of such date (a “Stated Dividend Stock Payment Notice”) (and such election shall be irrevocable as to
such Dividend Payment Date). Failure to timely deliver a Stated Dividend Stock Payment Notice to the Holder shall be deemed an election
by the Company to pay the Stated Dividend with respect to such Dividend Payment Date in cash. With respect to any Dividend Payment Date
for which the Company has elected to make a payment of a Stated Dividend (or any applicable portion thereof) in shares of Common Stock
in accordance with this Section 5(B), the Company shall issue to the Holder on such Dividend Payment Date a number of validly
issued, fully paid and Freely Tradable shares of Common Stock equal to the quotient (rounded up to the closest whole number) obtained
by dividing such payment of a Stated Dividend (or any applicable portion thereof) by the Market Stock Payment Price as of such Dividend
Payment Date. Notwithstanding anything herein to the contrary, the Company will not have the right to, and will not, make any payment
of a Stated Dividend (or any applicable portion thereof) in shares of Common Stock if the Equity Conditions are not satisfied for each
VWAP Trading Day occurring between the date of delivery of the Stated Dividend Stock Payment Notice and the applicable Dividend Payment
Date (and the Company shall certify in writing to the Holder on the applicable Dividend Payment Date that the Equity Conditions have
continued to have been satisfied during such period), and such Stated Dividend (or any applicable portion thereof) shall instead accrue
on each share of Preferred Stock on such Dividend Payment Date until paid in accordance with this Certificate of Designation, unless
such failure of the Equity Conditions to be so satisfied is waived in writing by the Holder, which waiver may be granted or withheld
by the Holder in its sole discretion.
(C) Company’s
Election to Pay Alternative Conversions in Cash. The Company may settle Alternative Conversions entirely (but not in part) in cash
(an “Alternative Conversion Cash Payment”) on the Conversion Settlement Dates in respect of such Alternative Conversions
if (i) the Market Stock Payment Price on the Trading Day immediately prior to the applicable Alternative Conversion Date is less than
five dollars ($5.00) per share (subject to proportionate adjustments for events of the type set forth in Section 7(G)(i)(1)) (such
price, the “Floor Price” and such Alternative Conversion, a “Below Floor Alternative Conversion”)
and (ii) the Company shall have first delivered to the Holder a written notice (an “Alternative Conversion Cash Payment Notice”)
of such election at least ten (10) Trading Days prior to any such Alternative Conversion Date, stating that the Company has elected to
settle all Below Floor Alternative Conversions in cash; provided that the Company shall not be entitled to (i) deliver more than
two (2) Alternative Conversion Cash Payment Notices in any rolling ninety (90) day period or (ii) deliver an Alternative Conversion Cash
Payment Notice at any time during which the Company would be restricted from redeeming such shares of Preferred Stock in cash in accordance
with the Senior Indebtedness Agreement. Such Alternative Conversion Cash Payment Notice shall remain in effect until and including the
tenth (10th) Trading Day following any written revocation of such Alternative Conversion Cash Payment Notice delivered by
the Company to the Holder, which period may be shortened by the Holder by providing written notice thereof to the Company. On the Conversion
Settlement Date with respect to such Below Floor Alternative Conversion, the Company shall pay to the Holder the Alternative Conversion
Cash Payment Amount in settlement of such Alternative Conversion Cash Payment. Solely in the event that an Alternative Conversion Cash
Payment Notice is in effect and has not been validly revoked by the Company, notwithstanding the Company’s election to settle a
Below Floor Alternative Conversion in cash pursuant to such notice, the Holder may instead elect to convert its shares of Preferred Stock
and accrued and unpaid dividends thereon in a Below Floor Alternative Conversion pursuant to Section 7(E)(ii); provided
that, in such circumstance only, the Alternative Conversion Rate referenced in Section 7(E)(ii)(1) shall be replaced by the Floor
Price Conversion Rate and the Market Stock Payment Price referenced in Section 7(E)(ii)(2) shall be replaced by the Floor Price.
At any time during the effectiveness of an Alternative Conversion Cash Payment Notice, if the Company becomes restricted from paying
cash on account of the Preferred Stock pursuant to the terms of the Senior Indebtedness Agreement, the Company shall provide written
notice to the Holder within one (1) Business Day of the effectiveness of such restriction and such notice shall immediately revoke the
effectiveness of the Alternative Conversion Cash Payment Notice.
(D) Delay
of Payment when Payment Date is Not a Business Day. If the due date for a payment on the shares of Preferred Stock as provided in
this Certificate of Designation is not a Business Day, then, notwithstanding anything to the contrary in this Certificate of Designation,
such payment may be made on the immediately following Business Day and no interest will accrue on such payment as a result of the related
delay.
(E) Additional
Payments Based on Conversion Price.
(i) With
respect to (a) the conversion of each share of Preferred Stock for Standard Conversion Consideration and (b) the redemption of each share
of Preferred Stock at the Company Redemption Price or the Fundamental Change Redemption Price, the Holder of such share shall be entitled
to receive an additional payment (each, an “Additional Payment”) in an amount equal to (x) nineteen million eight
hundred and seventy five thousand dollars ($19,875,000) multiplied by (y) a fraction, the numerator of which is the Stated
Value of such share of converted or redeemed Preferred Stock, and the denominator of which is the aggregate Stated Value of all shares
of Preferred Stock issued pursuant to the Securities Purchase Agreement, which Additional Payment, subject to Section 5(E)(ii),
shall be paid to such Holder in cash on the related Conversion Settlement Date, Company Redemption Date or Fundamental Change Redemption
Date; provided, however, that in no event will the aggregate amount of all Additional Payments exceed nineteen million eight hundred
and seventy five thousand dollars ($19,875,000).
(ii) To
the extent that any cash payment of an Additional Payment would be prohibited by the Senior Indebtedness Agreement, the Company shall
provide written notice (e-mail being sufficient) thereof to the applicable Holder on the related Conversion Date, Company Redemption
Date or Fundamental Change Redemption Date and, in lieu of such cash payment, the Company shall issue such Holder an amount of shares
of Common Stock (rounded up to the closest whole number) equal to the Additional Payment divided by the Market Stock Payment
Price on the Trading Day immediately preceding the date such shares of Common Stock are delivered to such Holder. Any such shares of
Common Stock delivered to the Holder pursuant to this Section 5(E)(ii) shall be Freely Tradeable. The Holder may elect to receive
any shares of Common Stock issuable to such Holder pursuant to this Section 5(E)(ii) in one or more portions over multiple Trading
Days by specifying a portion of such Additional Payment to be delivered in shares of Common Stock on any Trading Day. Notwithstanding
the foregoing, to the extent that the Market Stock Payment Price is lower than the Absolute Floor Price, the Holder shall, at its option,
receive such shares of Common Stock using the Absolute Floor Price or accrue the value of such Additional Payment on the Stated Value
of the shares of Preferred Stock as an unpaid dividend until paid in accordance with this Certificate of Designation.
(F) Shares
Held in Abeyance. In the event the Company has elected to make any payment of Stated Dividends in shares of Common Stock pursuant
to Section 5(B) or is required to issue shares of Common Stock pursuant to Section 5(E)(ii), but is prohibited from so
issuing such shares (or any applicable portion thereof) because it would cause such Holder, together with its Attribution Parties, to
hold in excess of the applicable percentage of the Company’s Common Stock as set forth in Section 7(J)(i), then such shares
shall be held in abeyance for the benefit of such Holder until such time or times as its right thereto would not result in such Holder
together with its Attribution Parties exceeding the applicable percentage in Section 7(J)(i), at which time or times such Holder
shall be issued such shares of Common Stock (and any such shares declared or made on such initial issuance or on any subsequent issuance
held similarly in abeyance) to the same extent as if there had been no such limitation, unless, with respect to shares of Common Stock
to be issued pursuant to Section 5(B), the Holder delivers written notice to the Company that the portion of such Stated Dividend
should instead accrue on each share of Preferred Stock on such Dividend Payment Date until paid in accordance with this Certificate of
Designation.
| Section
6. |
Required
Redemption upon a Fundamental Change or a Holder Election. |
(A) Redemption
Upon Fundamental Change.
(i) Subject
to the other terms of this Section 6(A), if a Fundamental Change occurs, then the Holder will have the right to require the
Company to redeem all or any portion of the shares of Preferred Stock owned by such Holder on the Fundamental Change Redemption Date
for such Fundamental Change for a cash purchase price equal to the Fundamental Change Redemption Price.
(ii) Fundamental
Change Redemption Date. The Fundamental Change Redemption Date for any Fundamental Change will be a Business Day of the Holder’s
choosing that is no more than twenty (20) Business Days after the later of (x) the date the Company delivers to the Holder the related
Fundamental Change Notice pursuant to Section 6(A)(iii); and (y) the effective date of such Fundamental Change.
(iii) Fundamental
Change Notice. No later than the tenth (10th) Business Day before the occurrence of any Fundamental Change, the Company will send
to the Holder a written notice (the “Fundamental Change Notice”) thereof (provided, however, in no event shall such
notice be required prior to the Company’s actual public announcement of such Fundamental Change), stating the expected date such
Fundamental Change will occur. No later than the fifth (5th) Business Day after the date of delivery of the Fundamental Change
Notice, the Holder shall notify the Company in writing whether it will require the Company to redeem all or any portion of the shares
of Preferred Stock owned by such Holder and specify the Fundamental Change Redemption Date.
(B) Effect
of Redemption. If any shares of Preferred Stock are to be redeemed upon a Redemption Upon Fundamental Change, then, from and after
the date the related Fundamental Change Redemption Price is paid in full, such shares of Preferred Stock will cease to be outstanding
and dividends will cease to accrue on such shares of Preferred Stock.
(A) Right
to Convert.
(i) Generally.
Subject to the provisions of this Section 7, the Holder may, at its option, convert the shares of Preferred Stock then held
by such Holder into Conversion Consideration.
(ii) Conversions
in Part. Subject to the terms of this Section 7, a Holder may convert less than all of the shares of Preferred Stock then
held by such Holder. Provisions of this Section 7 applying to the conversion of such shares of Preferred Stock in whole will equally
apply to conversions of any portion of the shares of Preferred Stock then held by such Holder.
(B) When
the Preferred Stock May Be Converted.
(i) Generally.
The Holder may convert the shares of Preferred Stock immediately at any time and from time to time.
(ii) Limitations
and Closed Periods. Notwithstanding anything to the contrary in this Section 7, if the shares of Preferred Stock are to be
redeemed upon a Redemption Upon Fundamental Change, then in no event may such shares be converted after the Close of Business on the
Scheduled Trading Day immediately before the related Fundamental Change Redemption Date; provided, that the limitations contained in
this Section 7(B)(ii) shall no longer apply to the Preferred Stock if the applicable Fundamental Change Redemption Price is not
delivered on the Fundamental Change Redemption Date in accordance with Section 6(A).
(C) Conversion
Procedures.
(i) Generally.
To convert the shares of Preferred Stock, the Holder must complete, sign and deliver to the Company the conversion notice attached to
this Certificate of Designation on Exhibit A or portable document format (.pdf) version of such conversion notice (at which
time such conversion will become irrevocable) (a “Holder Conversion Notice”). For the avoidance of doubt, the Holder
Conversion Notice may be delivered by e-mail in accordance with Section 15. If the Company fails to deliver, by the related Conversion
Settlement Date, (a) any shares of Common Stock forming part of the Conversion Consideration of the conversion of the Preferred Stock
or (b) any portion of the Alternative Conversion Cash Payment Amount in settlement of an Alternative Conversion Cash Payment, the Holder,
by notice to the Company, may rescind all or any portion of the corresponding Holder Conversion Notice at any time until such Undelivered
Shares are delivered.
(ii) Holder
of Record of Conversion Consideration. The person who is the holder of record of the Preferred Stock will be deemed to become the
holder of record of shares of Common Stock upon conversion thereof as of the Close of Business on the Conversion Date or Alternative
Conversion Date for such conversion, conferring, as of such time, upon such person, without limitation, all voting and other rights appurtenant
to such shares; provided, that the Holder shall be deemed to have waived any voting rights of any such shares of Common Stock
issued to the Holder that may arise during the period commencing on such Conversion Date or Alternative Conversion Date, through, and
including, such applicable Conversion Settlement Date, as necessary, such that the aggregate voting rights of any shares of Common Stock
(including such shares of Common Stock issued to the Holder) beneficially owned by the Holder and/or any Attribution Parties, collectively,
on any such record date shall not exceed the Maximum Percentage as a result of any such conversion of the Preferred Stock.
(iii) Taxes
and Duties. If the Holder converts any shares of Preferred Stock, the Company will pay any documentary, stamp or similar issue or
transfer tax or duty due on the issue of any shares of Common Stock upon such conversion; provided, that if any tax or duty is
due because such Holder requested such shares to be registered in a name other than such Holder’s name, then such Holder will pay
such tax or duty and, until having received a sum sufficient to pay such tax or duty, the Company may refuse to deliver any such shares
to be issued in a name other than that of such Holder.
(D) Alternative
Conversions.
(i) Generally.
If a Holder wishes to elect to convert all or a portion of the shares of Preferred Stock then held by such Holder using the Alternative
Conversion Rate in lieu of the Conversion Rate pursuant to Section 7(E)(i) (an “Alternative Conversion”), the
Holder shall indicate such election in the Holder Conversion Notice delivered in accordance with Section 7(C)(i), including the
applicable number of shares of Preferred Stock such Holder desires to convert pursuant to such Alternative Conversion.
(ii) Limitations.
A Holder may elect to conduct any number of Alternative Conversions during each calendar quarter, with the first such quarter after the
Issue Date ending on March 31, 2025; provided that the aggregate of the Stated Value of the shares of Preferred Stock converted
to Common Stock or redeemed for cash pursuant to Section 5(C) during any such calendar quarter pursuant to Alternative Conversions
shall not exceed the Alternative Conversion Cap for such calendar quarter; provided, that (1) the Holder and the Company may agree
to increase the size of the Alternative Conversion Cap for any given calendar quarter by mutual written consent, and (2) the Alternative
Conversion Cap shall not apply on and after any VWAP Trading Day on which the Daily VWAP per share of Common Stock is less than three
dollars and fifty cents ($3.50) (subject to proportionate adjustments for events of the type set forth in Section 7(G)(i)(1)) through
and including the twentieth (20th) VWAP Trading Day thereafter. Any Alternative Conversions that occur during any VWAP Trading
Day where the Alternative Conversion Cap does not apply pursuant to this Section 7(D)(ii) shall not reduce the amount available
under the Alternative Conversion Cap for such calendar quarter (including for purposes of any rollover pursuant to Section 7(D)(iii)).
(iii) Rollover.
Any portion of the Alternative Conversion Cap (including as adjusted pursuant to this Section 7(D)(iii)) for any calendar quarter
that remains available for Alternative Conversions upon the expiration of such calendar quarter shall be added to and increase the Alternative
Conversion Cap for the subsequent calendar quarter by such available amount.
(E) Settlement
upon Conversion.
(i) Generally.
The consideration (the “Standard Conversion Consideration”) due in respect of each share of Preferred Stock to be
converted (other than pursuant to an Alternative Conversion) will, subject to Section 7(E)(iii), consist of the following:
(1) a
number of shares of Common Stock equal to the Conversion Rate in effect on the Conversion Date for such conversion; and
(2) a
number of shares of Common Stock equal to the quotient (rounded up to the closest whole number) obtained by dividing the
aggregate accrued and unpaid dividends on such share of Preferred Stock to, but excluding, the Conversion Settlement Date by
the Conversion Price.
(ii) Alternative
Conversion. Subject to Section 5(C), the consideration (the “Alternative Conversion Consideration” and,
together with the Standard Conversion Consideration, the “Conversion Consideration”) due in respect of each share
of Preferred Stock to be converted pursuant to an Alternative Conversion will, subject to Section 7(E)(iii), consist of the following:
(1) a
number of shares of Common Stock equal to the Alternative Conversion Rate in effect on the Alternative Conversion Date for such conversion;
and
(2) a
number of shares of Common Stock equal to the quotient (rounded up to the closest whole number) obtained by dividing the
aggregate accrued and unpaid dividends on such share of Preferred Stock to, but excluding, the Conversion Settlement Date by
the Market Stock Payment Price.
(iii) Fractional
Shares. The total number of shares of Common Stock due in respect of any conversion of the shares of Preferred Stock pursuant to
this Section 7 will be determined on the basis of the total number of shares of Preferred Stock to be converted with the same
Conversion Date or Alternative Conversion Date; provided, however, that if such number of shares of Common Stock is not
a whole number, then such number will be rounded up to the nearest whole number.
(iv) Delivery
of the Conversion Consideration. The Company will pay or deliver, as applicable, the Conversion Consideration or, with respect to
an Alternative Conversion Cash Payment, the Alternative Conversion Cash Payment Amount, due upon the conversion of the shares of Preferred
Stock to the Holder on or before the first (1st) Business Day (or, if earlier, the standard settlement period for the primary Eligible
Exchange (measured in terms of trading volume for its Common Stock) on which the Common Stock is traded) immediately after the Conversion
Date or Alternative Conversion Date for such conversion (the “Conversion Settlement Date”).
(v) Company
Failure to Timely Deliver Stock Payments. If (x) the Company shall fail for any reason or for no reason on or prior to the applicable
Share Delivery Date to deliver shares of Common Stock in accordance with Section 5(B), Section 5(C), Section 5(E)(ii),
Section 7(C) or Section 7(D) (such shares to which Holder is entitled referred to as the “Undelivered Shares”);
and (y) the Holder (whether directly or indirectly, including by any broker acting on the Holder’s behalf or acting with respect
to such Undelivered Shares) purchases any shares of Common Stock (whether in the open market or otherwise) to cover any such Undelivered
Shares (whether to satisfy any settlement obligations with respect thereto of the Holder or otherwise), then, without limiting the Holder’s
right to pursue any other remedy available to it (whether hereunder, under applicable law or otherwise), the Holder will have the right,
exercisable by notice to the Company, to cause the Company to either:
(1) pay,
on or before the first (1st) Business Day after the date such notice is delivered (or, if earlier, the standard settlement period for
the primary Eligible Exchange (measured in terms of trading volume for its Common Stock) on which the Common Stock is traded), cash to
the Holder in an amount equal to the aggregate purchase price (including any brokerage commissions and other out-of-pocket costs) incurred
to purchase such shares (such aggregate purchase price, the “Covering Price”);
(2) promptly
deliver to the Holder such Undelivered Shares in accordance with this Certificate of Designation, together with cash in an amount equal
to the excess (the “Covering Price Excess”), if any, of the Covering Price over the product of (x) the number of such
Undelivered Shares; and (y) the Daily VWAP per share of Common Stock on the applicable Stock Payment Determination Date relating to such
conversion; or
(3) promptly
deliver to the Holder such Undelivered Shares in accordance with this Certificate of Designation, together with, to the extent there
is a Covering Price Excess, a number of shares of Common Stock (rounded up to the closest whole number) equal to such Covering Price
Excess divided by the Market Stock Payment Price on the Trading Day immediately preceding the date such Undelivered Shares
are delivered to the Holder,
provided,
that to the extent that any such cash payment would be prohibited by the Senior Indebtedness Agreement, such cash payment shall be paid
on the first (1st) Business Day after the date such cash payment is no longer so prohibited.
To
exercise such right, the Holder must deliver written notice of such exercise to the Company, specifying whether the Holder has elected
clause (1), (2), or (3) above to apply. If the Holder has elected clause (1) to apply, then the Company’s
obligation to deliver the Undelivered Shares in accordance with this Certificate of Designation will be deemed to have been satisfied
and discharged to the extent the Company has paid the Covering Price in accordance with clause (1). Nothing herein shall limit
the 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 Company’s failure to timely deliver shares of Common
Stock as required pursuant to the terms hereof, and the Company hereby agrees that the Company will not object to such decree of specific
performance and/or injunctive relief on the basis that monetary damages are a sufficient remedy. In addition to the foregoing, if the
Company fails for any reason to deliver Common Stock to the Holder by the applicable Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each one thousand dollars ($1,000) of Undelivered Shares (based on the
Daily VWAP on the applicable Share Delivery Date), ten dollars ($10) per Trading Day (increasing to twenty dollars ($20) per Trading
Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after the Conversion
Settlement Date until the cash amount set forth in Section 7(E)(v)(1) is paid to the Holder, the cash amount is paid and the shares
of Common Stock are delivered to the Holder pursuant to Section 7(E)(v)(2), or the shares of Common Stock are delivered to the
Holder pursuant to Section 7(E)(v)(3), as applicable.
(vi) Effect
of Conversion. If any share of Preferred Stock is converted in full, then, from and after the date the Conversion Consideration therefor
is issued or delivered in settlement of such conversion, such share of Preferred Stock will cease to be outstanding and all dividends
will cease to accrue on such share of Preferred Stock.
(F) Status
of Common Stock Issued upon Conversion.
(i) Status
of Conversion Consideration; Listing. Each share of Common Stock delivered pursuant to this Certificate of Designation will be a
newly issued or treasury share and will be duly and validly issued, fully paid, non-assessable, free from preemptive rights and free
of any Lien or adverse claim (except to the extent of any Lien or adverse claim created by the action or inaction of the Holder or the
Person to whom such share will be delivered). If the Common Stock is then listed on any securities exchange, or quoted on any inter-dealer
quotation system, then the Company will cause each share of Common Stock issued pursuant to this Certificate of Designation, when delivered,
to be admitted for listing on such exchange or quotation on such system. Any shares of Common Stock issued pursuant to this Certificate
of Designation will be issued in the form of book-entries at the facilities of DTC.
(ii) Transferability
of Conversion Consideration. Any shares of Common Stock issued pursuant to this Certificate of Designation, if issued by the Company
pursuant to an effective registration statement, will be identified therein by an “unrestricted” CUSIP number.
(G) Adjustments
to the Conversion Rate.
(i) Events
Requiring an Adjustment to the Conversion Rate. The Conversion Rate will be adjusted from time to time as follows:
(1) Stock
Dividends, Splits and Combinations. If the Company issues solely shares of Common Stock as a dividend or distribution on all or substantially
all shares of the Common Stock, or if the Company effects a stock split or a stock combination of the Common Stock (in each case excluding
an issuance solely pursuant to a Common Stock Change Event, as to which Section 7(I) will apply), then the Conversion Rate will
be adjusted based on the following formula:
where:
| |
CR0 |
= |
the Conversion Rate in effect immediately before the Open of
Business on the Ex-Dividend Date for such dividend or distribution, or immediately before the Open of Business on the effective date
of such stock split or stock combination, as applicable; |
| |
|
|
|
| |
CR1 |
= |
the Conversion Rate in effect immediately after the Open of
Business on such Ex-Dividend Date or the Open of Business on such effective date, as applicable; |
| |
|
|
|
| |
OS0 |
= |
the number of shares of Common Stock outstanding immediately
before the Open of Business on such Ex-Dividend Date or effective date, as applicable, without giving effect to such dividend, distribution,
stock split or stock combination; and |
| |
|
|
|
| |
OS1 |
= |
the number of shares of Common Stock outstanding immediately
after giving effect to such dividend, distribution, stock split or stock combination. |
If
any dividend, distribution, stock split or stock combination of the type described in this Section 7(G)(i)(1) is declared or announced,
but not so paid or made, then the Conversion Rate will be readjusted, effective as of the date the Board of Directors determines not
to pay such dividend or distribution or to effect such stock split or stock combination, to the Conversion Rate that would then be in
effect had such dividend, distribution, stock split or stock combination not been declared or announced.
(2) Rights,
Options and Warrants. If the Company distributes, to all or substantially all holders of Common Stock, rights, Options or warrants
(other than rights issued or otherwise distributed pursuant to a stockholder rights plan, as to which the provisions set forth in Sections
7(G)(i)(3)(a) and Section 7(G)(v) will apply) entitling such holders, for a period of not more than sixty (60) calendar days
after the record date of such distribution, to subscribe for or purchase shares of Common Stock at a price per share that is less than
the average of the Last Reported Sale Prices per share of Common Stock during the ten (10) consecutive Trading Days ending on, and including,
the Trading Day immediately before the date such distribution is announced, then the Conversion Rate will be increased (and for the avoidance
of doubt shall never be decreased) based on the following formula:
where:
| |
CR0 |
= |
the Conversion Rate in effect immediately before the Open of
Business on the Ex-Dividend Date for such distribution; |
| |
|
|
|
| |
CR1 |
= |
the Conversion Rate in effect immediately after the Open of
Business on such Ex-Dividend Date; |
| |
|
|
|
| OS | = |
the number of shares of Common Stock outstanding immediately
before the Open of Business on such Ex-Dividend Date; |
| | | |
|
| X | = |
the total number of shares of Common Stock issuable pursuant
to such rights, Options or warrants; and |
| | | |
|
| Y | = |
a number of shares of Common Stock obtained by dividing (x)
the aggregate price payable to exercise such rights, Options or warrants by (y) the average of the Last Reported Sale Prices per share
of Common Stock during the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before the date such
distribution is announced. |
For
purposes of this Section 7(G)(i)(2), in determining whether any rights, Options or warrants entitle holders of Common Stock to
subscribe for or purchase shares of Common Stock at a price per share that is less than the average of the Last Reported Sale Prices
per share of Common Stock during the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before the
date the distribution of such rights, Options or warrants is announced, and in determining the aggregate price payable to exercise such
rights, Options or warrants, there will be taken into account any consideration the Company receives for such rights, Options or warrants
and any amount payable on exercise thereof, with the value of such consideration, if not cash, to be determined by the Board of Directors
in good faith.
(3) Spin-Offs
and Other Distributed Property.
(a) Distributions
Other than Spin-Offs. If the Company distributes shares of its Capital Stock, evidences of its indebtedness or other assets or property
of the Company, or rights, Options or warrants to acquire Capital Stock of the Company or other securities, to all or substantially all
holders of the Common Stock, excluding:
(i) dividends,
distributions, rights, Options or warrants for which an adjustment to the Conversion Rate is required pursuant to Section 7(G)(i)(1)
or Section 7(G)(i)(2);
(ii)
dividends or distributions paid exclusively in cash for which an adjustment to the Conversion Rate is required pursuant to Section
7(G)(i)(4);
(iii)
rights issued or otherwise distributed pursuant to a stockholder rights plan, except to the extent provided in Section 7(G)(v);
(iv)
Spin-Offs for which an adjustment to the Conversion Rate is required pursuant to Section 7(G)(i)(3)(b); and
(v)
a distribution solely pursuant to a Common Stock Change Event, as to which Section 7(I) will apply,
then
the Conversion Rate will be increased based on the following formula:
where:
| |
CR0 |
= |
the Conversion Rate in effect
immediately before the Open of Business on the Ex-Dividend Date for such distribution; |
| |
|
|
|
| |
CR1 |
= |
the Conversion Rate in effect
immediately after the Open of Business on such Ex-Dividend Date; |
| |
|
|
|
| SP |
= | the
average of the Last Reported Sale Prices per share of Common Stock during the ten (10) consecutive
Trading Days ending on, and including, the Trading Day immediately before such Ex-Dividend
Date; and |
| | |
| |
| FMV |
= | the
fair market value (as determined by the Board of Directors in good faith), as of such Ex-Dividend
Date, of the shares of Capital Stock, evidences of indebtedness, assets, property, rights,
Options or warrants distributed per share of Common Stock pursuant to such distribution; |
provided,
however, that if FMV is equal to or greater than SP, then, in lieu of the foregoing adjustment to the Conversion
Rate, each Holder will receive, for each share of Preferred Stock held by such Holder on the record date for such distribution, at the
same time and on the same terms as holders of Common Stock, the amount and kind of shares of Capital Stock, evidences of indebtedness,
assets, property, rights, Options or warrants that such Holder would have received if such Holder had owned, on such record date, a number
of shares of Common Stock equal to the Conversion Rate in effect on such record date.
(b)
Spin-Offs. If the Company distributes or dividends shares of Capital Stock of any class or series, or similar equity interest,
of or relating to an Affiliate, a Subsidiary or other business unit of the Company to all or substantially all holders of the Common
Stock (other than solely pursuant to a Common Stock Change Event, as to which Section 7(I) will apply), and such Capital Stock
or equity interest is listed or quoted (or will be listed or quoted upon the consummation of the transaction) on a U.S. national securities
exchange (a “Spin-Off”), then the Conversion Rate will be increased based on the following formula:
where:
| |
CR0 | = | the
Conversion Rate in effect immediately before the Open of Business on the Ex-Dividend Date
for such Spin-Off; |
| |
| | |
| |
CR1 | = | the
Conversion Rate in effect immediately after the Open of Business on such Ex-Dividend Date; |
| |
| | |
| FMV |
= | the
product of (x) the average of the Last Reported Sale Prices per share or unit of the Capital
Stock or equity interests distributed in such Spin-Off over the ten (10) consecutive Trading
Day period (the “Spin-Off Valuation Period”) beginning on, and including,
such Ex-Dividend Date (such average to be determined as if references to Common Stock in
the definitions of Last Reported Sale Price, Trading Day and Market Disruption Event were
instead references to such Capital Stock or equity interests); and (y) the number of shares
or units of such Capital Stock or equity interests distributed per share of Common Stock
in such Spin-Off; and |
| | |
| |
| SP |
= | the
average of the Last Reported Sale Prices per share of Common Stock for each Trading Day in
the Spin-Off Valuation Period. |
The
adjustment to the Conversion Rate pursuant to this Section 7(G)(i)(3)(b) will be calculated as of the Close of Business on the
last Trading Day of the Spin-Off Valuation Period but will be given effect immediately after the Open of Business on the Ex-Dividend
Date for the Spin-Off, with retroactive effect. If a share of Preferred Stock is converted and the Conversion Date or Alternative Conversion
Date occurs during the Spin-Off Valuation Period, then, notwithstanding anything to the contrary in this Certificate of Designation,
the Company will, if necessary, delay the settlement of such conversion until the first (1st) Business Day after the last day of the
Spin-Off Valuation Period (or, if earlier, the standard settlement period for the primary Eligible Exchange (measured in terms of trading
volume for its Common Stock) on which the Common Stock is traded).
(4)
Cash Dividends or Distributions. If any cash dividend or distribution is made to all or substantially all holders of Common Stock,
then the Conversion Rate will be increased based on the following formula:
where:
| |
CR0 |
= |
the Conversion Rate in effect
immediately before the Open of Business on the Ex-Dividend Date for such dividend or distribution; |
| |
|
|
|
| |
CR1 |
= |
the Conversion Rate in effect
immediately after the Open of Business on such Ex-Dividend Date; |
| |
|
|
|
| SP |
= | the
Last Reported Sale Price per share of Common Stock on the Trading Day immediately before
such Ex-Dividend Date; and |
| | |
| |
| D |
= | the
cash amount distributed per share of Common Stock in such dividend or distribution; |
provided,
however, that if D is equal to or greater than SP, then, in lieu of the foregoing adjustment to the Conversion Rate,
each Holder will receive, for each share of Preferred Stock held by the Holder on the record date for such dividend or distribution,
at the same time and on the same terms as holders of Common Stock, the amount of cash that such Holder would have received if such Holder
had owned, on such record date, a number of shares of Common Stock equal to the Conversion Rate in effect on such record date.
(5)
Tender Offers or Exchange Offers. If the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange
offer for shares of Common Stock (other than solely pursuant to an odd-lot tender offer pursuant to Rule 13e-4(h)(5) under the Exchange
Act), and the value (determined as of the Expiration Time by the Board of Directors in good faith) of the cash and other consideration
paid per share of Common Stock in such tender or exchange offer exceeds the Last Reported Sale Price per share of Common Stock on the
Trading Day immediately after the last date (the “Expiration Date”) on which tenders or exchanges may be made pursuant
to such tender or exchange offer (as it may be amended), then the Conversion Rate will be increased based on the following formula:
where:
| |
CR0 |
= |
the Conversion Rate in effect
immediately before the time (the “Expiration Time”) such tender or exchange offer expires; |
| |
CR1 |
= |
the Conversion Rate in effect
immediately after the Expiration Time; |
| |
|
|
|
| AC |
= | the
aggregate value (determined as of the Expiration Time by the Board of Directors in good faith)
of all cash and other consideration paid for shares of Common Stock purchased or exchanged
in such tender or exchange offer; |
| | |
| |
| |
OS0 |
= |
the number of shares of Common
Stock outstanding immediately before the Expiration Time (including all shares of Common Stock accepted for purchase or exchange in
such tender or exchange offer); |
| |
|
|
|
| |
OS1 |
= |
the number of shares of Common
Stock outstanding immediately after the Expiration Time (excluding all shares of Common Stock accepted for purchase or exchange in
such tender or exchange offer); and |
| |
|
|
|
| SP |
= | the
average of the Last Reported Sale Prices per share of Common Stock over the ten (10) consecutive
Trading Day period (the “Tender/Exchange Offer Valuation Period”) beginning
on, and including, the Trading Day immediately after the Expiration Date; |
provided,
however, that the Conversion Rate will in no event be adjusted down pursuant to this Section 7(G)(i)(5), except to the
extent provided in the immediately following paragraph. The adjustment to the Conversion Rate pursuant to this Section 7(G)(i)(5)
will be calculated as of the Close of Business on the last Trading Day of the Tender/Exchange Offer Valuation Period but will be
given effect immediately after the Expiration Time, with retroactive effect. If a share of Preferred Stock is converted and the Conversion
Date or Alternative Conversion Date occurs on the Expiration Date or during the Tender/Exchange Offer Valuation Period, then, notwithstanding
anything to the contrary in this Certificate of Designation, the Company will, if necessary, delay the settlement of such conversion
until the first (1st) Business Day after the last day of the Tender/Exchange Offer Valuation Period (or, if earlier, the standard settlement
period for the primary Eligible Exchange (measured in terms of trading volume for its Common Stock) on which the Common Stock is traded).
(ii)
No Adjustments in Certain Cases.
(1)
Where the Holder Participates in the Transaction or Event Without Conversion. Notwithstanding anything to the contrary in Section
7(G)(i), the Company will not be obligated to adjust the Conversion Rate on account of a transaction or other event otherwise requiring
an adjustment pursuant to Section 7(G)(i) (other than a stock split or combination of the type set forth in Section 7(G)(i)(1)
or a tender or exchange offer of the type set forth in Section 7(G)(i)(5)) if the Holder participates, at the same time and
on the same terms as holders of Common Stock, and solely by virtue of being the Holder of a share of Preferred Stock, in such transaction
or event without having to convert such share of Preferred Stock and as if the Holder held a number of shares of Common Stock equal to
the product of (i) the Conversion Rate in effect on the related record date; and (ii) the aggregate number of shares of Preferred Stock
held by this Holder on such date.
(2)
Certain Events. The Company will not be required to adjust the Conversion Rate except as provided in Section 7(G), Section
7(I) and Section 7(K). Without limiting the foregoing, the Company will not be obligated to adjust the Conversion Rate on account
of:
(a)
except as otherwise provided in Section 7(G), the sale of shares of Common Stock for a purchase price that is less than the market
price per share of Common Stock or less than the Conversion Price;
(b)
the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest
payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any such
plan;
(c)
the issuance of any shares of Common Stock, restricted stock or options or rights to purchase shares of Common Stock pursuant to any
present or future employee, director or consultant benefit plan or program of, or assumed by, the Company or any of its Subsidiaries;
(d)
the issuance of any shares of Common Stock pursuant to any option, warrant, right or convertible or exchangeable security of the Company
outstanding as of the Issue Date (other than an adjustment pursuant to Section 7(G)(i)(3)(a) in connection with the separation
of rights under the Company’s stockholder rights plan existing, if any, as of the Issue Date);
(e)
repurchases of shares of Common Stock, including structured or derivative transactions, that are not pursuant to a tender offer as contemplated
by Section 7(G)(i)(5);
(f)
solely a change in the par value of the Common Stock; or
(g)
accrued and unpaid dividends on the Preferred Stock.
(iii)
Adjustments Not Yet Effective. Notwithstanding anything to the contrary in this Certificate of Designation, if:
(1)
a share of Preferred Stock is to be converted;
(2)
the record date, effective date or Expiration Time for any event that requires an adjustment to the Conversion Rate pursuant to Section
7(G)(i) has occurred on or before the Conversion Date for such conversion, but an adjustment to the Conversion Rate for such event
has not yet become effective as of such Conversion Date;
(3)
the Conversion Consideration due upon such conversion includes any whole shares of Common Stock; and
(4)
such shares are not entitled to participate in such event (because they were not held on the related record date or otherwise),
then,
solely for purposes of such conversion, the Company will, without duplication, give effect to such adjustment on such Conversion Date.
In such case, if the date on which the Company is otherwise required to deliver the consideration due upon such conversion is before
the first date on which the amount of such adjustment can be determined, then the Company will delay the settlement of such conversion
until the first (1st) Business Day after such first date (or, if earlier, the standard settlement period for the primary Eligible Exchange
(measured in terms of trading volume for its Common Stock) on which the Common Stock is traded).
(iv)
Conversion Rate Adjustments where the Converting Holder Participates in the Relevant Transaction or Event. Notwithstanding anything
to the contrary in this Certificate of Designation, if:
(1)
a Conversion Rate adjustment for any dividend or distribution becomes effective on any Ex-Dividend Date pursuant to Section 7(G)(i);
(2)
a share of Preferred Stock is to be converted;
(3)
the Conversion Date for such conversion occurs on or after such Ex-Dividend Date and on or before the related record date;
(4)
the Conversion Consideration due upon such conversion includes any whole shares of Common Stock based on a Conversion Rate that is adjusted
for such dividend or distribution; and
(5)
such shares would be entitled to participate in such dividend or distribution (including pursuant to Section 7(C)(ii)),
then
(x) such Conversion Rate adjustment will not be given effect for such conversion; (y) the shares of Common Stock issuable upon such conversion
based on such unadjusted Conversion Rate will not be entitled to participate in such dividend or distribution; and (z) there will be
added, to the Conversion Consideration otherwise due upon such conversion, the same kind and amount of consideration that would have
been delivered in such dividend or distribution with respect to such shares of Common Stock had such shares been entitled to participate
in such dividend or distribution.
(v)
Stockholder Rights Plans. If any shares of Common Stock are to be issued upon conversion of any shares of Preferred Stock and,
at the time of such conversion, the Company has in effect any stockholder rights plan, then the Holder of such shares of Preferred Stock
will be entitled to receive, in addition to, and concurrently with the delivery of, the Conversion Consideration otherwise payable under
this Certificate of Designation upon such conversion, the rights set forth in such stockholder rights plan, unless such rights have separated
from the Common Stock at such time, in which case, and only in such case, the Conversion Rate will be adjusted pursuant to Section
7(G)(i)(3)(a) on account of such separation as if, at the time of such separation, the Company had made a distribution of the type
referred to in such Section to all holders of the Common Stock, subject to readjustment in accordance with such Section if such rights
expire, terminate or are redeemed.
(vi)
Limitation on Effecting Transactions Resulting in Certain Adjustments. The Company will not engage in or be a party to any transaction
or event that would require the Conversion Rate to be adjusted pursuant to Section 7(G)(i), Section 7(I) or Section 7(K)
to an amount that would result in the Conversion Price per share of Common Stock being less than the par value per share of Common Stock.
(vii)
Equitable Adjustments to Prices. Whenever any provision of this Certificate of Designation requires the Company to calculate the
average of the Last Reported Sale Prices, or any function thereof, over a period of multiple days (including to calculate an adjustment
to the Conversion Rate), the Company will make proportionate adjustments, if any, to such calculations to account for any adjustment
to the Conversion Rate pursuant to Section 7(G)(i) that becomes effective, or any event requiring such an adjustment to the Conversion
Rate where the Ex-Dividend Date or effective date, as applicable, of such event occurs, at any time during such period.
(viii)
Calculation of Number of Outstanding Shares of Common Stock. For purposes of this Section 7(G), the number of shares of
Common Stock outstanding at any time will (i) include shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock; and (ii) exclude shares of Common Stock held in the Company’s treasury (unless the Company pays any dividend
or makes any distribution on shares of Common Stock held in its treasury).
(ix)
Calculations. All calculations with respect to the Conversion Rate and adjustments thereto will be made to the nearest
1/10,000th of a share of Common Stock (with 5/100,000ths rounded upward).
(x)
Notice of Conversion Rate Adjustments. Upon the effectiveness of any adjustment to the Conversion Rate pursuant to Section
7(G)(i), the Company will promptly send notice to the Holder containing (i) a brief description of the transaction or other event
on account of which such adjustment was made; (ii) the Conversion Rate in effect immediately after such adjustment; and (iii) the effective
time of such adjustment.
(H)
Voluntary Adjustments.
(i)
Generally. To the extent permitted by law and applicable stock exchange rules, the Company, from time to time, may (but is not
required to) increase the Conversion Rate for any period of time by any amount if (i) the Board of Directors determines in good faith
that such increase is either (x) in the best interest of the Company; or (y) advisable to avoid or diminish any income tax imposed on
holders of Common Stock or rights to purchase Common Stock as a result of any dividend or distribution of shares (or rights to acquire
shares) of Common Stock or any similar event, (ii) such increase is irrevocable during such period and (iii) the Company shall have received
the prior written consent of the Holder prior to such adjustment. The Company and the Holder agree that any such voluntary adjustment
to the Conversion Rate and any conversion of any shares of Preferred Stock based upon any such voluntary adjustment shall not constitute
material non-public information with respect to the Company.
(ii)
Notice of Voluntary Increases. If the Board of Directors determines to increase the Conversion Rate pursuant to Section 7(H)(i),
then, no later than the first Business Day following such determination, the Company will send notice to the Holder of such increase,
the amount thereof and the period during which such increase will be in effect.
(I)
Effect of Certain Recapitalizations, Reclassifications, Consolidations, Mergers and Sales.
(i)
Generally. If there occurs any:
(1)
recapitalization, reclassification or change of the Common Stock (other than (x) changes solely resulting from a subdivision or combination
of the Common Stock, (y) a change only in par value or from par value to no par value or no par value to par value and (z) stock splits
and stock combinations that do not involve the issuance of any other series or class of securities);
(2)
consolidation, merger, combination or binding or statutory share exchange involving the Company;
(3)
sale, lease or other transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any
Person; or
(4)
other similar event,
and,
in each case, as a result of such occurrence, the Common Stock is converted into, or is exchanged for, or represents solely the right
to receive, other securities or other property (including cash or any combination of the foregoing) (such an event, a “Common
Stock Change Event,” and such other securities or other property, the “Reference Property,” and the amount
and kind of Reference Property that a holder of one (1) share of Common Stock would be entitled to receive on account of such Common
Stock Change Event (without giving effect to any arrangement not to issue fractional shares of securities or other property), a “Reference
Property Unit”), then, notwithstanding anything to the contrary in this Certificate of Designation, at the effective time of
such Common Stock Change Event, (x) the Conversion Consideration due pursuant to the conversion of any shares of Preferred Stock will
be determined in the same manner as if each reference to any number of shares of Common Stock in this Section 7 (or in any related
definitions) were instead a reference to the same number of Reference Property Units; (y) for purposes of Section 7(A), each reference
to any number of shares of Common Stock in such Section (or in any related definitions) will instead be deemed to be a reference to the
same number of Reference Property Units; and (z) for purposes of the definition of “Fundamental Change,” the term “
Common Stock” and “common equity” will be deemed to mean the common equity, if any, forming part of such Reference
Property. For these purposes, (I) the Daily VWAP of any Reference Property Unit or portion thereof that consists of a class of common
equity securities will be determined by reference to the definition of “Daily VWAP,” substituting, if applicable, the Bloomberg
page for such class of securities in such definition; and (II) the Daily VWAP of any Reference Property Unit or portion thereof that
does not consist of a class of common equity securities, and the Last Reported Sale Price of any Reference Property Unit or portion thereof
that does not consist of a class of securities, will be the fair value of such Reference Property Unit or portion thereof, as applicable,
determined in good faith by the Company (or, in the case of cash denominated in U.S. dollars, the face amount thereof).
If
the Reference Property consists of more than a single type of consideration to be determined based in part upon any form of stockholder
election, then the composition of the Reference Property Unit will be deemed to be the weighted average of the types and amounts of consideration
actually received, per share of Common Stock, by the holders of Common Stock. The Company will notify the Holder of such weighted average
as soon as practicable after such determination is made.
At
or before the effective date of such Common Stock Change Event, the Company and the resulting, surviving or transferee Person (if not
the Company) of such Common Stock Change Event (the “Successor Person”) will execute and deliver such instruments
or agreements that (x) provides for subsequent conversions of the shares of Preferred Stock in the manner set forth in this Section
7(I); (y) provides for subsequent adjustments to the Conversion Rate pursuant to Section 7(G), Section 7(H) or Section 7(K)
in a manner consistent with this Section 7(I); and (z) contains such other provisions as the Company reasonably determines are
appropriate to preserve the economic interests of the Holder and to give effect to the provisions of this Section 7(I). If the
Reference Property includes shares of stock or other securities or assets of a Person other than the Successor Person, then such other
Person will also execute such instruments or agreements and such instruments or agreements will contain such additional provisions the
Company reasonably determines are appropriate to preserve the economic interests of the Holder.
(ii)
Notice of Common Stock Change Events. As soon as practicable after learning the anticipated or actual effective date of any Common
Stock Change Event, the Company will provide written notice to the Holder of such Common Stock Change Event, including a brief description
of such Common Stock Change Event, its anticipated effective date and a brief description of the anticipated change in the conversion
rights of the Preferred Stock.
(iii)
Compliance Covenant. The Company will not become a party to any Common Stock Change Event unless its terms are consistent with
this Section 7(I).
(J)
Limitations on Conversions.
(i)
Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained herein, the Company shall not effect the conversion
of any shares of Preferred Stock, or otherwise issue shares on account of such shares of Preferred Stock, and the Holder shall not have
the right to convert any portion of such shares of Preferred Stock, pursuant to the terms and conditions of this Certificate of Designation
and any such conversion or issuance shall be null and void and treated as if never made, to the extent that after giving effect to such
conversion or issuance (including, for the avoidance of doubt, any shares of Common Stock issuable in connection with such conversion
or issuance pursuant to Section 5(E)(ii)), the Holder together with the other Attribution Parties collectively would beneficially
own in the aggregate in excess of 4.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding
immediately after giving effect to such conversion or issuance. For purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock
held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of, or otherwise
on account of, the shares of Preferred Stock with respect to which the determination of such sentence is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, unconverted shares of Preferred Stock
beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or
warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section 7(J)(i). For purposes of this Section 7(J)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Certificate of Designation, in determining the
number of outstanding shares of Common Stock the Holder may acquire in connection with its ownership of shares of Preferred Stock without
exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s
most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Commission,
as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer
Agent (as defined in the Securities Purchase Agreement) setting forth the number of shares of Common Stock outstanding (the “Reported
Outstanding Share Number”). If the Company receives a notice from the Holder related to the conversion of the shares of Preferred
Stock or any issuance of shares of Common Stock on account of such shares of Preferred Stock at a time when the actual number of outstanding
shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall promptly notify the Holder in writing of
the number of shares of Common Stock then outstanding and, to the extent that such conversion or issuance of shares of Common Stock would
otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 7(J)(i), to exceed the Maximum
Percentage, the Holder must notify the Company of a reduced number of shares of Common Stock to be issued pursuant to such notice. For
any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Trading Day confirm in writing
or by electronic mail to the 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 Company, including the Preferred
Stock, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In
the event that the issuance of shares of Common Stock to the Holder upon conversion of, or otherwise on account, the shares of Preferred
Stock results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum
Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number of
shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum
Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, a Holder may from
time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% and not less than 4.99% as specified
in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any Other Holder of shares of Preferred Stock that is not an Attribution Party of the Holder. For purposes
of clarity, the shares of Common Stock issuable pursuant to the terms of this Certificate of Designation in excess of the Maximum Percentage
shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1)
of the Exchange Act. No prior inability to convert the shares of Preferred Stock or receive shares on account of such shares of Preferred
Stock pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent
determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 7(J)(i) to the extent necessary to correct this paragraph or any portion of this paragraph
which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 7(J)(i) or
to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this Section
7(J)(i) may not be waived or amended by the Company or Holder and shall apply to a successor holder of any shares of Preferred Stock.
(ii)
Stock Exchange Limitations. Notwithstanding anything to the contrary in this Certificate of Designation, until the Requisite Stockholder
Approval is obtained, in no event will the sum of (A) the number of shares of Common Stock issuable upon conversion or otherwise on account
of the shares of Preferred Stock, including (for the avoidance of doubt) any portion constituting a payment of a Stated Dividend, plus
(B) three million six hundred fixty six thousand ninety eight (3,656,098) shares exceed five million three hundred ninety two thousand
seven hundred fifty seven (5,392,757) shares in the aggregate. If any one or more shares of Common Stock are not delivered as a result
of the operation of the preceding sentence (such shares, the “Withheld Shares”), then (1) on the date such shares
of Common Stock are issuable hereunder (after giving effect to any limitations imposed under Section 7(J)(i)), the Company will
pay to the Holder, in addition to the Conversion Consideration otherwise due upon such conversion or shares otherwise due to the Holder
hereunder, cash in an amount equal to the product of (x) the number of such Withheld Shares; and (y) the Daily VWAP per share of Common
Stock on the applicable Stock Payment Determination Date; and (2) to the extent the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in settlement of a sale by the Holder of such Withheld Shares, the Company will reimburse
the Holder for (x) any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection with such
purchases and (y) the excess, if any, of (A) the aggregate purchase price of such purchases over (B) the product of (I) the number of
such Withheld Shares purchased by the Holder; and (II) the Daily VWAP per share of Common Stock on the applicable Stock Payment Determination
Date; provided, that to the extent that any such cash payment would be prohibited by the Senior Indebtedness Agreement, such cash
payment shall be paid on the first (1st) Business Day after the date such cash payment is no longer prohibited.
(K)
Adjustments to Conversion Rate in Connection with a Triggering Event. If a Triggering Event occurs and the Conversion Date or
Alternative Conversion Date, as applicable, for the conversion of any shares of Preferred Stock occurs during the related Triggering
Event Conversion Period, then, subject to Section 7(J), the Conversion Rate or Alternative Conversion Rate applicable to such
conversion will be increased by a number of shares equal to the Triggering Event Additional Shares.
| Section 8. |
Affirmative
and Negative Covenants. |
(A)
Financial Covenants.
(i)
Net Leverage Ratio. The Company will not, as of the last day of any fiscal quarter commencing with the fiscal quarter ending March
31, 2025, permit the Net Leverage Ratio to be greater than 2.50 to 1.00.
(ii)
Current Ratio. The Company will not permit, as of the last day of any fiscal quarter commencing with the fiscal quarter ending
March 31, 2025, the Current Ratio as of such date to be less than 1.00 to 1.00.
(B)
Corporate Existence. Subject to Section 9, the Company will cause to preserve and keep in full force and effect:
(i)
its corporate existence and the corporate existence of its Subsidiaries in accordance with the organizational documents of the Company
or its Subsidiaries, as applicable; and
(ii)
the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries;
provided,
however, that the Company need not preserve or keep in full force and effect any such rights (charter and statutory), license
or franchise or existence of any of its Subsidiaries if the Board of Directors determines in good faith that (x) the preservation thereof
is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole; and (y) the loss thereof
is not, individually or in the aggregate, materially adverse to the Holder.
(C)
Ranking. All payments due under this Certificate of Designation in respect of a share of Preferred Stock shall rank pari passu
with all other shares of Preferred Stock.
(D)
Indebtedness; Amendments to Indebtedness. The Company shall not and shall not permit any Subsidiary to: (a) create, incur, assume,
guarantee or be or remain liable with respect to any Indebtedness, other than Permitted Indebtedness; (b) prepay any Indebtedness (other
than in respect of Senior Indebtedness) except as permitted under Section 9.04(b)(i)(A) through (D) of the Senior Indebtedness Agreement
(in each case of such sections of the Senior Indebtedness Agreement, as such sections are in effect as of the Issue Date); provided that
any such prepayment made pursuant to Section 9.04(b)(i)(D) shall be subject to Section 4(B) hereof, or (c) amend or modify any documents
or notes evidencing any Indebtedness (other than the Senior Indebtedness Agreement in accordance with the definition thereof (as in effect
on the Issue Date)). The Company shall not and shall not permit any Subsidiary to incur any Indebtedness (other than the Senior Indebtedness
in accordance with the terms of the Senior Indebtedness Agreement (as in effect on the Issue Date)) that would cause a breach or Triggering
Event under this Certificate of Designation or prohibit or restrict the performance of any of the Company’s or its Subsidiaries’
obligations under this Certificate of Designation, including without limitation, the payment of dividends and redemption amounts in respect
of the Preferred Stock. Notwithstanding anything to the contrary herein, the Company shall not (i) incur indebtedness under the Senior
Indebtedness Agreement or under any agreement evidencing a Senior Indebtedness Permitted Refinancing in a principal amount in excess
of the Borrowing Base in existence under the Senior Indebtedness Agreement in effect on the Issue Date, or (ii) amend the Senior Indebtedness
Agreement or enter into any agreement evidencing a Senior Indebtedness Permitted Refinancing in a manner that requires the payment of
any prepayment premium, make-whole amount or other similar fee to repay all principal plus accrued and unpaid interest obligations thereunder
(other than, in respect of this clause (ii), customary breakage reimbursement fees substantially similar to those set forth in the Senior
Indebtedness Agreement in effect on the Issue Date), in each case, without the prior written consent of the Required Holders.
(E)
Liens. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, permit
or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens.
(F)
Investments. The Company shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit
any of its Subsidiaries so to do, other than Permitted Investments; provided that the Company may not make any Investment (including
a Permitted Investment) or permit any of its Subsidiaries to make any Investment (including a Permitted Investment) if (i) any Triggering
Event has occurred hereunder and has not been waived by the Required Holders or (ii) any event or circumstance has occurred and is continuing
which, with the giving of notice or passage of time or both, could constitute a Triggering Event with respect to Section 10(A)(ii),
Section 10(A)(iv), Section 10(A)(vi), Section 10(A)(ix), Section 10(A)(x) or Section 10(A)(xi).
(G)
Distributions. The Company shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other
Equity Interest other than pursuant to (i) this Certificate of Designation or (ii) employee, director or consultant repurchase plans
or other similar agreements provided under plans approved by the Board of Directors; provided, however, in each case of the foregoing
clause (ii), the repurchase or redemption price does not exceed the original consideration paid for such stock or Equity Interest, or
(b) declare or pay any cash dividend or make a cash distribution on any class of stock or other Equity Interest, other than pursuant
to (i) this Certificate of Designation or (ii) the declaration or payment of dividends or distributions permitted to be made under Section
9.04(a) of the Senior Indebtedness Agreement (as in effect on the Issue Date); provided that (x) no such declaration or payment shall
be made until all accrued and unpaid dividends owing on the Preferred Stock have been paid, (y) no such declarations or payments shall
be made unless all dividends paid on the Preferred Stock on each of the two (2) preceding Dividend Payment Dates were paid in cash and
(z) any such declaration or payment shall be subject to Section 4(B) hereof, or (c) lend money to any employees, officers or directors
(except as permitted under the definition of Permitted Investment), or guarantee the payment of any such loans granted by a third party,
in each case, other than as permitted under Section 9.05(i) of the Senior Indebtedness Agreement (as in effect on the Issue Date), provided
that the maximum amount applicable thereto shall be two hundred fifty thousand dollars ($250,000). If there are dividends or distributions
made by the Company or any Subsidiary (other than a Subsidiary of the Company paying dividends or making distributions to the Company
or a parent company that is a direct or indirect Wholly Owned Subsidiary of the Company), within one (1) Business Day following the date
on which the Company files an Annual Report on Form 10-K or Quarterly Report on Form 10-Q with the Commission, the Company will provide
the Holder with a written notice setting forth the aggregate amount of dividends or distributions made by the Company or any Subsidiary
pursuant to this Section 8(G) for the period covered by such Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable.
Notwithstanding anything herein to the contrary, the Company shall not, and shall not allow any Subsidiary to, declare or pay any cash
dividend or make a cash distribution on any class of stock or other Equity Interest (other than pursuant to this Certificate of Designation)
if (A) any Triggering Event has occurred hereunder and has not been waived by the Required Holders or (B) any event or circumstance has
occurred and is continuing which, with the giving of notice or passage of time or both, could constitute a Triggering Event with respect
to Section 10(A)(ii), Section 10(A)(iv), Section 10(A)(vi), Section 10(A)(ix), Section 10(A)(x) or
Section 10(A)(xi), other than a Subsidiary of the Company paying dividends or making distributions to the Company or a parent
company that is a direct or indirect Wholly Owned Subsidiary of the Company.
(H)
Transfers. The Company shall not, and shall not allow any Subsidiary to, voluntarily or involuntarily transfer, sell, lease, license,
lend or in any other manner convey any equitable, beneficial or legal interest in any material portion of the assets of the Company and
its Subsidiaries (taken as a whole), except for Permitted Transfers and Permitted Investments.
(I)
Taxes. The Company and its Subsidiaries shall file all income and other material tax returns and reports required to have been
filed (taking into account ordinary course extensions) and pay prior to delinquency all income and other material taxes, fees or other
related charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against
the Company and its Subsidiaries or their respective assets or upon their ownership, possession, use, operation or disposition thereof
or upon their rents, receipts or earnings arising therefrom, except such taxes, fees and charges that are being contested in good faith
by appropriate proceedings diligently conducted and for which the Company and its Subsidiaries, as applicable, have set aside on its
books adequate reserves in accordance with GAAP.
(J)
Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, allow any material change to be made in the character of its business as an independent oil and gas exploration and production
company.
(K)
Maintenance of Properties, Etc. The Company shall maintain and preserve, and the Company shall cause each of its Subsidiaries
to maintain and preserve, all of its properties which are necessary or useful (as determined by the Company in good faith) to the conduct
of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times in all material respects
with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.
(L)
Maintenance of Intellectual Property. The Company will take, and the Company shall cause each of its Subsidiaries to take, all
actions necessary or advisable to maintain and preserve all of the Intellectual Property Rights (as defined in the Securities Purchase
Agreement) of the Company or such Subsidiary that are necessary or material (as determined by the Company in good faith) to the conduct
of its business in full force and effect.
(M)
Maintenance of Insurance. The Company shall maintain, and the Company shall cause each of its Subsidiaries to maintain, insurance
with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard,
rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as are
customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.
(N)
Transactions with Affiliates. Neither the Company, nor any of its Subsidiaries, shall enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any affiliate (other than the Company or any of its
Wholly Owned Subsidiaries), except transactions (i) that are disclosed pursuant to the Securities Purchase Agreement or (ii) as permitted
to be entered into, renewed, extended or to be a party to pursuant to Section 9.14 of the Senior Indebtedness Agreement as in effect
on the Issue Date (other than pursuant to Section 9.14(c), (d) and (f) (in each case of such sections of the Senior Indebtedness Agreement,
as such sections are in effect as of the Issue Date)).
(O)
Executive Compensation. The Company shall maintain an independent compensation committee comprised entirely of independent directors
(the “Compensation Committee”) and who shall retain the services of a reputable third-party compensation consultant
for the purposes of informing themselves regarding compensation practices among the Company’s peer group companies and of the market
generally. The Company agrees that once the 2025 Planned Compensation Adjustments are made and for so long as any shares of Preferred
Stock are outstanding, neither the Company, nor any of its Subsidiaries, shall increase the total annual cash compensation of any executive
officer or director of the Company or its Subsidiaries by more than five percent (5%) on an annual basis, unless the Daily VWAP on each
of the twenty (20) consecutive VWAP Trading Days ending on and including the VWAP Trading Day immediately prior to the date of such annual
increase in total annual compensation exceeds one hundred fifty percent (150%) of the Conversion Price. The Company shall be permitted
to (i) issue equity compensation in the form of restricted stock units (“RSU’s”) and performance stock units
(“PSU’s”) to executives officers and directors as approved by the Compensation Committee; provided, that
(A) all such PSU’s issued to executive officers will be subject to the achievement of the company’s Key Performance Indicators
that are established by the Compensation Committee annually (the “KPIs”), and all such current and new RSU’s
and PSU’s awarded to executive officers will be subject to the Lockup Agreements entered into by such executive officers, (ii)
issue stock options to executive officers pursuant to the Company’s equity incentive plan; provided that such stock options
will not have a strike prices less than the value of a share of Common Stock implied by the Conversion Price, and (iii) enter into compensation
arrangements with newly hired executive officers or newly elected or appointed directors to the extent approved by the Board of Directors;
provided, that, following the establishment of such newly hired executive officer’s or newly elected or appointed director’s
compensation in connection with their initial retention, any changes to the compensation of such newly hired executive officer or newly
elected or appointed director will be subject to the terms of this Section 8(O), and each such newly hired executive officer or
newly elected or appointed director shall execute a lock up agreement substantially in the form of the Lock-Up Agreements. Notwithstanding
the foregoing, following the occurrence of a Triggering Event until the date that no shares of Preferred Stock are outstanding, base
salary (without any increase) shall be the only cash compensation of such executive officers and directors of the Company, and the Company
shall not issue Capital Stock of the Company (including, for the avoidance of doubt, RSU’s or PSU’s) to such executive officers
or directors.
(P)
Restricted Issuances. The Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, without the prior
written consent of the Required Holders, (i) issue any shares of Preferred Stock (other than as contemplated by the Securities Purchase
Agreement and this Certificate of Designation) or (ii) issue any other securities or incur any Indebtedness, in each case, that would
cause a breach or Trigger under this Certificate of Designation or that by its terms would prohibit or restrict the performance of any
of the Company’s or its Subsidiaries’ obligations under this Certificate of Designation, including, without limitation, the
payment of dividends and redemption amounts in respect of the Preferred Stock.
(Q)
Share Reserve. So long as any shares of Preferred Stock remain outstanding, as of any date, the Company shall at all times have
no less than a number of shares of authorized but unissued Common Stock reserved for any issuance equal to the greater of (i) an amount
equal to the product of three hundred fifty million (350,000,000) multiplied by a fraction, the numerator of which is the aggregate number
of shares of Preferred Stock outstanding as of such date and the denominator of which is the number of shares of Preferred Stock issued
pursuant to the Securities Purchase Agreement, (ii) two hundred percent (200%) of a fraction, the numerator of which shall be the aggregate
Stated Value with respect to all outstanding shares of Preferred Stock as of such date, plus all remaining unpaid dividends payable on
the Preferred Stock through and including September 26, 2029, plus the maximum number of shares of Common Stock exercisable pursuant
to the Anniversary Warrants, and the denominator of which shall be the Triggering Event Conversion Price and (iii) one hundred percent
(100%) of a fraction, the numerator of which shall be the aggregate Stated Value with respect to all outstanding shares of Preferred
Stock as of such date, plus all remaining unpaid dividends payable on the Preferred Stock through and including September 26, 2029, plus
the maximum number of shares of Common Stock exercisable pursuant to the Anniversary Warrants, and the denominator of which shall be
the Conversion Price (the “Required Reserve Amount”); provided that at no time shall the number of shares of Common
Stock reserved pursuant to this Section 8(Q) be reduced other than in connection with any stock combination, reverse stock split
or other similar transaction. If at any time the number of shares of Common Stock authorized and reserved for issuance is not sufficient
to meet the Required Reserve Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient
number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the
Company’s obligations pursuant to the Transaction Documents, in the case of an insufficient number of authorized shares, obtain
stockholder approval (if required) of an increase in such authorized number of shares, and voting the management shares of the Company
in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet
the Required Reserve Amount.
(R)
At-the-Market Offering. The Company shall (i) at all times from and after September 1, 2025 have an agreement providing for an
“at-the-market” offering within the meaning of Rule 415(a)(4) of the Securities Act (an “ATM Sales Agreement”)
in place pursuant to which the Company may issue and sell shares of Common Stock from time to time and (ii) ensure that the aggregate
amount of Common Stock that is available to be issued and sold under the ATM Sales Agreement at all times equals or exceeds twenty five
million dollars ($25,000,000).
(S)
Independent Investigation. At the request of the Required Holders at any time the Required Holders have determined in good faith
that (i) a Triggering Event has occurred or (ii) any event or circumstance has occurred and is continuing which, with the giving of notice
or passage of time or both, could constitute a Triggering Event but the Company has not timely agreed to such determination in writing,
the Company shall hire an independent, reputable accounting firm selected by the Company and approved by the Required Holders to investigate
as to whether such Triggering Event or event or circumstance has occurred (the “Independent Investigator”). If the
Independent Investigator determines that such Triggering Event or event or circumstance has occurred, the Independent Investigator shall
notify the Company of such Triggering Event or occurrence of such event or circumstance and the Company shall promptly deliver written
notice to the Holder of such Triggering Event if such Triggering Event has occurred. In connection with such investigation, the Independent
Investigator may, during normal business hours and upon signing a confidentiality agreement in a form reasonably acceptable to the Company,
inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and,
to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its accountants (including
the accountants’ work papers) and any books of account, records, reports and other papers not contractually required of the Company
to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make
such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish the Independent
Investigator with such financial and operating data and other information with respect to the business and properties of the Company
as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to discuss the affairs,
finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, any of the Company’s
officers, directors, key employees and independent public accountants (and by this provision the Company authorizes said accountants
to discuss with such Independent Investigator the finances and affairs of the Company and any Subsidiaries; provided, that the Company’s
Chief Financial Officer and Chief Executive Officer shall also be invited to attend any discussion with any key employee or the Company’s
independent public accountants), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.
(T)
Regulatory Filings. To the extent required in connection with the exercise of any the Holder’s rights with respect to the
Preferred Stock or the Anniversary Warrants (including the conversion, exercise or redemption thereof) (the “Exercise Transactions”),
the Company and the Holder shall as soon as reasonably practicable (but in no event more than ten (10) business days) following written
request by Holder, make any filings and apply for any approvals or consents that are required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the “HSR Act”) or any other applicable Antitrust Laws with respect to the Exercise Transactions and the
Company and Holder shall, to the extent permitted under applicable law, (i) cooperate and coordinate, subject to all applicable privileges
(including the attorney-client privilege), with the other in the making of any filings or submissions that are required to be made under
any applicable Antitrust Laws or requested to be made by any Governmental Authority in connection with the Exercise Transactions, (ii)
supply the other or its outside counsel with any information that may be required or requested by any Governmental Authority in connection
with such filings or submissions, (iii) supply any additional information that may be required or requested by the Federal Trade Commission,
the Department of Justice, or other Governmental Authorities in which any such filings or submissions are made under any applicable Antitrust
Laws as promptly as practicable, and (iv) use their respective reasonable best efforts consistent with applicable law to cause the expiration
or termination of the applicable waiting periods under any applicable Antitrust Laws as soon as reasonably practicable. Subject to applicable
law relating to the exchange of information, the Holder shall have the right, with reasonable consideration of the Company’s comments,
(x) to direct all matters with any Governmental Authority relating to the Exercise Transactions and (y) to review in advance, and direct
the revision of, any filing, application, notification, or other document to be submitted by the Company to any Governmental Authority
under any Antitrust Law. Neither party shall, without the prior written consent of the other party (which shall not be unreasonably withheld),
participate in any meeting or substantive discussion with any Governmental Authority relating to the Exercise Transactions unless such
party consults with the other party in advance and, to the extent permitted by such Governmental Authority, grants the other party the
opportunity to attend and participate in such discussions. In furtherance of this Section 8(T), if any objections are asserted
with respect to the Exercise Transactions under the HSR Act, any other applicable Antitrust Law or any other applicable law or if any
legal proceeding is instituted (or threatened to be instituted) by the Federal Trade Commission, the Department of Justice, or any other
Governmental Authority challenging the Exercise Transactions or that would otherwise prohibit or materially impair or delay the consummation
of the Exercise Transactions (an “Antitrust Restriction”), the Company and the Holder shall use their respective reasonable
best efforts to resolve any such objections or lawsuits or other proceedings (or threatened proceedings) so as to permit consummation
of the Exercise Transactions as soon as reasonably practicable. For as long as the shares of Preferred Stock or Anniversary Warrants
are outstanding, the Company shall (subject to any restrictions on provision of such information under applicable law) as promptly as
reasonably practicable provide such information regarding the Company and its subsidiaries as the Holder may reasonably request in order
to determine what antitrust requirements may exist with respect to the Exercise Transactions.
(U)
On or prior to the first (1st) Business Day of each month (or, if requested by the Holder in its sole discretion, within one
(1) Business Day of such request or, if earlier, immediately in the event a Triggering Event has occurred as a result of a breach of
Section 8(A), Section 8(D), Section 8(E), Section 8(F), Section 8(G), Section 8(O), Section 8(Q),
Section 8(R) or Section 8(Y)), the Company shall provide to the Holder a certification, in the form attached hereto as
Exhibit B, executed on behalf of the Company by the Chief Financial Officer of the Company, certifying whether or not the
Company has satisfied the requirements of Section 8(A), Section 8(D), Section 8(E), Section 8(F), Section 8(G),
Section 8(O), Section 8(Q), Section 8(R) or Section 8(Y) during the immediately preceding calendar month
or calendar quarter, as applicable (a “Compliance Certification”); provided that, solely with respect to the certification
of Section 8(A), if the Company has not closed its books by the first (1st) Business Day of the month, the Company
shall supplement such month’s Compliance Certification by the third (3rd) Business Day with its certification of Section
8(A). If the Company determines in its sole discretion that such information constitutes material non-public information, then the
Company will so indicate in the certification provided pursuant to the preceding sentence and the Company will concurrently disclose
such material non-public information on a Current Report on Form 8-K or otherwise.
(V)
Upon delivery by the Company to the Holder (or receipt by the Company from the Holder) of any notice in accordance with the terms of
this Certificate of Designation, unless the Company has in good faith determined that the matters relating to such notice do not constitute
material, non-public information relating to the Company or any of its Subsidiaries, the Company shall on or prior to 9:00 am, New York
City time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information
on a Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to
the Company or any of its Subsidiaries, the Company so shall indicate to the Holder explicitly in writing in such notice (or immediately
upon receipt of notice from the Holder, as applicable), and in the absence of any such written indication in such notice (or notification
from the Company immediately upon receipt of notice from the Holder), the Holder shall be entitled to presume that information contained
in the notice does not constitute material, non-public information relating to the Company or any of its Subsidiaries. Nothing contained
in this Section 8(V) shall limit any obligations of the Company, or any rights of the Holder, under the Securities Purchase Agreement.
(W)
The Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company, the Holder will not have any obligations
hereunder except those obligations expressly set forth herein (and in the Securities Purchase Agreement) and the Holder is acting solely
in the capacity of an arm’s length stockholder of the Company and not as a fiduciary or agent of the Company. The Company agrees
that it will not assert any claim against the Holder based on an alleged breach of fiduciary duty by the Holder in connection with this
Certificate of Designation or such Holder’s status as a stockholder of the Company. The Company acknowledges that the Holder shall
have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities
while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that
explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement,
the Company acknowledges that the Holder may freely trade in any securities issued by the Company, may possess and use any information
provided by the Company in connection with such trading activity, and may disclose any such information to any third party.
(X)
Stay, Extension and Usury Laws. To the extent that it may lawfully do so, the Company (i) agrees that it will not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law (wherever
or whenever enacted or in force) that may affect the covenants or the performance of the Company’s obligations pursuant to this
Certificate of Designation; and (ii) expressly waives all benefits or advantages of any such law and agrees that it will not, by resort
to any such law, hinder, delay or impede the execution of any power granted to the Holders by this Certificate of Designation, but will
suffer and permit the execution of every such power as though no such law has been enacted.
(Y)
MSA Subordination Provision. The Company shall comply with the requirements of Section 4(cc) of the Securities Purchase Agreement
regarding the implementation of the MSA Subordination Provision into Company Vendor Contracts.
(Z)
Information Rights. The Company shall permit any Holder and any of such Holder’s consultants, accountants, advisors, and
legal counsel, at the Company’s expense, to visit and inspect the Company’s properties; examine its books of account and
records; and discuss the Company’s affairs, finances, and accounts with the Company’s officers, during normal business hours
of the Company as may be reasonably requested by the Holder; provided that the Company shall not be obligated pursuant to this
Section 8(Z) to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential
information (unless covered by an enforceable confidentiality agreement) or the disclosure of which would adversely affect the attorney-client
privilege between the Company and its counsel.
(AA)
Reimbursement. The Company shall reimburse the Holder for all documented out of pocket expenses incurred in connection with the
Holder’s ongoing diligence of the Company following the Issue Date and the exercise and enforcement of its rights hereunder within
two (2) Business Days of written notice thereof.
The
Company will not consolidate with or merge with or into, or (directly, or indirectly through one or more of its Subsidiaries) sell, lease
or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, to another Person, other than the Holder or any of its Affiliates (a “Business Combination Event”),
unless:
(A)
the resulting, surviving or transferee Person either (x) is the Company or (y) if not the Company, is a corporation (the “Successor
Corporation”) duly organized and existing under the laws of the United States of America, any State thereof or the District
of Columbia that expressly assumes (by executing and delivering to the Holder, at or before the effective time of such Business Combination
Event, a supplement to this instrument) all of the Company’s obligations under this Certificate of Designation (including, without
limitation, by way of incorporating the terms hereunder into the organizational documents of such Successor Corporation); and
(B)
immediately after giving effect to such Business Combination Event, no Triggering Event will have occurred that has not been waived and
no Trigger will have occurred and be continuing which has not been waived.
At
the effective time of any Business Combination Event, the Successor Corporation (if not the Company) will succeed to, and may exercise
every right and power of, the Company under this Certificate of Designation with the same effect as if such Successor Corporation had
been named as the Company in this Certificate of Designation, and, except in the case of a lease, the predecessor Company will be discharged
from its obligations under this Certificate of Designation.
| Section 10. |
Triggers
and Remedies |
(A)
Triggering Events. “Triggering Event” means the occurrence of any of the following (whose occurrence, for the
avoidance of doubt, may be waived, but may not be cured):
(i)
any failure to pay in full when due any cash payment required pursuant to this Certificate of Designation, including, without limitation,
any Alternative Conversion Cash Payment, Cash Sweep Payment, Company Redemption Price, Additional Payment, or Fundamental Change Redemption
Price;
(ii)
any failure for two (2) Business Days in the payment when due of any dividends on the Preferred Stock (to the extent not accrued pursuant
to the terms of this Certificate of Designation);
(iii)
any failure in the execution of the Company’s obligation to issue shares pursuant to this Certificate of Designation in accordance
with Section 5(B), Section 5(C), Section 5(E)(ii), or Section 7;
(iv)
any failure in the execution of the Company’s obligation to timely deliver a Fundamental Change Notice pursuant to Section
6(A)(iii), Cash Sweep Certification in accordance with the requirements of Section 4(B), or Compliance Certification and such
failure continues for three (3) Business Days, or the delivery of a materially false or inaccurate Fundamental Change Notice, Cash Sweep
Certification, Company Redemption Notice or Compliance Certification;
(v)
any failure to timely deliver a Triggering Event Notice or any delivery of a materially false or inaccurate certification (including
a false or inaccurate deemed certification) by the Company (A) that the Equity Conditions or Company Redemption Equity Conditions, as
applicable, are satisfied or (B) as to whether any Triggering Event has occurred;
(vi)
any failure in the execution of the Company’s obligations or agreements under this Certificate of Designation or the Transaction
Documents (in each case, other than as set forth in clauses (i) - (v) or (vii) – (xvi)
of this Section 10(A)), or a breach of any representation or warranty in any material respect (other than representations or warranties
subject to material adverse effect or materiality qualifications, which may not be breached in any respect) of any Transaction Document
as of the date when made (except for representations and warranties that speak as of a specific date, which shall be true and correct
as of such specific date); provided, however, that if such failure or breach can be cured, then such failure or breach
shall not be a Triggering Event unless the Company has failed to cure such failure or breach within ten (10) days after its occurrence;
(vii)
any provision of any Transaction Document at any time for any reason (other than pursuant to the express terms thereof) ceases to be
valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof is contested, directly or
indirectly, by the Company or any of its Subsidiaries, or a proceeding is commenced by the Company or any of its Subsidiaries or any
governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof;
(viii)
the Company fails to comply with any covenant set forth in Section 8(A), Section (B), Section (C), Section 8(D),
Section 8(E), Section 8(F), Section 8(G), Section 8(H), Section 8(P), Section 8(Q), Section 8(R), Section
8(T), Section 8(U), Section 8(V), Section 8(Y), Section 8(Z) and Section 8(AA) of this Certificate of Designation;
(ix)
the suspension from trading or failure of the Common Stock to be trading or listed on the Company’s primary Eligible Exchange (measured
in terms of trading volume for its Common Stock) on which the Common Stock is traded for a period of three (3) consecutive Trading Days;
(x)
(i) the failure of the Company or any of its Subsidiaries to pay when due or within any applicable grace period any Indebtedness having
an individual principal amount in excess of at least one million dollars ($1,000,000) (or its foreign currency equivalent) in the aggregate
of the Company or any of its Subsidiaries, whether such Indebtedness exists as of the Issue Date or is thereafter created, and whether
such default has been waived for any period of time or is subsequently cured; (ii) the occurrence of any breach or default under any
terms or provisions of any other Indebtedness of at least one million dollars ($1,000,000) (or its foreign currency equivalent) in the
aggregate of the Company or any of its Subsidiaries, if the effect of such failure or occurrence is to cause or to permit the holder
or holders of any such Indebtedness, to cause, Indebtedness having an individual principal amount in excess of one million dollars ($1,000,000)
to become or be declared due prior to its stated maturity (whether or not such breach or default has been waived by the holders of such
Indebtedness or otherwise cured) or (iii) the Company effects any amendment, amendment and restatement or other modification to the Senior
Indebtedness Agreement or effects any refinancing, refunding, renewal or extension of the Senior Indebtedness that has, in the reasonable
determination of the Holder, an adverse effect on such Holder;
(xi)
one or more final judgments, orders or awards (or any settlement of any litigation or other proceeding that, if breached, could result
in a judgment, order or award) for the payment of at least one million dollars ($1,000,000) (or its foreign currency equivalent) in the
aggregate (excluding any amounts covered by insurance pursuant to which the insurer has been notified and has not denied coverage), is
rendered against the Company or any of its Subsidiaries and remains unsatisfied and (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment, order, award or settlement or (ii) there shall be a period of ten (10) consecutive days after
entry thereof during which (A) a stay of enforcement thereof is not in effect or (B) the same is not vacated, discharged, stayed or bonded
pending appeal;
(xii)
(A) the Company fails to timely file its quarterly reports on Form 10-Q or its annual reports on Form 10-K with the Commission in the
manner and within the time periods required by the Exchange Act, (B) the Company withdraws or restates any such quarterly report or annual
report previously filed with the Commission or (C) the Company at any time ceases to satisfy the eligibility requirements set forth under
Section I.A of the General Instructions to Form S-3;
(xiii)
at any time any shares of Common Stock issuable pursuant to this Certificate of Designation are not Freely Tradable;
(xiv)
the Company or any of its Significant Subsidiaries, pursuant to or within the meaning of any Bankruptcy Law, either:
(1)
commences a voluntary case or proceeding;
(2)
consents to the entry of an order for relief against it in an involuntary case or proceeding;
(3)
consents to the appointment of a custodian of it or for any substantial part of its property;
(4)
makes a general assignment for the benefit of its creditors;
(5)
takes any comparable action under any foreign Bankruptcy Law; or
(6)
generally is not paying its debts as they become due; or
(xv)
a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that either:
(1)
is for relief against Company or any of its Significant Subsidiaries in an involuntary case or proceeding;
(2)
appoints a custodian of the Company or any of its Significant Subsidiaries, or for any substantial part of the property of the Company
or any of its Significant Subsidiaries;
(3)
orders the winding up or liquidation of the Company or any of its Significant Subsidiaries; or
(4)
grants any similar relief with respect to the Company or any of its Significant Subsidiaries under any foreign Bankruptcy Law,
and,
in each case under this Section 10(A)(xv), such order or decree remains unstayed and in effect for at least thirty (30) days.
(xvi)
the Company’s stockholders approve any plan for the liquidation or dissolution of the Company.
(B)
Notice of Triggering Events. Promptly, but in no event later than two (2) Business Days after a Triggering Event, the Company
will provide written notice of such Triggering Event to the Holder (a “Triggering Event Notice”), which Triggering
Event Notice shall include (i) a reasonable description of the applicable Triggering Event, (ii) the date on which the Triggering Event
occurred and (iii) the date on which the Trigger underlying such Triggering Event initially occurred, if different than the date on which
the Triggering Event occurred.
(C)
Trigger Dividends. If a Trigger or a Triggering Event occurs, then in each case, each Holder will be entitled to receive, on a
cumulative basis, whether or not authorized or declared and whether or not the Company has assets legally available therefor, dividends
(in addition to the Stated Dividends) on each share of Preferred Stock (the “Trigger Dividend”) at a rate per annum
equal to twenty two percent (22%) less the then current Stated Dividend Rate on the amount equal to the sum of (a) the
Stated Value plus (b) all accrued and unpaid dividends on such share of Preferred Stock (including dividends accrued and
unpaid on previously unpaid dividends, but excluding any dividends accruing and not yet due). Such Trigger Dividends will automatically
accrue daily and compound quarterly from, and including, the date of such Trigger or Triggering Event, as applicable, to, but excluding,
the date such Trigger is cured and all outstanding Trigger Dividends have been paid. Trigger Dividends hereunder will be computed on
the basis of a 360-day year comprised of twelve 30-day months and will be payable in arrears on the earlier of (i) the first day of each
calendar month, (ii) the date such Trigger is cured, and (iii) the date on which any shares of Preferred Stock on which such Trigger
Dividends have accrued (including dividends accrued and unpaid on previously unpaid dividends thereon) are redeemed, converted or otherwise
retired (including, without limitation, a Conversion Settlement Date, Company Redemption Date, Fundamental Change Redemption Date, or
any date that a Cash Sweep Payment is paid by the Company to the Holder).
| Section 11. |
Senior
Credit Step-In Rights. |
If
at any time following the Issue Date, the trading price of a share of Common Stock on the principal U.S. national or regional securities
exchange on which the Common Stock is then listed is below (x) two dollars ($2.00) at any time during a Trading Day for three (3) consecutive
Trading Days or (y) one dollar fifty cents ($1.50) at any time during a Trading Day, then from and after such time, the Holder (or any
affiliate of the Holder to which the Holder has assigned its rights under this Section 11, in which event references to the Holder
in this Section 11 shall be in reference to such affiliate) will have the right to make a loan to the Company secured by all assets
of the Company and in an amount necessary to, and to require the Company to use the proceeds thereof to, effect Payment in Full (as defined
in the Senior Indebtedness Agreement or any equivalent term set forth in any agreement evidencing Senior Indebtedness Permitted Refinancing)
(including, in respect of any Letters of Credit, Secured Swap Agreements and Bank Products (each, as defined in the Senior Indebtedness
Agreement as in effect on the Issue Date) then extant, cash collateralizing or otherwise entering into arrangements satisfactory to the
applicable parties in accordance with the Senior Indebtedness Agreement as in effect on the Issue Date), with the documentation for such
secured loan being substantially in the form of the Senior Indebtedness Agreement and the applicable Loan Documents (as defined in the
Senior Indebtedness Agreement), in each case, as in effect on the Issue Date (other than removing any letter of credit facility therefrom)
(collectively, the “Mirror Credit Facility”). Concurrently with the closing of such Mirror Credit Facility and the
making of such secured loan by Holder to the Company or at any time thereafter (at the option of the Holder), the Company hereby agrees
to (A) amend the Mirror Credit Facility so that the lien on the Collateral (as defined in the Mirror Credit Facility) pursuant to the
Mirror Credit Facility shall also secure, on a pari passu basis, the Company’s payment obligations under this Certificate of Designation,
(B) enter into a new senior secured credit agreement or any other agreement evidencing Indebtedness with the Holder (including, without
limitation, by exchange of the Preferred Stock for senior secured convertible notes at the Holder’s option), the terms of which
shall be substantially similar to the terms of the Preferred Stock, and use the proceeds paid by the Holder thereunder to redeem the
shares of Preferred Stock or (C) any combination of the foregoing clauses (A) and (B). The Company hereby agrees that (i) it shall negotiate
in good faith and use its best efforts to agree on a form of the Mirror Credit Facility and any other agreements contemplated under this
Section 11 with the Holder (without unreasonable conditions or delay) and (ii) shall duly authorize, execute, deliver and perform
such Mirror Credit Facility and any other agreements contemplated under this Section 11 upon the Holder’s exercise of its
rights under this Section 11.
| Section 12. |
Absolute
Floor. |
Notwithstanding
any other provision of this Certificate of Designation to the contrary, in no event shall any share of Preferred Stock be converted into
shares of Common Stock using a Market Stock Payment Price or Triggering Event Conversion Price that is lower than the Absolute Floor
Price, in which case, the Absolute Floor Price shall be used for such conversion.
All
payments due under this Certificate of Designation in respect of a share of Preferred Stock shall rank pari passu with all other shares
of Preferred Stock.
| Section 14. |
Lost
or Mutilated Preferred Stock Certificate. |
If
a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Company 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
Company, and of the ownership hereof reasonably satisfactory to the Company.
Any
notice or communication to the Company will be deemed to have been duly given if in writing and delivered in person or by first class
mail (registered or certified, return receipt requested), electronic transmission (including e-mail) or other similar means of unsecured
electronic communication or overnight air courier guaranteeing next day delivery, or to the other’s address, which initially is
as follows:
Prairie
Operating Co.
55 Waugh Drive, Suite 400
Houston, TX 77007
Attention: General Counsel
Email address: ds@prairieopco.com
The
Company, by notice to the Holder, may designate additional or different addresses for subsequent notices or communications.
Any
notice or communication to the Holder will be by e-mail to its e-mail address, which initially is as set forth in the Securities Purchase
Agreement. The Holder, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.
If
a notice or communication is mailed in the manner provided above within the time prescribed, it will be deemed to have been duly given,
whether or not the addressee receives it.
| Section 16. |
Successors
and Assigns. |
All
agreements of the Company in this Certificate of Designation will bind its successors and will inure to the benefit of the Holder’s
successors and assigns.
| Section 17. |
Severability. |
If
any provision of this Certificate of Designation is invalid, illegal or unenforceable, then the validity, legality and enforceability
of the remaining provisions of this Certificate of Designation will not in any way be affected or impaired thereby.
| Section 18. |
Headings,
Etc. |
The
headings of the Sections of this Certificate of Designation have been inserted for convenience of reference only, are not to be considered
a part of this Certificate of Designation and will in no way modify or restrict any of the terms or provisions of this Certificate of
Designation.
This
Certificate of Designation may not be amended or modified unless in writing by the Company and the Required Holders, and no condition
herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit; provided that
this Section 19 and the provision restricting the waiver or amendment of the limitation in Section 7(J)(i) may not be amended
or waived.
| Section 20. |
Governing
Law; Waiver of Jury Trial. |
All
questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed
by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of Delaware. The Company and each Holder hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the
State of Delaware, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents
or with any transaction contemplated hereby or thereby, 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 court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party 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 to such party
at the address for such 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
manner permitted by law. Nothing contained herein shall be deemed or operate to preclude any Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such Holder or to enforce
a judgment or other court ruling in favor of such Holder. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH
OR ARISING OUT OF THIS CERTIFICATE OF DESIGNATION OR ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
| Section 21. |
Submission
to Jurisdiction. |
The
Company (A) agrees that any suit, action or proceeding against it arising out of or relating to this Certificate of Designation may be
instituted in the Court of Chancery of the State of Delaware; (B) waives, to the fullest extent permitted by applicable law, (i) any
objection that it may now or hereafter have to the laying of venue of any such suit, action or proceeding; and (ii) any claim that it
may now or hereafter have that any such suit, action or proceeding in such a court has been brought in an inconvenient forum; and (C)
submits to the nonexclusive jurisdiction of such court in any such suit, action or proceeding.
| Section 22. |
Enforcement
Fees. |
The
Company agrees to pay all costs and expenses of the Holder incurred as a result of enforcement of this Certificate of Designation and
the collection of any amounts owed to the Holder hereunder (whether in cash, Common Stock or otherwise), including, without limitation,
reasonable attorneys’ fees and expenses.
| Section 23. |
Electronic
Execution. |
The
words “execution,” “signed,” “signature,” and words of similar import in this Certificate of Designation
shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the
same effect, validity, and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be,
to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000
(15 U.S.C. §§ 7001-7006), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. §§ 301-309), or any
other similar state laws based on the Uniform Electronic Transactions Act.
*
* *
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 26th day of March 2025.
| /s/
Gary Hanna |
|
/s/
Edward Kovalik |
| Name: |
Gary
Hanna |
|
Name: |
Edward
Kovalik |
| Title: |
President |
|
Title: |
Chief
Executive Officer |
Exhibit
A
Form
of Holder Conversion Notice
Prairie
Operating Co.
Series
F Convertible Preferred Stock
Subject
to the terms of the Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock of Prairie
Operating Co., a Delaware corporation, by executing and delivering this Holder Conversion Notice, the undersigned Holder of shares of
Preferred Stock directs the Company to convert [_____] shares of Preferred Stock plus the accrued and unpaid dividends on such shares
in accordance with the following details.
Alternative
Conversion: ___ Yes ___ No
Below
Floor Alternative Conversion: ___ Yes ___ No
Triggering
Event Conversion Period in effect since (if applicable): ______________________
Shares
of Common Stock to be delivered:
______________________________
Accrued
and unpaid dividends:
______________________________
Account
Number:
______________________________
DTC
Participant Number:
______________________________
DTC
Participant Name:
______________________________
| Date: |
|
|
|
| |
|
|
(Legal
Name of Holder)
|
Exhibit
B
Form
of Covenant Compliance Certification
The
undersigned, the duly qualified and elected Chief Financial Officer of Prairie Operating Co., a Delaware corporation (the “Company”),
does hereby certify in such capacity and on behalf of the Company, pursuant to the Certificate of Designation of Preferences, Rights
and Limitations of Series F Convertible Preferred Stock of the Company (the “Certificate”), that:
| |
i. |
the
Company did not violate Section 8(A) of the Certificate during the calendar quarter ended [ ● ]; |
| |
|
|
| |
ii. |
the
Company did not violate Section 8(D) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
iii. |
the
Company did not violate Section 8(E) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
iv. |
the
Company did not violate Section 8(F) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
v. |
the
Company did not violate Section 8(G) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
vi. |
the
Company did not violate Section 8(O) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
vii. |
the
Company did not violate Section 8(Q) of the Certificate during the calendar month ended [ ● ]; |
| |
|
|
| |
viii. |
the
Company did not violate Section 8(R) of the Certificate during the calendar month ended [ ● ]; or |
| |
|
|
| |
ix. |
the
Company did not violate Section 8(Y) of the Certificate during the calendar month ended [ ● ]. |
Unless
otherwise specified, capitalized terms used herein without definition shall have the meanings given to such terms in the Certificate.
| |
PRAIRIE
OPERATING CO. |
| |
|
|
| |
By: |
|
| |
Name: |
|
| |
Title: |
|
| |
Date: |
|
Appendix
B
FORM
OF WARRANT
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
PRAIRIE
OPERATING CO.
| Warrant
Shares: [ ● ]1 |
Original
Issuance Date:2 [ ● ] |
THIS
WARRANT TO PURCHASE SHARES OF COMMON STOCK (this “Warrant”) certifies that, for value received, _____________ or its
assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time or times on or after the Original Issuance Date (the “Initial Exercise Date”) and on or prior
to 5:00 p.m. (New York City time) on the five year anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Prairie Operating Co., a Delaware corporation (the “Company”),
up to [ ● ] shares of Common Stock, par value $0.01 per share (the “Common Stock”), of the Company (as subject
to adjustment hereunder, the “Warrant Shares”). The purchase price of one Warrant Share under this Warrant shall be
equal to the Exercise Price, as defined in Section 2(b).
1.
Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the “Securities Purchase Agreement), dated as of March 24, 2025, among the Company, the Holder and the
other Buyers party thereto.
2.
Exercise.
(a)
Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time
or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF
copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”).
Within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined
in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the
Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank
unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised
in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the
date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection
to any Notice of Exercise on the date of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the
number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
1
NTD: To be a number of shares of Common Stock equal to the quotient of (i) one hundred
twenty five percent (125%) of the Stated Value (as defined in the Certificate of Designation)
of all Purchased Preferred Stock held by such Holder on the date that is the one year anniversary
of the Closing Date, provided that if such date is not a Trading Day, then the immediately
preceding Trading Day, divided by (ii) the average of the ten Daily VWAPs (as defined in
the Certificate of Designation) during the ten VWAP Trading Day (as defined in the Certificate
of Designation) period prior to the Original Issuance Date.
2
NTD: To be the date that is the one year anniversary of the Closing Date, provided that if such date is not a Trading Day, then
the immediately preceding Trading Day, provided that the Last Reported Sale Price (as defined in the Certificate of Designation) of the
Company’s shares of Common Stock during any Trading Day in the twenty (20) Trading Day period ending on such date was less than
one hundred fifteen percent (115%) of the Conversion Price (as defined in the Certificate of Designation).
(b)
Exercise Price. The exercise price per share of Common Stock under this Warrant, shall be $[●]3 per share,
subject to adjustment hereunder (the “Exercise Price”).
(c)
Cashless Exercise. Notwithstanding anything to the contrary set forth herein, if at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the
Holder or the resale of Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means
of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
| (A)
= | as
applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable
Notice of Exercise if such Notice of Exercise is (1) delivered pursuant to Section 2(a) hereof
on a day that is not a Trading Day or (2) delivered pursuant to Section 2(a) hereof on a
Trading Day prior to the opening of “regular trading hours” (as defined in Rule
600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day,
(ii) at the option of the Holder, either (x) the VWAP on the Trading Day immediately preceding
the date of the applicable Notice of Exercise or (y) the highest Bid Price of the Common
Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”)
within two (2) hours of the time of the Holder’s delivery of the Notice of Exercise
pursuant to Section 2(a) hereof if such Notice of Exercise is delivered during “regular
trading hours,” or within two (2) hours after the close of “regular trading hours”
on a Trading Day or (iii) the VWAP on the date of the applicable Notice of Exercise if the
date of such Notice of Exercise is a Trading Day and such Notice of Exercise is delivered
pursuant to Section 2(a) hereof after two (2) hours following the close of “regular
trading hours” on such Trading Day; |
| | | |
| (B)
= | the
Exercise Price of this Warrant, as adjusted hereunder; and |
| | | |
| | (X)
= | the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance
with the terms of this Warrant if such exercise were by means of a cash exercise rather than
a cashless exercise. |
If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the
Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not
to take any position contrary to this Section 2(c).
3
NTD: To be an exercise price equal to one hundred ten percent (110%) of the average of the ten Daily VWAPs during the ten VWAP
Trading Day period prior to the Original Issuance Date.
“Bid
Price” 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 bid price of the Common Stock for the time in question (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (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 Common Stock is not then listed or quoted on a Trading Market and
if the Common Stock is listed or quoted for trading on the OTC Market Group’s OTCQB exchange (“OTCQB”) or OTCQX
exchange (“OTCQX”) (or any successors to either of the foregoing) , the VWAP 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 on The Pink Open Market (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the
fair market value of a share of the Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of
a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
“Trading
Market” means any of the following markets or exchanges on which the shares of Common Stock are listed or quoted for trading
on the date in question: the NYSE American, the Nasdaq Stock Market LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
“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 (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 Common Stock is not then listed or quoted on a Trading Market and
if the Common Stock is listed or quoted for trading on OTCQB or OTCQX (or any successors to either of the foregoing), 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 on The Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of 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 Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.
(d)
Mechanics of Exercise
(i)
Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted to
the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through
its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either
(A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by
the Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of the Warrant Shares, registered
in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder
is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest
of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the
aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery
to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon the date of delivery
of the Notice of Exercise (the “Exercise Date”, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery
of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received
within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period following
delivery of the Notice of Exercise; and provided further, that the Holder shall be deemed to have waived any voting rights of any such
Warrant Shares that may arise during the period commencing on such Exercise Date, through, and including, such applicable Warrant Share
Delivery Date, as necessary, such that the aggregate voting rights of any Common Stock (including such Warrant Shares) beneficially owned
by the Holder and/or any Attribution Parties, collectively, shall not exceed the Beneficial Ownership Limitation (as defined below) as
a result of any such exercise of this Warrant. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject
to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not
as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable
Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery
Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise.
The Company agrees to maintain a registrar (which may be the Company’s transfer agent (the “Transfer Agent”))
that is a participant in the Fast Automated Securities Transfer Program so long as this Warrant remains outstanding and exercisable.
As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading
Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice
of Exercise.
(ii)
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
(iii)
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(iv)
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to
the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required
by its broker 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 the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds
(y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, 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 Company’s failure to timely deliver shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms hereof.
(v)
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company
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 Exercise Price or round up to the next whole share of Common Stock.
(vi)
Charges, Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue
or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall
be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed
by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and
the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository
Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of
the Warrant Shares.
(vii)
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
(viii)
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the
right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any
other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial
ownership of the shares of Common Stock would or could be aggregated with the Holder’s for the purposes of Section 13(d) (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 the Holder and its Affiliates
and Attribution Parties shall include the number of Warrant Shares issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of Warrant Shares which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other
securities of the Company or its Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock (collectively “Common Stock Equivalents”))
subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any
of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(d)(viii), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(d)(viii) applies, the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates
and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation,
and the Company 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, and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes
of this Section 2(d)(viii), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange
Commission (the “Commission”), as the case may be, (B) a more recent public announcement by the Company or (C) a more
recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the 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 Company, including this Warrant, by the 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% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the Warrant Shares
issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(d)(viii), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares
of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(d)(viii) shall continue to apply. Any increase in the Beneficial Ownership Limitation will
not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d)(viii) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained 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 this Warrant and this Section 2(d)(viii) may not be amended by the Company and the Holder. If the
Warrant is unexercisable as a result of the Holder’s Beneficial Ownership Limitation, no alternate consideration is owing to the
Holder.
3.
Certain Adjustments.
(a)
Share Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a share dividend or otherwise
makes a distribution or distributions on shares of Common Stock or any other equity or Common Stock Equivalents payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of Common Stock
any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant remains unchanged.
Any adjustment made pursuant to this Section 3(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 reclassification.
(b)
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time while this Warrant
remains outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase shares, warrants, securities
or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (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 the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding
the Beneficial Ownership Limitation, then the 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 the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
(c)
Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make 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, shares 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 Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on exercise 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, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding
the Beneficial Ownership Limitation, then the 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 the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
(d)
Fundamental Transaction. If at any time while this Warrant is outstanding (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (or any Subsidiary),
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of the Company’s assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer
or exchange offer (whether by the Company 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 shares of Common Stock or 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly
or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of shares of Common
Stock or any compulsory share exchange pursuant to which the shares of Common Stock are effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, 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,
merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires 50% or more of the
outstanding shares of Common Stock or 50% or more of the voting power of the common equity of the Company (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant
Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option
of the Holder (without regard to any limitation in Section 2(d)(viii) on the exercise of this Warrant), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, 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 Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any
limitation in Section 2(d)(viii) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise
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 Company shall apportion the Exercise 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
the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor
Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within thirty (30) days
after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental
Transaction), purchase this Warrant from the Holder by paying to the Holder, as described below, an amount of cash equal to the Black
Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental
Transaction, provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved
by the Company’s Board of Directors, the Holder shall only be entitled to receive from the Company or any Successor Entity, as
of the date of the consummation of such Fundamental Transaction, the same type or form of consideration (and in the same proportion),
valued at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common
Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any
combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration
in connection with the Fundamental Transaction; provided further, that if holders of Common Stock of the Company are not offered or paid
any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received shares of the Successor
Entity (which Successor Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black
Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting
(A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement
of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of (1)
the 30 day volatility, (2) the 100 day volatility or (3) the 365 day volatility, each of clauses (1)-(3) as obtained from the HVT function
on Bloomberg (determined utilizing a 365-day annualization factor) as of the Trading Day immediately following the public announcement
of the applicable contemplated Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater
of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered
in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the public
announcement of the applicable contemplated Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if
earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 3(d) and (D) a remaining option time equal
to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the Termination Date
and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within
five Business Days of the Holder’s election (or, if later, on the date of the consummation of the Fundamental Transaction). The
Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents
in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of
the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation
of such Fundamental Transaction, each and every provision of this Warrant and the other Transaction Documents referring to the “Company”
shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor
Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto
and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant and
the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally,
had been named as the Company herein. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this
Section 3(d) regardless of whether (i) the Company has sufficient authorized shares of Common Stock for the issuance of Warrant Shares;
(ii) a Fundamental Transaction occurs prior to the Initial Exercise Date; and/or (iii) the Requisite Stockholder Approval (as defined
in the Securities Purchase Agreement) has been obtained.
(e)
Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share of Common
Stock, as the case may be. For purposes of this Section 3, 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 treasury shares, if any) issued and outstanding.
(f)
Notice to Holder.
(i)
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company
shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii)
Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock 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 Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any
sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email
address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to
deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such
notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
(g)
Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during
the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the board of directors of the Company.
4.
Transfer of Warrant.
(a)
Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable,
in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
(b)
New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of
the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of
this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c)
Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the
“Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
5.
Miscellaneous.
(a)
Currency. All dollar amounts referred to in this Warrant are in United States Dollars (“U.S. Dollars”). All
amounts owing under this Warrant shall be paid in U.S. Dollars. All amounts denominated in other currencies shall be converted in the
U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means,
in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Warrant, the U.S. Dollar exchange rate as published
in the Wall Street Journal (New York edition) on the relevant date of calculation.
(b)
No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights,
dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly
set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant
to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be
required to net cash settle an exercise of this Warrant.
(c)
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares,
and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
(d)
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading
Day.
(e)
Authorized Shares. The Company covenants that during the period that the Warrant is outstanding, it will reserve from its authorized
and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise
of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued and
delivered, as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed. The Company covenants that all Warrant Shares underlying this Warrant which may be issued upon
the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary
or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the
foregoing, the Company will (i) not increase the par value of any shares of Common Stock above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (iii)
use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction thereof.
(f)
Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined
in accordance with the provisions of the Securities Purchase Agreement.
(g)
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and
the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state, federal or foreign securities laws.
(h)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Securities Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(i)
Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Securities Purchase Agreement.
(j)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the purchase price of any shares of Common Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
(k)
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law would be adequate.
(l)
Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall
inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall
be enforceable by the Holder or holder of Warrant Shares.
(m)
Amendment. This Warrant, other than this Section 5(m) and the provision restricting the amendment of Section 2(d)(viii), may be
modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(n)
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
(o)
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
(Signature
Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above
indicated.
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PRAIRIE
OPERATING CO. |
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By: |
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Name: |
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Title: |
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EXHIBIT
A
NOTICE
OF EXERCISE
TO:
PRAIRIE OPERATING CO.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only
if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
In exercising the Warrant, the undersigned hereby confirms and acknowledges that the representations set forth in the Warrant as they
apply to the undersigned are true and complete as of this date.
(2)
Payment shall take the form of (check applicable box(es)):
☐ in
lawful money of the United States; and/or
☐ if
permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
| [SIGNATURE
OF HOLDER] |
Name
of Investing Entity: |
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Signature
of Authorized Signatory of Investing Entity:
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Title
of Authorized Signatory: |
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Date: |
| |
EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name:
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| (Please Print) |
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Address: |
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| (Please Print) |
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Phone
Number: |
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Email
Address: |
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Dated: |
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Holder’s
Signature: |
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Holder’s
Address: |
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Prairie Operating (NASDAQ:PROP)
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