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8-K - JUNE 7 2010 FORM 8K - Agritech Worldwide, Inc. | form8k060710.htm |
EX-4.1 - SUBSCRIPTION AGREEMENT - Agritech Worldwide, Inc. | ex41.htm |
EX-4.2 - WARRANT - Agritech Worldwide, Inc. | ex42.htm |
EX-4.3 - REGISTRATION RIGHTS AGREEMENT - Agritech Worldwide, Inc. | ex43.htm |
Exhibit 3.1(a)
Form BCA 6.10 (rev. Dec. 2003)
STATEMENT OF RESOLUTION
ESTABLISHING SERIES
Business Corporation Act
Jesse White, Secretary of State
Department of Business Services
Springfiled, IL 62756
Telephone (217)782-8961
www.cyberdriveIllinois.com
Remit payment in the form of a
check or money order payable
to the Secretary of State
_________________________File # 5780-124-7 Filing Fee
$25.00
1. Corporate Name: Z Trim Holdings, Inc.
2. The Board of Directors on April 23, 2010 duly adopted the
following resolution establishing and designating one or more serices and fixing
and determining the relative rights and preferences thereof:
SEE ANNEX A ATTACHED
3. The undersigned corporation has caused this statement to be signed
by a duly authorized officer, who affirms, under penalties of perjury, that the
facts stawted herein are true. (All signatures must be in BLACK
INK.)
Dated: April 26, 2010 Z Trim Holdings,
Inc.
by /Steve Cohen
Steve Cohen, Chief Executive Officer
This form is applicable only where the articles of incorporation expressly
vest authority in the board of directors to establish series and to fix and
determine the relative rights and preferences thereof. In such case series
may be established and rights and prederences fixed and determined by by
resolution of the board of directors only ot the extent not already established,
fixed and determined by the articles of incorporation.
Note: Only special and preferred classes of stock can be established
in series.
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ANNEX
A
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To
the
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STATEMENT OF
RESOLUTION
ESTABLISHING SERIES
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Z
Trim Holdings Inc.
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Series
I Preferred Stock
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Resolved
that the Corporation is authorized to issue One Million (1,000,000) shares of
the Series I 8% Convertible Preferred Stock (the “Series I Preferred
Stock”) , par value $0.01 per share, which shall have the following powers,
privileges and restrictions, qualifications, limitations designations,
preferences and other special rights:
Rights. Preferences and
Restrictions of Series I Preferred Stock. The
preferences, qualifications, limitations, restrictions and special or relative
rights in respect of the shares the Series I 8% Convertible Preferred Stock,
which series shall consist of One Million (1,000,000) shares ( the “Series I
Preferred Stock”), are as set forth below.
A.
Dividend
Provisions.
Subject
to the rights of any series of preferred stock which may from time to time come
into existence and the proviso set forth in the last sentence of this Section A,
the holders of shares of Series I Preferred Stock (the “Holder” or
“Holders”) shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in shares of common stock of the
Corporation, par value $0.0005 per share (the “Common Stock”) or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock) on the
shares of Common Stock, at the rate of 8% of $5.00 per share (the “Original Series I Issue
Price”) per annum, payable in shares of the Common Stock, at the option
of the Holder, either quarterly or on the Redemption Date (as hereinafter
defined). The Original Series I Issue Price of the Series I Preferred
Stock is $5.00 per share. The number of Common Stock to be issued on
the Series I Preferred Stock for accrued dividends is equal to the result
obtained by dividing (x) the accrued and unpaid dividends by (y) the Conversion
Price (as hereinafter defined in subsection D(2)). The initial
Conversion Price is $1.00. Such dividends shall accrue on each share
from the date of issuance of the Series I Preferred Stock(the “Issuance Date”), and
shall accrue from day to day, whether or not earned or declared. Such
dividends shall be cumulative so that if such dividends, in respect of any
previous or current annual dividend period, at the annual rate specified above,
shall not have been paid, the deficiency shall first be fully paid before any
dividend or other distribution shall be paid on or declared and set apart for
the Common Stock. Any accumulation of dividends on the Series I
Preferred Stock shall not bear interest. Cumulative dividends with
respect to a share of Series I Preferred Stock which are accrued, payable and/or
in arrears shall, upon conversion of such share to Common Stock, subject to the
rights of series of preferred stock which may from time to time come into
existence, be paid to the extent assets are legally available therefor and any
amounts for which assets are not legally available shall be paid promptly as
assets become legally available therefor any partial payment will be made pro
rata among the holders of such shares. Unless full dividends on the
Series I Preferred Stock for all past dividend periods and the then current
dividend period shall have been paid or declared and a sum sufficient for the
payment thereof set apart: (A) no dividend whatsoever (other than a dividend
payable solely in Common Stock or other securities and rights convertible into
or entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock) shall be paid or declared, and no distribution shall be
made, on any Common Stock, and (B) no shares of Common Stock shall be purchased,
redeemed, or acquired by the Corporation and no funds shall be paid into or set
aside or made available for a sinking fund for the purchase, redemption, or
acquisition thereof; provided, however, that this restriction shall not apply to
the repurchase of shares of Common Stock held by employees, officers, directors,
consultants or other persons performing services for the Corporation or any
wholly-owned subsidiary (including, but not by way of limitation, distributors
and sales representatives) that are subject to restrictive stock purchase
agreements under which the Corporation has the option to repurchase such shares
at cost upon the occurrence of certain events, such as the termination of
employment. Notwithstanding the forgoing, payment of dividends on the Series I
Preferred Stock shall be deferred (the “Deferral’) until none of the 8% Senior
Secured Convertible Notes issued in 2008 and 2009 by the Corporation (the
“Notes”) are outstanding or, in the alternative, until the provisions in the
Notes restricting the payment of dividends (“Dividend Restriction”) have been
waived as therein permitted. Once the Notes have been paid or the Dividend
Restriction waived, all accrued and unpaid dividends, as hereinabove provided,
may be paid by the Corporation. Any failure to pay dividends as hereinabove
provided, due solely to the Deferral, including a Deferral due to an
extension of the maturity dates on the Notes, shall not be deemed a
default hereunder.
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B. Liquidation
Preference.
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(1) In
the event of any liquidation, dissolution or winding up of this Corporation,
either voluntary or involuntary, subject to the rights of series of preferred
stock that may from time to time come into existence, the holders of Series I
Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets of this Corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal to
the sum of (i) the Original Series I Issue Price, ($5.00) for each outstanding
share of Series I Preferred Stock and (ii) accrued but unpaid dividends on such
share. If upon the occurrence of such event, the assets and funds
thus distributed among the Holders of the Series I Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of preferred
stock
that may
from time to time come into existence, the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the Holders of the Series I Preferred Stock in proportion to the amount of
such stock owned by each such Holder.
(2) For
purposes of this Section, a liquidation, dissolution or winding up of this
Corporation shall be deemed to be occasioned by, or to include, (A) the
acquisition of the Corporation by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation but, excluding any merger effected
exclusively for the purpose of changing the domicile of the Corporation); or (B)
a sale of all or substantially all of the assets of the Corporation; unless the
Corporation’s shareholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by virtue
of securities issued as consideration for the Corporation’s acquisition or sale
or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity (each of such events, a “Deemed Liquidation
Event”). In any of such events, if the consideration received by the
Corporation is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
(a)
Securities not subject to securities law restrictions on free marketability or
other similar restrictions on free marketability : (i) If traded on a securities
exchange, the OTC Bulletin Board or through NASDAQ-NNM, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the thirty-day period ending three (3) days prior to the closing;
(ii)If actively traded over-the-counter, the value shall be deemed to be the
average of the closing bid or sale prices (whichever is applicable) over the
thirty-day period ending three (3) days prior to the closing; and (iii) If there
is no active public market, the value shall be the fair market value thereof, as
mutually determined by the Corporation and the holders of at least a majority of
the voting power of all then outstanding shares of Series I Preferred
Stock.
(b) The
method of valuation of securities subject to securities law restrictions on free
marketability or other similar restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder’s status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i), (ii) or (ii) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the Holders
of at least a majority of the voting power of all then outstanding shares of
such Series I Preferred Stock.
(3) In
the event the requirements of this subsection are not complied with, this
Corporation shall forthwith either: (a) cause such closing to be postponed until
such time as the requirements of this Section have been complied with; or (b)
cancel such transaction, in which event the rights, preferences and privileges
of the holders of the Series I Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in subsection B.(4)
hereof.
(4) The
Corporation shall give each Holder of record of Series I Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the shareholders’ meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section , and the
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than ten (10) days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the Holders of Series I Preferred Stock
that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of such Series I Preferred Stock.
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C
Redemption.
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(1)
Subject to the rights of preferred stock which may from time to time come into
existence and the proviso in subsection (4) of this Section C, this Corporation
shall redeem, from any source of funds legally available therefor, the Series I
Preferred Stock 24 months after the Issuance Date of each share of such Series I
Preferred Stock (the “Series I Redemption
Date”). The Corporation shall effect such redemption on the
applicable Series I Redemption Dates by paying in cash in exchange for the
shares of Series I Preferred Stock to be redeemed a sum equal to $5.00 per share
of Series I Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such shares) plus all accrued or accumulated but
unpaid dividends, on such shares payable in the shares of the Common Stock (the
“Series I Redemption
Price”). Any redemption effected pursuant to this subsection
shall be made on a pro rata basis among the holders of the Series I Preferred
Stock in proportion to the number of shares of Series I Preferred Stock then
held by such holders.
(2) As
used herein, the term “Redemption Date” shall refer to the “Series I Redemption
Date” and the term “Redemption Price” shall refer to each of “Series I
Redemption Price.” Subject to the rights of series of preferred stock
which may from time to time come into existence, at least fifteen (15) but no
more than thirty (30) days prior to each Redemption Date, written notice shall
be mailed, first class postage prepaid, to each Holder of record (at the close
of business on the business day next preceding the day on which notice is given)
of the Series I Preferred Stock to be redeemed, at the address last shown on the
records of this Corporation for such Holder, notifying such Holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such Holder, the Redemption Date, the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to this
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the “Redemption
Notice”). On or after the Redemption Date, each Holder of
Series I Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(3) From
and after the Redemption Date, unless there shall have been a default in payment
of the Redemption Price, all rights of the Holders of shares of Series I
Preferred Stock designated for redemption in the Redemption Notice as Holders of
Series I Preferred Stock (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of this Corporation or be deemed to be outstanding for
any purpose whatsoever. Subject to the rights of series of preferred
stock which may from time to time come into existence, if the funds of the
Corporation legally available for redemption of shares of Series I Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series I Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the Holders of such shares to be redeemed based
upon their holdings of Series I Preferred Stock. The shares of Series
I Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights
and
preferences provided herein. Subject to the rights of series of
preferred stock which may from time to time come into existence, at any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series I Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obliged to redeem on any Redemption Date but which it has not
redeemed.
(4) Notwithstanding the
forgoing, the redemption of the Series I Preferred Stock shall be deferred (the
“Deferral”) until none of the 8% Senior Secured Convertible Notes issued in 2008
and 2009 by the Corporation (the “Notes”) are outstanding or, in the
alternative, until the provisions in the Notes restricting the redemption of
capital stock by the Company (“redemption restriction”) have been waived as
therein permitted. Once the Notes have been paid or the redemption restriction
waived, the outstanding shares of the Series I Preferred Stock may be redeemed,
as hereinabove provided. Any failure to redeem due solely to a Deferral,
including a Deferral due to an extension of the maturity dates of the
Notes, shall not be deemed a default hereunder.
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D. Conversion.
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The
Holders of the Series I Preferred Stock shall have conversion rights as
follows (the “Conversion Rights”):
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1. Right to
Convert. Each share of Series I Preferred Stock shall be
convertible, at the option of the Holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to the Redemption
Date, if any, as may have been fixed in any Redemption Notice with respect to
the Series I Preferred Stock, at the office of this Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (x) the Original Series I Issue Price
plus the amount represented by accrued but unpaid dividends on such share by (y)
the Conversion Price (as defined below) applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion.
2. Conversion
Price.
(a)The
initial Conversion Price per share for shares of Series I Preferred Stock shall
be $1.00; provided, however, that the Conversion Price for the Series I
Preferred Stock shall be subject to adjustment as set forth in subsection D(4)
below. References herein to the Conversion Price shall mean the
Conversion Price as from time to time adjusted pursuant to the provisions
of subsection D(4)and in effect on the applicable date.
(b)The
term “Conversion
Shares” shall mean such Common Stock issuable upon conversion of the
Series I Preferred Stock.
3. Mechanics of
Conversion.
Before
any Holder of Series I Preferred Stock shall be entitled to convert the same
into shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this Corporation or of any transfer
agent for the Series I Preferred Stock, and shall give written notice to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series I Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series I Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such
date. If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities Act, the conversion
may, at the option of any Holder tendering Series I Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series I Preferred Stock shall
not be deemed to have converted such Series I Preferred Stock until immediately
prior to the closing of such sale of securities.
4. Adjustment of Conversion
Price.
(a) The
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments for Stock Splits
and Combinations. If the Corporation shall at any time or from time to
time after the Issuance Date, effect a stock split of the outstanding Common
Stock, the applicable Conversion Price in effect immediately prior to the stock
split shall be proportionately decreased. If the Corporation shall at
any time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the applicable Conversion Price in effect immediately
prior to the combination shall be proportionately increased. Any
adjustments under this Section D.4(a)(i) shall be effective at the close of
business on the date the stock split or combination occurs.
(ii) Adjustments for Certain
Dividends and Distributions. If the Corporation shall at any time or from
time to time after the Issuance Date make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in Common Stock, then, and in each event, the applicable
Conversion Price in effect immediately prior to such event shall be decreased as
of the time of such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by multiplying the
applicable Conversion Price then in effect by a fraction:
(A) the
numerator of which shall be the total number of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; and
(B) the
denominator of which shall be the total number of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of Common Stock issuable in payment
of such dividend or distribution.
(iii) Adjustments for
Reclassification, Exchange or Substitution. If the Common Stock issuable
upon conversion of the Series I Preferred Stock at any time or from time to time
after the Issuance Date shall be changed to the same or different number of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in clauses (i) and (ii) of Subsection
D.4(a), or a reorganization, merger, consolidation, or sale of assets provided
for in Subsection D.4(a)(iv)), then, and in each event, an appropriate revision
to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that the Holders shall have
the right thereafter to convert the Series I Preferred Stock into the kind and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of Common Stock
into which such Series I Preferred Stock might have been converted immediately
prior to such reclassification, exchange, substitution or other change, all
subject to further adjustment as provided herein.
(iv) Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets. If at any time
or from time to time after the Issuance Date there shall be a capital
reorganization of the Corporation (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
clauses (i) and (ii) of Subsection D.4(a), or a reclassification, exchange or
substitution provided for in Subsection D.4(a)(iii)), or a merger or
consolidation of the Corporation with or into another corporation where the
holders of outstanding voting securities of the Corporation prior to such merger
or consolidation do not own over fifty percent (50%) of the outstanding voting
securities of the merged or consolidated entity, immediately after such merger
or consolidation, or any Asset Sale (an “Organic Change”),
then as a part of such Organic Change, (A)if the surviving entity in any such
Organic Change is a public company that is registered pursuant to the Securities
Exchange Act of 1934, as amended, ( the “Exchange
Act”) and its common stock is listed or quoted on a national
exchange or the OTC Bulletin Board, an appropriate revision to the Conversion
Price shall be made and provision shall be made (by adjustments of the
Conversion Price) so that the Holders shall have the right thereafter to convert
such Series I Preferred Stock into the kind and amount of shares of stock and
other securities or property of the Corporation or any successor corporation as
it would have received as a result of such Organic Change if it had converted
the Series I Preferred Stock into Common Stock immediately prior to such Organic
Change, and (B) if the surviving entity in any such Organic Change is not a
public company that is registered pursuant to the Exchange Act or its common
stock is not listed or quoted on a national securities exchange or the OTC
Bulletin Board, the Holders shall have the right to demand redemption of the
then outstanding Series I Preferred Stock at 115% of the Original Series I Issue
Price per share (“Mandatory
Redemption”). The Corporation shall give the Holders at least
twenty (20) day’s prior written notice of any Organic Change, during which time
the Holder shall have the right to convert any portion of the Series I Preferred
Stock into Common Stock. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Subsection D.4(a)(iv)
with respect to the rights of the Holders after the Organic Change to the end
that the provisions of this Subsection D.4(a)(iv) (including any adjustment in
the applicable Conversion Price then in effect and the number of shares of stock
or other securities deliverable upon conversion of the Series I Preferred Stock)
shall be applied after that event in as nearly an equivalent manner as may be
practicable.
(v) Certain
Issuances. In the event that the Corporation sells or issues
Common Stock after the Issuance Date at a price less than the Conversion Price
in effect immediately prior to such sale or issuance, then the Conversion Price
shall be reduced immediately thereafter so that it shall equal the price at
which such Conversion Shares are sold or issued, as applicable.
(vi) Options, Rights, Warrants
and Convertible and Exchangeable Securities. Subject to the provisions in
subsection D.(vii). (B) below, in case the Corporation shall at any time after
the Issuance Date issue options, rights or warrants to subscribe for Common
Stock, or issue any securities convertible into or exchangeable for Common Stock
(collectively the “Rights”), for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Rights, or
without consideration, the Conversion Price in effect immediately prior to the
issuance of such Rights shall be reduced to the price established for such
Rights that entitle the holders thereof to receive Common Stock.
. If (i)any change shall occur in the price per share provided
for in any of the Rights: (ii) any change shall occur in the price per share at
which the securities referred to in this subsection are exchangeable; (iii) any
of the Rights are exercised in an amount or at a price different from the
assumed aggregate maximum number of shares or the minimum purchase price
provided in this subsection; or (iv) any of the Rights are cancelled or expire
without being exercised, then (x) such Rights, as the case may be, shall be
deemed to have been cancelled, expired or terminated on the date when such price
change, exercise or expiration became effective in respect to shares not
theretofore issued pursuant to the exercise or exchange thereof, (y) the Company
shall be deemed to have issued upon such date new Rights at the new price in
respect of the number of shares issuable upon the exercise of such Rights, and
(z) the adjustment to Conversion Price provided in this subsection shall be
recalculated as if the original issuance causing the prior adjustment to
Conversion Price had not occurred. Consequently, if the Rights are
subsequently modified, cancelled or expire without exercise, any adjustment
previously made to the Conversion Price shall be readjusted to reflect such
modification, cancellation and or expiration.
(vii) Any reset
of the Conversion Price pursuant to Subsections D.4(a)(v)
or (vi) shall not reduce the Conversion Price below $0.10 under any
circumstances.
(viii) No Adjustment of Conversion
Price in Certain Cases. No adjustment of the Conversion Price shall be
made:
(A) Upon
issuance or sale of the Series I Preferred Stock, or the warrants and warrant
shares issued in connection with the issuance of the Series I Preferred Stock,
or shares of Common Stock issuable upon exercise of other options, warrants and
convertible securities outstanding as of the Issuance Date of the Series I
Preferred Stock.
(B) Upon
the issuance or sale of any shares of capital stock, or the grant of options
exercisable therefor, outstanding as of, or granted, exercised, issued or
issuable on or after the first issuance of the Series I Preferred Stock, to
directors, officers, employees, advisers and consultants of the Corporation or
any subsidiary pursuant to any incentive or non-qualified stock option plan or
agreement, stock purchase plan or agreement, stock restriction agreement or
restricted stock plan, employee stock ownership plan (ESOP), consulting
agreement, stock appreciation right (SAR), stock depreciation right (SDR), bonus
stock arrangement, or such other similar compensatory options, issuances,
arrangements, agreements or plans approved by the Board of Directors of the
Corporation.
(C) Upon
the issuance of any shares of capital stock or the grant of warrants or options
(or the exercise thereof) as consideration for mergers (other than as referred
to in Subsection D. 4. (a) (iv) above), acquisitions, strategic alliances and
other commercial transactions, other than in connection with a financing
transaction.
(D) If
the amount of said adjustment shall be less than one cent ($0.01) per security
issuable upon conversion of the Series I Preferred Stock; provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least one cent ($0.01) per security issuable upon
conversion of the Series I Preferred Stock.
(b) Obligation Absolute;
Partial Liquidated Damages. The Corporation shall not, by
amendment of its Articles 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 to be observed or performed hereunder by the
Corporation, but will at all times in good faith, assist in the carrying out of
all the provisions of this Section D.4 and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of the
Holders against impairment. Subject to the proviso in the last
sentence of this Subsection D.4.(b,) if the Corporation fails for any reason to
deliver to any Holder any certificate or certificates required pursuant to
Subsection D.3 by the fifth Trading Day after the Conversion Date, the
Corporation shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each $1,000 of the amount of the Redemption Price for the shares
of the Series I Preferred Stock being converted, $5 per Trading Day (increasing
to $10 per Trading Day after five Trading Days after such damages begin to
accrue) for each Trading Day after such fifth Trading Day until such
certificates are delivered (the “Liquidated Damage Payment”). The
Corporation’s obligations to issue and deliver the Conversion Shares upon
conversion of the Series I Preferred Stock in accordance with the terms hereof
are absolute and unconditional, irrespective of any action or inaction by the
Holders to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any individual, corporation,
partnership, limited liability company, association, trust or unincorporated
organization, or a government or any agency or political subdivision thereof
(“Person”) or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holders or any other Person of any obligation to the Corporation or any
violation or alleged violation of law by the Holders or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to the Holders in connection with the issuance of
Conversion Shares. In the event a Holder shall elect to convert any or all
of the shares of the Series I Preferred Stock held by such Holder, the
Corporation may not refuse conversion based on any claim that such Holder or
anyone associated or affiliated with such Holder has been engaged in any
violation of law, violation of an agreement to which such Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and adjoining conversion of all or part of said Series I Preferred
Stock shall have issued and the Corporation posts a surety bond for the benefit
of such Holder in an amount equal to one hundred fifty percent (150%) of the
amount of the Original Series I Issue Price that the Holder has
elected to convert, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder (as liquidated damages) in the event it obtains
judgment. In the absence of an injunction precluding the same, the
Corporation shall issue Conversion Shares or, if applicable, cash or other
property as required hereunder. Nothing herein shall limit a Holder’s
right to pursue actual damages for the Corporation’s failure to deliver
Conversion Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief. Likewise, nothing herein shall prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law. Notwithstanding the forgoing and the provisions relating to Buy
In set forth below, payment of the Liquidated Damages Payment and the Buy In
Payment referred to below, shall be deferred until none of the 8% Senior Secured
Convertible Notes issued in 2008 and 2009 by the Corporation (the “Notes”) are
outstanding or, in the alternative, until the provisions in the Notes
restricting payments on equity securities (“Security Payment Restriction”) have
been waived as therein permitted. Once the Notes have been paid or the security
payment restriction waived all accrued and unpaid dividends, as hereinabove
provided, may be paid by the Corporation. Deferral of payment of the
Liquidated Damage Payment or the Buy In Payment, due solely to the Deferral
shall not constitute a default hereunder.
(c) 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 the Holder any certificate or certificates
required pursuant to Subsection D.3 by the fifth Trading Day after the
Conversion Date, and if after such fifth Trading Day the Holder is required by
its brokerage firm to purchase (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”), then
the Corporation shall subject to the Deferral referred to in Subsection D.4
(b) above (i)
pay in cash to the Holder (in addition to any remedies available to or elected
by the Holder) the amount by which (x) the Holder’s total Original Series I
Issue Price (including brokerage commissions, if any) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that such Holder anticipated receiving from the conversion at issue
multiplied by (2) the actual sale price of the Common Stock at the time of the
sale (including brokerage commissions, if any) giving rise to such purchase
obligation (the “Buy In Payment”) and (ii) at the option of the Holder, either
reissue Series I Preferred Stock in an amount equal to the Original
Series I Issue Price of the attempted conversion or deliver to the Holder the
number of shares Common Stock that would have been issued had the Corporation
timely complied with its delivery requirements under Subsection D.3.
(d) Certificates as to
Adjustments. Upon occurrence of each adjustment or readjustment of the
Conversion Price or number of Common Stock issuable upon conversion of the
Series I Preferred Stock pursuant to this Subsection D.4, the Corporation, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holders a certificate
setting forth such adjustment and readjustment, showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation
shall, upon written request of a Holder, at any time, furnish or cause to be
furnished to the Holder a like certificate setting forth such adjustments and
readjustments, the applicable Conversion Price in effect at the time, and the
number of Common Stock and the amount, if any, of other securities or property
which at the time would be received upon the conversion of the Series I
Preferred Stock. Notwithstanding the foregoing, the Corporation shall
not be obligated to deliver a certificate unless such certificate would reflect
an increase or decrease of at least one percent (1%) of such adjusted
amount.
(e) Issue Taxes. The
Corporation shall pay any and all issue and other taxes, excluding federal,
state or local income taxes, that may be payable in respect of any issue or
delivery of Common Stock on conversion of the Series I Preferred Stock;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by a Holder in connection
with any such conversion.
(f) Fractional Shares. No
fractional shares of Common Stock shall be issued upon conversion of the Series
I Preferred Stock. In lieu of any fractional shares to which a Holder
would otherwise be entitled, the Corporation shall pay in cash any remainder
resulting from after the number of whole Common Stock is determined as a result
of any conversion. If the Corporation elects not, or is unable for
any reason including the Security Payment Restriction in the Notes referred to
in Subsection D.4.(b) above, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a Common Share, one whole
Common Share.
(g) Reservation of Common
Stock. The Corporation shall at all times when the Series I Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued shares Common Stock, solely for the purpose of issuance upon conversion
of the Series I Preferred Stock and payment of the amount of accrued but unpaid
dividends on the Series I Preferred Stock, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holders, not less than such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of the Series I
Preferred Stock, taking into account the adjustments and restrictions of
Subsection D.4. The Corporation shall, from time to time in
accordance with Illinois law, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized Common Stock shall not be
sufficient to satisfy the Corporation’s obligations under this Subsection
D.4(g). The Corporation covenants that all Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Registration Statement (as hereinafter defined)
is then effective under the Securities Act of 1933 (the “1933 Act”),
registered for public sale in accordance with the Registration Statement. “Registration
Statement” shall mean any registration statement of the Corporation filed
under the 1933 Act, pursuant to the provisions of a Registration Rights
Agreement between the Corporation and the holders of the Series I Preferred
Stock (the “Registration Rights Agreement”), that covers the resale of
Conversion Shares and shares issued in payment of dividends on the Series I
Preferred Stock (as well as other shares of Common Stock as set forth in such
Registration Rights Agreement) amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
(h) Regulatory
Compliance. If any Common Stock to be reserved for the purpose of
conversion of the Series I Preferred Stock requires registration or listing with
or approval of any governmental authority, stock exchange or other regulatory
body under any federal or state law or regulation or otherwise before such
shares may be validly issued or delivered upon conversion, the Corporation
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
5. Calculations. All
calculations under this Section D shall be made to the nearest cent or the
nearest 1/100th of a
share of Common Stock, as the case may be. The number of shares
Common Stock outstanding at any given time shall not include the Common Stock
owned by or held by or for the account of the Corporation, and the description
of any such Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section D, 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 Common Stock (excluding treasury shares, if any) issued and
outstanding.
E. Voting
Rights.
The
Holder of each share of Series I Preferred Stock shall not have the have the
right to vote except as expressly set forth herein and as may be required under
the Illinois Business Corporation Act.
F. Protective
Provisions.
Subject
to the rights of a series of preferred stock which may from time to time come
into existence, so long as at least 30% of the total number of shares of the
Series I Preferred Stock issued by the Corporation (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares) are outstanding, this
Corporation shall not either directly or indirectly by amendment, merger,
consolidation or otherwise, do any of the following without first obtaining the
approval (by vote or written consent, as provided by law) of the Holders
representing at least a majority of the then outstanding shares of Series I
Preferred Stock:
(1)
except as hereinafter provided, enter into, create, incur, assume or suffer to
exist any indebtedness or Liens (as defined in the 8% Convertible Notes of the
Company issued in 2009 and 2008; hereinafter referred to as the “2008 Notes” and
the “2009 Notes” and collectively the “Company Notes”)of any kind, on or with
respect to any of its property or assets or Collateral (as defined in
the Company Notes) now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, subordinated to or
pari passu with, in any respect, to the Corporation’s obligations under the
Company Notes, other than indebtedness on terms substantially similar to either
the 2008 Notes or the 2009 Notes;
(2) except
as permitted in Section 1.2 of the Company Notes, repay, repurchase or offer to
repay, repurchase, make any payment in respect of or otherwise acquire any of
its Common Stock or other equity securities;
(3) amend
its articles of incorporation, bylaws or charter documents so as to adversely
affect any rights of the Holders; provided that reincorporating the Corporation
in Delaware and eliminating cumulative voting rights for the election of
directors shall not be deemed a violation of this covenant;
(4) create
or acquire any subsidiary after the date hereof unless (i) such subsidiary is a
wholly-owned subsidiary of the Corporation and (ii) such subsidiary becomes
party to the Security Documents (either by executing a counterpart thereof or an
assumption or joinder agreement in respect thereof) and, to the extent required
by the Holder, satisfied each condition of this Agreement as if such subsidiary
were a subsidiary on the Issuance Date;
(5) make
any capital expenditure in an amount greater than $1,500,000;
(6) engage
in any transactions with any officer, director, employee or any affiliate of the
Corporation, including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Corporation, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $10,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Corporation
and (iii) for other employee benefits, including stock option agreements under
any stock option plan of the Corporation;
(7) consummate
any Organic Change without the prior consent of the Holders of not less than a
majority of the then outstanding Series I Preferred Stock; or
(8) create
and issue a new series of preferred stock senior to the Series I Preferred
Stock.
(9) enter
into any agreement with respect to any of the foregoing.
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G. Status of Converted
or Redeemed Stock.
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In
the event any shares of Series I Preferred Stock shall be redeemed or converted
pursuant to Redemption and conversion provisions hereinabove provided, the
shares so converted or redeemed shall revert to authorized, unissued and
undesignated shares of preferred stock of the Corporation.
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H.
Waiver.
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Any of the rights, powers,
preferences and other terms of the Series I Preferred Stock set forth herein may
be waived or amended on behalf of all Holders of Series I Preferred Stock by the
affirmative written consent or vote of the holders of at least a simple majority
of the shares of Series I Preferred Stock then
outstanding.