Attached files
file | filename |
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8-K - FORM 8-K - UFood Restaurant Group, Inc. | c06679e8vk.htm |
EX-3.2 - EXHIBIT 3.2 - UFood Restaurant Group, Inc. | c06679exv3w2.htm |
EX-4.1 - EXHIBIT 4.1 - UFood Restaurant Group, Inc. | c06679exv4w1.htm |
EX-10.1 - EXHIBIT 10.1 - UFood Restaurant Group, Inc. | c06679exv10w1.htm |
EX-99.1 - EXHIBIT 99.1 - UFood Restaurant Group, Inc. | c06679exv99w1.htm |
EX-10.2 - EXHIBIT 10.2 - UFood Restaurant Group, Inc. | c06679exv10w2.htm |
EX-10.3 - EXHIBIT 10.3 - UFood Restaurant Group, Inc. | c06679exv10w3.htm |
Exhibit 3.1
ROSS MILLER Secretary of State 204 North Carson Street, Suite 1 Carson City, Nevada 89701-4520 (775) 684-5708 Website: www.nvsos.gov |
Certificate of Designation
(PURSUANT TO NRS 78.1955)
(PURSUANT TO NRS 78.1955)
Filed in the Office of |
Document Number | |
/s/ Ross Miller
|
20100746683-87 | |
Ross Miller
|
Filing Date and Time | |
Secretary of State
|
10/04/2010 9:00 AM | |
State of Nevada
|
Entity Number | |
E0085022006-3 |
USE BLACK INK ONLY DO NOT HIGHLIGHT | ABOVE SPACE IS FOR OFFICE USE ONLY |
Certificate of Designation For
Nevada Profit Corporations
(Pursuant to NRS 78.1955)
Nevada Profit Corporations
(Pursuant to NRS 78.1955)
1. Name of corporation:
UFood Restaurant Group, Inc.
2. By resolution of the board of directors pursuant to a provision in the articles of
incorporation this
certificate establishes the following regarding the voting powers, designations,
preferences,
limitations, restrictions and relative rights of the following class or series of stock.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B 8% CONVERTIBLE PREFERRED STOCK
RIGHTS AND LIMITATIONS
OF
SERIES B 8% CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 78.1955 OF THE
REVISED STATUTES OF THE STATE OF NEVADA
REVISED STATUTES OF THE STATE OF NEVADA
The undersigned, Charles Cocotas, does
hereby certify that:
[See attached Exhibit A]
3. Effective date of filing: (optional)
(must not be later than 90 days after the certificate is filed) |
4. Signature: (required)
/s/
George A. Naddaff |
Filing Fee: $175.00
IMPORTANT: Failure to include any of the above information and submit with the proper fees may
cause this filing to be rejected.
Nevada Secretary of State Stock Designation | ||
This form must be accompanied by appropriate fees. | Revised: 3-5-09 |
EXHIBIT A
1. He is the President, of UFood Restaurant Group, Inc., a Nevada corporation (the
Corporation).
2. The Corporation is authorized to issue 10,000,000 shares of preferred stock, none of which
have been issued.
3. The following resolutions were duly adopted by the board of directors of the Corporation
(the Board of Directors):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, consisting of 10,000,000 shares, $0.001 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 70,000 shares of the preferred stock which the Corporation
has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the
issuance of a series of preferred stock for cash or exchange of other securities, rights or
property and does hereby fix and determine the rights, preferences, restrictions and other matters
relating to such series of preferred stock as follows:
1
TERMS OF PREFERRED STOCK
Section 1. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
Affiliate means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 405 of the Securities Act.
Alternate Consideration shall have the meaning set forth in Section 7(e).
Base Conversion Price shall have the meaning set forth in Section 7(b).
Beneficial Ownership Limitation shall have the meaning set forth in Section
6(d).
Business Day means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
Buy-In shall have the meaning set forth in Section 6(c)(iv).
Change of Control Transaction means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity or group
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Corporation, by
contract or otherwise) of in excess of 33% of the voting securities of the Corporation
(other than by means of conversion or exercise of Preferred Stock and the Securities issued
together with the Preferred Stock), (b) the Corporation merges into or consolidates with any
other Person, or any Person merges into or consolidates with the Corporation and, after
giving effect to such transaction, the stockholders of the Corporation immediately prior to
such transaction own less than 66% of the aggregate voting power of the Corporation or the
successor entity of such transaction, (c) the Corporation sells or transfers all or
substantially all of its assets to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 66% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a replacement at one time or within
a one year period of more than one-half of the members of the Board of Directors which is
not approved by a majority of those individuals who are members of the Board of Directors on
the Original Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by a majority
of the members of the Board of Directors who are members on the Original Issue Date), or (e)
the execution by the Corporation of an agreement to which the Corporation is a party or by
which it is bound, providing for any of the events set forth in clauses (a) through (d)
above.
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Closing means the closing of the purchase and sale of the Securities pursuant
to Section 2.1 of the Purchase Agreement.
Commission means the United States Securities and Exchange Commission.
Common Stock means the Corporations common stock, par value $0.001 per
share, and stock of any other class of securities into which such securities may hereafter
be reclassified or changed.
Common Stock Equivalents means any securities of the Corporation or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
Conversion Amount means the sum of the Stated Value at issue.
Conversion Date shall have the meaning set forth in Section 6(a).
Conversion Price shall have the meaning set forth in Section 6(b).
Conversion Shares means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
Conversion Shares Registration Statement means a registration statement that
registers the resale of all Conversion Shares of the Holders, who shall be named as selling
stockholders therein and meets the requirements of the Registration Rights Agreement.
Dilutive Issuance shall have the meaning set forth in Section 7(b).
Dilutive Issuance Notice shall have the meaning set forth in Section 7(b).
Effective Date means the date that the Conversion Shares Registration
Statement filed by the Corporation pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
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Equity Conditions means, during the period in question, (a) the Corporation
shall have duly honored all conversions scheduled to occur or occurring by virtue of one or
more Notices of Conversion of the applicable Holder on or prior to the dates so requested or
required, if any, (b) the Corporation shall have paid all liquidated damages and other
amounts owing to the applicable Holder in respect of the Preferred Stock, (c)(i)
there is an effective Conversion Shares Registration Statement pursuant to which the
Holders are permitted to utilize the prospectus thereunder to resell all of the shares of
Common Stock issuable pursuant to the Transaction Documents (and the Corporation believes,
in good faith, that such effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents
(and shares issuable in lieu of cash payments of dividends) may be resold pursuant to Rule
144 without volume or manner-of-sale restrictions or current public information requirements
as determined by the counsel to the Corporation as set forth in a written opinion letter to
such effect, addressed and acceptable to the Transfer Agent and the affected Holders, (d)
the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to
the Transaction Documents are listed or quoted for trading on such Trading Market (and the
Corporation believes, in good faith, that trading of the Common Stock on a Trading Market
will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of
authorized, but unissued and otherwise unreserved, shares of Common Stock for the issuance
of all of the shares then issuable pursuant to the Transaction Documents, (f) the issuance
of the shares in question (or, in the case of a redemption, the shares issuable upon
conversion in full of the redemption amount) to the applicable Holder would not violate the
limitations set forth in Section 6(d), (g) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated, (h) the applicable Holder is not in possession of any information provided
by the Corporation that constitutes, or may constitute, material non-public information, and
(i) for each Trading Day in a period of 20 consecutive Trading Days prior to the applicable
date in question, the daily trading volume for the Common Stock on the principal Trading
Market exceeds 250,000 shares per Trading Day (subject to adjustment for forward and reverse
stock splits and the like).
Escrow Agent means Signature Bank, a New York State chartered bank and having
an office at 261 Madison Avenue, New York, New York 10016.
Escrow Agreement means the escrow agreement entered into prior to the date of
the Purchase Agreement, by and among the Corporation and the Escrow Agent pursuant to which
the Holder shall deposit Subscription Amounts with the Escrow Agent to be applied to the
transactions contemplated hereunder.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
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Exempt Issuance means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on
the date of this Agreement, provided that such securities have not been amended since
the date of this Agreement to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such securities, (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall only be to a
Person (or to the equityholders of a Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of
the Company and shall provide to the Company additional benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities, (d) with the prior written consent of the Placement
Agent, up to an amount of Preferred Stock and warrants equal to the difference between
$6,000,000 and the aggregate Subscription Amounts hereunder, on the same terms and
conditions and prices as hereunder, (e) up to $100,000 in any 12 month period, of securities
issued or issuable in connection with a bank loan, lease or other non-equity interim
financing and (f) 10,000 shares of Preferred Stock to be issued by the Corporation to Summit
Trading Limited.
Forced Conversion Date shall have the meaning set forth in Section 8(a).
Forced Conversion Notice shall have the meaning set forth in Section 8(a).
Forced Conversion Notice Date shall have the meaning set forth in Section
8(a).
Fundamental Transaction shall have the meaning set forth in Section 7(e).
Holder means a holder of Preferred Stock.
Junior Securities means the Common Stock and all other Common Stock
Equivalents of the Corporation other than those securities which are explicitly senior or
pari passu to the Preferred Stock in dividend rights or liquidation
preference (including without limitation the Series A Preferred).
Liquidation shall have the meaning set forth in Section 5.
New York Courts shall have the meaning set forth in Section 9(d).
Notice of Conversion shall have the meaning set forth in Section 6(a).
Optional Redemption shall have the meaning set forth in Section 8(b).
Optional Redemption Amount means the sum of (a) 120% of the aggregate Stated
Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated damages and
other amounts due in respect of the Preferred Stock.
5
Optional Redemption Date shall have the meaning set forth in Section 8(b).
Optional Redemption Notice shall have the meaning set forth in Section 8(b).
Optional Redemption Notice Date shall have the meaning set forth in Section
8(b).
Original Issue Date means the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be issued to evidence such
Preferred Stock.
Person means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
Preferred Stock shall have the meaning set forth in Section 2.
Purchase Agreement means the Securities Purchase Agreement, dated as of the
Original Issue Date, among the Corporation and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.
Registration Rights Agreement means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, among the Corporation and the original Holders, in
the form of Exhibit B attached to the Purchase Agreement.
Registration Statement means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Holder as provided for in the Registration Rights Agreement.
Rule 144 means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.
Securities means the Preferred Stock, the Warrants, the Warrant Shares and
the Underlying Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Series A Preferred shall mean the Corporations Series A 8% Convertible
Preferred Stock, par value $0.001 per share.
6
Share Delivery Date shall have the meaning set forth in Section 6(c).
Stated Value shall have the meaning set forth in Section 2, as the same may
be increased pursuant to Section 3.
Subscription Amount shall mean, as to each Holder, the aggregate amount to be
paid for the Preferred Stock purchased pursuant to the Purchase Agreement as specified below
such Holders name on the signature page of the Purchase Agreement and next to the heading
Subscription Amount, in United States dollars and in immediately available funds.
Subsidiary means any direct or indirect subsidiary of the Corporation and
shall, where applicable, also include any direct or indirect subsidiary of the Corporation
formed or acquired after the date of the Purchase Agreement.
Successor Entity shall have the meaning set forth in Section 7(e).
Threshold Period shall have the meaning set forth in Section 8(a).
Trading Day means a day on which the principal Trading Market is open for
business.
Trading Market means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
Transaction Documents means this Certificate of Designation, the Purchase
Agreement, the Warrants, the Registration Rights Agreement, the Escrow Agreement, all
exhibits and schedules thereto and hereto and any other documents or agreements executed in
connection with the transactions contemplated pursuant to the Purchase Agreement.
Transfer Agent means Continental Stock Transfer & Trust Company, the current
transfer agent of the Company, with a mailing address of 17 Battery Place, 8th
Floor, New York, New York, 10004, and a facsimile number of (212) 509-5150, and any
successor transfer agent of the Company.
Underlying Shares means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock, upon exercise of the Warrants and issued
and issuable in lieu of the cash payment of dividends on the Preferred Stock in accordance
with the terms of this Certificate of Designation.
7
Variable Rate Transaction shall have the meaning ascribed to such term in
Section 4.13(b) of the Purchase Agreement.
Warrants means, collectively, the Common Stock purchase warrants delivered to
the Holder at the Closing in accordance with Section 2.2(a) of the Purchase Agreement, which
Warrants shall be exercisable immediately and have a term of exercise equal to five years,
in the form of Exhibit C attached to the Purchase Agreement.
Warrant Shares means the shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount and Par Value. The series of preferred
stock shall be designated as Series B 8% Convertible Preferred Stock (the Preferred
Stock) and the number of shares so designated shall be 70,000. Each share of Preferred
Stock shall have a par value of $0.001 per share and a stated value equal to $100, subject
to increase set forth in Section 3 below (the Stated Value).
Section 3. Dividends.
a) Cumulative Dividends. Holders shall be entitled to receive, and the
Corporation shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 8% per annum, compounded annually, payable upon a Liquidation.
Such dividends shall begin to accrue with respect to any shares of Preferred Stock on the
date of issuance of such shares. Dividends shall be payable to holders of record, as they
appear on the stock books of the Corporation. Notwithstanding anything herein to the
contrary, payment of any dividends shall be made to the Preferred Stock on a pro rata, pari
passu basis with the Series A Preferred.
b) Dividend Calculations. Dividends on the Preferred Stock shall be calculated
on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall
accrue daily commencing on the Original Issue Date, and shall be deemed to accrue from such
date whether or not earned or declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends. Dividends
shall cease to accrue with respect to any Preferred Stock converted.
c) Other Securities. So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities; provided, however, that the
Corporation may redeem those certain 8% Senior Secured Convertible Debentures issued by the
Corporation in exchange for shares of Series A Preferred. So long as any Preferred Stock
shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall directly
or indirectly pay or declare any dividend or make any distribution upon (other than a
dividend or distribution described in Section 6 or dividends due and paid in the
ordinary course on preferred stock of the Corporation at such times when the
Corporation is in compliance with its payment and other obligations hereunder), nor shall
any distribution be made in respect of, any Junior Securities as long as any dividends due
on the Preferred Stock remain unpaid, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or
shares pari passu with the Preferred Stock.
8
Section 4. Voting Rights. Except as otherwise provided herein or as
otherwise required by law, the Preferred Stock shall have no voting rights. However, as long
as any shares of Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote of the Holders of a majority of the then outstanding shares of the
Preferred Stock: (a) alter or change the powers, preferences or rights given to the
Preferred Stock in a manner that adversely affects the powers, preferences or rights of the
Preferred Stock or alter or amend this Certificate of Designation; (b) authorize or create
any class of stock ranking as to dividends, redemption or distribution of assets upon a
Liquidation (as defined in Section 5) senior to, or otherwise pari passu
with, the Preferred Stock other than the Series A Preferred; (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, other than in
connection with the designation of the Series A Preferred; or (e) enter into any agreement
with respect to any of the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution, winding-up
of the Corporation, whether voluntary or involuntary (a Liquidation), the Holders
shall be entitled to receive out of the assets, whether capital or surplus, of the
Corporation an amount equal to the greater of (i) 120% of the Stated Value, plus any accrued
and unpaid dividends thereon and any other fees or liquidated damages then due and owing
thereon under this Certificate of Designation and (ii) (A) 20% of the Stated Value, plus (B)
any accrued but unpaid dividends on such shares of Preferred Stock, plus (C) the amount that
such shares of Preferred Stock would be entitled to receive if the amounts set forth in
Section 5(ii)(A) and (B) were paid as a preference to the holders of Preferred stock and
then holders of the Preferred Stock were entitled to receive, pro rata with the Common
Stock, as if the Preferred Stock was converted into the number of shares of Common Stock
into which the Preferred Stock was then convertible), all remaining assets of the
Corporation, for each share of Preferred Stock before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be distributed to the
Holders shall be ratably distributed among the Holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in
full. The Corporation shall mail written notice of any such Liquidation, not less than 45
days prior to the payment date stated therein, to each Holder. Each Holder may elect to
have a Fundamental Transaction treated as a Liquidation with respect to such Holders
Preferred Shares by providing written notice of such election to the Corporation; upon such
election, Section 7(e) shall not apply to the Preferred Shares held by the electing
Holder. Notwithstanding anything herein to the contrary, payment upon any Liquidation
shall be made to the Preferred Stock on a pro rata, pari passu basis with the Series A
Preferred.
9
Section 6. Conversion.
a) Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible, at any time on or after January 1, 2011, at the option of the Holder thereof,
into that number of shares of Common Stock (subject to the limitations set forth in Section
6(d)) determined by dividing the Stated Value of such share of Preferred Stock by the
Conversion Price. In addition to the foregoing, simultaneously with the conversion of any
shares of Preferred Stock, all accrued but unpaid dividends through the conversion date on
such shares shall be converted into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the aggregate amount of accrued but unpaid
dividends through the conversion date to be converted by the Conversion Price for such
shares, in effect at the time of conversion. Holders shall effect conversions by providing
the Corporation with the form of conversion notice attached hereto as Annex A (a
Notice of Conversion). Each Notice of Conversion shall specify the number of
shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent
to the conversion at issue and the date on which such conversion is to be effected, which
date may not be prior to the date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the Conversion Date). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and
entries set forth in the Notice of Conversion shall control in the absence of manifest or
mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not
be required to surrender the certificate(s) representing the shares of Preferred Stock to
the Corporation unless all of the shares of Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing such shares
of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred
Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued.
b) Conversion Price. The conversion price for the Preferred Stock shall equal
$0.23, subject to adjustment herein (the Conversion Price).
c) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the Share Delivery Date), the
Corporation shall deliver, or cause to be delivered, to the converting Holder (A) a
certificate or certificates representing the Conversion Shares which, on or after
the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions (other
than those which may then be required by the Purchase Agreement) representing
the number of Conversion Shares being acquired upon the conversion of the Preferred
Stock. On or after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the Effective Date, the Corporation shall use its best efforts to
deliver any certificate or certificates required to be delivered by the Corporation
under this Section 6 electronically through the Depository Trust Company or another
established clearing corporation performing similar functions.
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ii. Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed by
the applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Corporation at any time on or before its receipt of
such certificate or certificates, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock
certificate delivered to the Corporation and the Holder shall promptly return to the
Corporation the Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.
iii. Obligation Absolute; Partial Liquidated Damages. The
Corporations obligation to issue and deliver the Conversion Shares upon conversion
of Preferred Stock in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach
by such Holder or any other Person of any obligation to the Corporation or any
violation or alleged violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such obligation
of the Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a
waiver by the Corporation of any such action that the Corporation may have against
such Holder. In the event a Holder shall elect to convert any or all of the Stated
Value of its Preferred Stock, the Corporation may not refuse conversion based on any
claim that such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, agreement or for any other reason, unless an
injunction from a court, on notice to Holder, restraining and/or enjoining
conversion of all or part of the Preferred Stock of such Holder shall have been
sought and obtained, and the Corporation posts a surety bond for the benefit of such
Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject
to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall be
payable to such Holder to the extent it obtains judgment. In the absence of such
injunction, the Corporation shall issue Conversion Shares upon a properly noticed
conversion. If the Corporation fails to deliver to a Holder such
11
certificate or certificates pursuant to Section 6(c)(i) on the fifth Trading
Day after the Share Delivery Date applicable to such conversion, the Corporation
shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day
(increasing to $100 per Trading Day on the sixth Trading Day and increasing to $200
per Trading Day on the ninth Trading Day after such damages begin to accrue) for
each Trading Day after such fifth Trading Day after the Share Delivery Date until
such certificates are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holders right to pursue actual damages for the Corporations failure
to deliver Conversion Shares within the period specified herein and such Holder
shall have the right to pursue all remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit a Holder from
seeking to enforce damages pursuant to any other Section hereof or under applicable
law.
iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the applicable certificate
or certificates by the Share Delivery Date pursuant to Section 6(c)(i), and if after
such Share Delivery Date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holders brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by
such Holder of the Conversion Shares which such Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a Buy-In), then the
Corporation shall (A) pay in cash to such Holder (in addition to any other remedies
available to or elected by such Holder) the amount, if any, by which (x) such
Holders total purchase price (including any brokerage commissions) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that such Holder was entitled to receive from the conversion at issue
multiplied by (2) the actual sale price at which the sell order giving rise to such
purchase obligation was executed (including any brokerage commissions) and (B) at
the option of such Holder, either reissue (if surrendered) the shares of Preferred
Stock equal to the number of shares of Preferred Stock submitted for conversion (in
which case, such conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section 6(c)(i). For example,
if a Holder purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the
Corporation shall be required to pay such Holder $1,000. The Holder shall provide
the Corporation written notice indicating the amounts payable to such Holder in
respect of the
Buy-In and, upon request of the Corporation, evidence of the amount of such
loss. Nothing herein shall limit a Holders 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
Corporations failure to timely deliver certificates representing shares of Common
Stock upon conversion of the shares of Preferred Stock as required pursuant to the
terms hereof.
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v. Reservation of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Preferred Stock and payment of dividends on the Preferred Stock, each as
herein provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of the Preferred
Stock), not less than such aggregate number of shares of the Common Stock as shall
(subject to the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section 7) upon
the conversion of the then outstanding shares of Preferred Stock and payment of
dividends hereunder. The Corporation covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued, fully
paid and nonassessable and, if the Conversion Shares Registration Statement is then
effective under the Securities Act, shall be registered for public resale in
accordance with such Conversion Shares Registration Statement (subject to such
Holders compliance with its obligations under the Registration Rights Agreement).
vi. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the Preferred Stock. As
to any fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Corporation shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
vii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Preferred Stock shall be made without charge to
any Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holders of such shares of Preferred Stock and the
Corporation shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction of
the Corporation that such tax has been paid.
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d) Beneficial Ownership Limitation. The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to convert any
portion of the Preferred Stock, to the extent that, after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder (together with such Holders
Affiliates, and any Persons acting as a group together with such Holder or any of such
Holders Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which
such determination is being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining, unconverted Stated Value of
Preferred Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities of the
Corporation subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred Stock or the Warrants)
beneficially owned by such Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any Affiliates) and of how
many shares of Preferred Stock are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such Holders
determination of whether the shares of Preferred Stock may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and how many shares of
the Preferred Stock are convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, each Holder will be deemed to
represent to the Corporation each time it delivers a Notice of Conversion that such Notice
of Conversion has not violated the restrictions set forth in this paragraph and the
Corporation shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 6(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the following: (i) the Corporations
most recent periodic or annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Corporation or (iii) a more recent written notice by
the Corporation or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Corporation shall within two
Trading Days confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or
14
its Affiliates 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 the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the
applicable Holder. A Holder, upon not less than 61 days prior notice to the Corporation,
may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d)
applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no
event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon conversion of this
Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to
apply. Any such increase or decrease will not be effective until the 61st day
after such notice is delivered to the Corporation and shall only apply to such Holder and no
other Holder. The provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section 6(d) to correct
this paragraph (or any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of Preferred Stock.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time while the
Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of Common Stock on shares of Common Stock or any other
Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, the
Preferred Stock); (ii) subdivides outstanding shares of Common Stock into a larger number of
shares; (iii) combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding any treasury shares of
the Corporation) outstanding immediately before such event, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 7(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in the case of
a subdivision, combination or re-classification.
15
b) Subsequent Equity Sales. If, at any time while the Preferred Stock is
outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other disposition), any Common Stock
or Common Stock Equivalents entitling any Person to acquire shares of Common
Stock at an effective price per share that is lower than the then Conversion Price
(such lower price, the Base Conversion Price and such issuances, collectively, a
Dilutive Issuance) (if the holder of the Common Stock or Common Stock Equivalents
so issued shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share that is lower
than the Conversion Price, such issuance shall be deemed to have occurred for less than the
Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced and only reduced by multiplying the Conversion Price by a fraction, the numerator of
which is the number of shares of Common Stock issued and outstanding immediately prior to
the Dilutive Issuance plus the number of shares of Common Stock which the offering price for
such Dilutive Issuance would purchase at the then Conversion Price, and the denominator of
which shall be the sum of the number of shares of Common Stock issued and outstanding
immediately prior to the Dilutive Issuance plus the number of shares of Common Stock so
issued or issuable in connection with the Dilutive Issuance. Notwithstanding the foregoing,
no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance. If the
Corporation enters into a Variable Rate Transaction, despite the prohibition set forth in
the Purchase Agreement, the Corporation shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion price at which such securities
may be converted or exercised. The Corporation shall notify the Holders in writing, no
later than the third Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 7(b), indicating therein the applicable issuance price,
or applicable reset price, exchange price, conversion price and other pricing terms (such
notice, the Dilutive Issuance Notice). For purposes of clarification, whether or
not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon
the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of
Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive
Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in
the Notice of Conversion.
c) Subsequent Rights Offerings. If the Corporation, at any time while this
Preferred Stock is outstanding, shall issue rights, options or warrants to all holders of
Common Stock (and not to the Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the closing bid price on the record
date referenced below, then the Conversion Price shall be multiplied by a fraction of which
the denominator shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares which the aggregate offering price of the total number of
shares so offered (assuming delivery to the Corporation in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such closing bid price.
Such adjustment shall be made
whenever such rights, options or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled to receive
such rights, options or warrants.
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d) Pro Rata Distributions. If the Corporation, at any time while the Preferred
Stock is outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security (other than the Common Stock, which shall
be subject to Section 7(b)), then in each such case the Conversion Price shall be adjusted
by multiplying such Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the closing bid price determined as of the record date
mentioned above, and of which the numerator shall be such closing bid price on such record
date less the then fair market value at such record date of the portion of such assets or
evidence of indebtedness or rights or warrants so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors of the Corporation in good
faith. In either case the adjustments shall be described in a statement delivered to the
Holders describing the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately after the
record date mentioned above.
e) Fundamental Transaction. If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Corporation or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell, tender or
exchange their shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or
property, (v) the Corporation, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with another Person whereby such other Person acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a
Fundamental Transaction), then, subject to Section 5, upon any subsequent
conversion of this Preferred Stock, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
17
immediately prior to the occurrence of such Fundamental Transaction (without regard to
any limitation in Section 6(d) on the conversion of this Preferred Stock), the number of
shares of Common Stock of the successor or acquiring corporation or of the Corporation, if
it is the surviving corporation, and any additional consideration (the Alternate
Consideration) receivable as a result of such Fundamental Transaction by a holder of
the number of shares of Common Stock for which this Preferred Stock is convertible
immediately prior to such Fundamental Transaction (without regard to any limitation in
Section 6(d) on the conversion of this Preferred Stock). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental Transaction, and the
Corporation shall apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Corporation or surviving entity in
such Fundamental Transaction shall file a new Certificate of Designation with the same terms
and conditions and issue to the Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders right to convert such preferred stock into Alternate
Consideration. The Corporation shall cause any successor entity in a Fundamental
Transaction in which the Corporation is not the survivor (the Successor Entity) to
assume in writing all of the obligations of the Corporation under this Certificate of
Designation and the other Transaction Documents (as defined in the Purchase Agreement) in
accordance with the provisions of this Section 7(e) 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 of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a
security of the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Preferred Stock which is convertible 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 conversion of this Preferred Stock
(without regard to any limitations on the conversion of this Preferred Stock) prior to such
Fundamental Transaction, and with a conversion price which applies the conversion 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 conversion price being for
the purpose of protecting the economic value of this Preferred Stock 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 succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction, the provisions of this Certificate of Designation and
the other Transaction Documents referring to the
Corporation shall refer instead to the Successor Entity), and may exercise every
right and power of the Corporation and shall assume all of the obligations of the
Corporation under this Certificate of Designation and the other Transaction Documents with
the same effect as if such Successor Entity had been named as the Corporation herein.
18
f) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding any treasury
shares of the Corporation) issued and outstanding.
g) Notice to the Holders.
i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Corporation is a party, any sale or transfer of all or substantially all of the
assets of the Corporation, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Corporation shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation, then, in each case, the Corporation shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered to each Holder at its last address
as it shall appear upon the stock books of the Corporation, at least twenty (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 hereunder constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the Corporation shall
simultaneously file such notice with the Commission pursuant to a Current Report on
Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of the
Preferred Stock (or any part hereof) during the 20-day period commencing on the date
of such notice through the effective date of the event triggering such notice except
as may otherwise be expressly set forth herein.
19
Section 8. Forced Conversion and Optional Redemption.
a) Forced Conversion. Notwithstanding anything herein to the contrary, if
after January 1, 2011 (i) the closing bid price for each of any 10 consecutive Trading Day
period (Threshold Period), exceeds 300% of the then effective Conversion Price
and (ii) the volume for each Trading Day during any Threshold Period exceeds 250,000 shares
of Common Stock per Trading Day, the Corporation may, within three (3) Trading Days after
the end of any such Threshold Period, deliver a written notice to all Holders (a Forced
Conversion Notice and the date such notice is delivered to all Holders, the Forced
Conversion Notice Date) to cause each Holder to convert all or part of such Holders
Preferred Stock (as specified in such Forced Conversion Notice) plus all accrued but unpaid
dividends thereon and all liquidated damages and other amounts due in respect of the
Preferred Stock pursuant to Section 6, it being agreed that the Conversion Date for
purposes of Section 6 shall be deemed to occur on the third Trading Day following the Forced
Conversion Notice Date (such third Trading Day, the Forced Conversion Date). The
Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion Notice
delivered by the Corporation shall not be effective, unless all of the Equity Conditions
have been met on each Trading Day during the applicable Threshold Period through and
including the later of the Forced Conversion Date and the Trading Day after the date that
the Conversion Shares issuable pursuant to such conversion are actually delivered to the
Holders pursuant to the Forced Conversion Notice. Any Forced Conversion Notices shall be
applied ratably to all of the Holders based on each Holders initial purchases of Preferred
Stock hereunder, provided that any voluntary conversions by a Holder shall be applied
against such Holders pro rata allocation, thereby decreasing the aggregate
amount forcibly converted hereunder if less than all shares of the Preferred Stock are
forcibly converted. For purposes of clarification, a Forced Conversion shall be subject to
all of the provisions of Section 6, including, without limitation, the provisions requiring
payment of liquidated damages and limitations on conversions provided, however, that for the
purpose of this Section 8, the Conversion Price shall equal $0.29, subject to adjustment
herein.
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b) Optional Redemption at Election of Corporation. Subject to the provisions
of this Section 8, at any time, the Corporation may deliver a notice to the
Holders (an Optional Redemption Notice and the date such notice is deemed
delivered hereunder, the Optional Redemption Notice Date) of its irrevocable
election to redeem some or all of the then outstanding Preferred Stock, for cash in an
amount equal to the Optional Redemption Amount on the 20th Trading Day following
the Optional Redemption Notice Date (such date, the Optional Redemption Date and
such redemption, the Optional Redemption). The Optional Redemption Amount is
payable in full on the Optional Redemption Date. The Corporation may only effect an
Optional Redemption if each of the Equity Conditions shall have been met on each Trading Day
occurring during the period commencing on the Optional Redemption Notice Date through to the
Optional Redemption Date and through and including the date payment of the Optional
Redemption Amount is actually made. If any of the Equity Conditions shall cease to be
satisfied at any time during the 20 Trading Day period, then a Holder may elect to nullify
the Optional Redemption Notice as to such Holder by notice to the Corporation within 3
Trading Days after the first day on which any such Equity Condition has not been met
(provided that if, by a provision of the Transaction Documents, the Corporation is obligated
to notify the Holders of the non-existence of an Equity Condition, such notice period shall
be extended to the third Trading Day after proper notice from the Corporation) in which case
the Optional Redemption Notice shall be null and void, ab initio. The
Corporation covenants and agrees that it will honor all Notices of Conversion tendered from
the time of delivery of the Optional Redemption Notice through the date the Optional
Redemption Amount is paid in full.
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Corporation, at the address set forth
above Attention: Chief Financial Officer, facsimile number (617) 787-6010, or such other
facsimile number or address as the Corporation may specify for such purposes by notice to
the Holders delivered in accordance with this Section 9. Any and all notices or other
communications or deliveries to be provided by the Corporation hereunder shall be in writing
and delivered personally, by facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of such Holder appearing
on the books of the Corporation, or if no such facsimile number or address appears on the
books of the Corporation, at the principal place of business of such Holder, as set forth in
the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth in this
Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after
the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following
the
date of mailing, if sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be given.
21
b) Absolute Obligation. Except as expressly provided herein, no provision of
this Certificate of Designation shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and
rate, and in the coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a Holders Preferred
Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a
new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such certificate,
and of the ownership hereof reasonably satisfactory to the Corporation.
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be governed by and
construed and enforced in accordance with the internal laws of the State of Nevada, without
regard to the principles of conflict of laws thereof. Each party agrees that all legal
proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or
its respective Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York, Borough of
Manhattan (the New York Courts). Each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such New York Courts, or such
New York Courts are improper or inconvenient venue for such proceeding. 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 via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of Designation or the transactions
contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred in the investigation, preparation and prosecution of such action
or proceeding.
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e) Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The failure of the Corporation
or a Holder to insist upon strict adherence to any term of this Certificate of Designation
on one or more occasions shall not be considered a waiver or deprive that party (or any
other Holder) of the right thereafter to insist upon strict adherence to that term or any
other term of this Certificate of Designation on any other occasion. Any waiver by the
Corporation or a Holder must be in writing.
f) Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any Person or circumstance, it
shall nevertheless remain applicable to all other Persons and circumstances. If it shall be
found that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum rate of interest permitted under applicable
law.
g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to limit or
affect any of the provisions hereof.
i) Status of Converted or Redeemed Preferred Stock. If any shares of Preferred
Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall
resume the status of authorized but unissued shares of preferred stock and shall no longer
be designated as Series B 8% Convertible Preferred Stock.
*********************
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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 Nevada law.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 1st day of October
2010.
/s/ Charles Cocotas
|
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Title: President |
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series B 8% Convertible Preferred
Stock indicated below into shares of common stock, par value $0.001 per share (the Common
Stock), of UFood Restaurant Group, Inc., a Nevada corporation (the Corporation),
according to the conditions hereof, as of the date written below. If shares of Common Stock are to
be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates and opinions as may
be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to
the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
Date to Effect Conversion: |
||||
Number of shares of Preferred Stock owned prior to Conversion: |
||||
Number of shares of Preferred Stock to be Converted: |
||||
Stated Value of shares of Preferred Stock to be Converted: |
||||
Number of shares of Common Stock to be Issued: |
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Applicable Conversion Price: |
||||
Number of shares of Preferred Stock subsequent to Conversion: |
||||
Address for Delivery: |
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or
DWAC Instructions: | ||||
Broker no: |
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Account no: |
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[HOLDER] | ||||||
By: | ||||||
Title: |
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