EX-10 3 inb10_20.txt Exhibit 10.20 EXECUTION COPY INTEGRATED BIOPHARMA, INC. SUBSCRIPTION AGREEMENT June 25, 2003 Integrated BioPharma, Inc. 225 Long Avenue Hillside, New Jersey 07205 Attention: Mr. E. Gerald Kay, Chief Executive Officer Dear Mr. E. Gerald Kay: 1. Subscription for Series A Preferred and Warrants. The undersigned (the "Investor") hereby offers to purchase Series A Convertible Preferred Stock (the "Series A Preferred") of the stock of Integrated BioPharma, Inc., a Delaware corporation (the "Company") and warrants for the Company's common stock (the "Warrants"), on the terms and conditions set forth herein. The Investor understands that the Company will rely on the Investor's representations and warranties herein in accepting or rejecting the Investor's subscription to purchase the Series A Preferred and Warrants. This Subscription Agreement (this "Agreement") is being submitted to the Company by the Investor prior to the making of any offer to sell or the sale of any Series A Preferred or any Warrants by the Company. This Agreement relates to an offering of Series A Preferred and Warrants in the Company until terminated by the Company in its sole discretion (the "Offering"). The Series A Preferred and Warrants will be offered to accredited investors pursuant to one or more exemptions from registration under Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"). THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY A SECURITY. The Investor is supplying the information set forth herein to the Company, in order to induce the Company to make an offer to sell and a sale of the Series A Preferred and Warrants to the Investor. Such information will be relied on by the Company to determine if the Investor satisfies the requirements for investing in the Offering. Such information will be kept confidential by the Company, and the Company or any agent of the Company, except with regard to the access requirements of governmental authorities having jurisdiction and as otherwise provided in Section 5 below. 2. Offering. The Offering will be comprised of Series A Preferred Stock of the Company in an amount up to $20,000,000 and Warrants. The Company can give no assurances that it will be able to raise such amounts. A copy of the proposed Certificate of Designation of the Series A Preferred Stock setting forth the rights of such Series A Preferred is attached hereto as Exhibit A. The Company, in its sole discretion, may terminate the Offering at any time for any reason. With respect to the Offering, the Company intends to rely on the exemption from registration under the Act pursuant to Rule 506 of Regulation D promulgated thereunder, among any other available exemptions. During the Offering, the purchase price per share of Series A Preferred will be $1,000 per share. The exercise price per share of the Warrants will be $5.40 per share. The Investor hereby subscribes for shares of Series A Preferred and Warrants pursuant to this Agreement equal to the total purchase price as indicated by the Investor on the signature page of this Agreement. Simultaneously with this Agreement the Investor is delivering to the Company via wire transfer of immediately available funds or via a check made payable to "Integrated BioPharma, Inc." (or such other confirmation of good funds as acceptable to the Company) in an amount equal to the total purchase price of the Series A Preferred and Warrants being subscribed for herein. 3. Acceptance or Rejection. The acceptance of the Company, in its sole and independent discretion, shall be required for the subscription set forth herein or any other subscription in the Offering to be a binding obligation of the Company. Consequently, the Company in its sole and independent discretion may reject the subscription contained herein or any other subscription in the Offering. Specifically, the Investor agrees that the Company (i) may in its sole and independent discretion accept or reject any subscription in the Offering, including without limitation, this Agreement, in whole or in part, and regardless of reason, and (ii) shall have no obligation to accept subscriptions in the order received. Any subscription that is rejected by the Company will be marked "Void" and returned along with any unnegotiated check or the cash proceeds from any negotiated check, without interest or other income, promptly thereafter. The Company's acceptance shall be deemed consummated upon the execution of this Agreement by the Company's authorized representative(s) in the space provided on the last page hereof, and the return of this Agreement, as fully executed, or a copy thereof, to the Investor. A subscription shall be of no force or effect unless accepted by the Company as described above. In the event that a subscription is accepted in writing by the Company as described above, and the Company has received good funds from the Investor, the Investor shall be deemed a holder of Series A Preferred and Warrants of the Company. 4. Representations and Warranties. The Investor represents and warrants as follows, with knowledge that the Company and its representatives will rely on such representations and warranties in accepting or rejecting the subscription for the Interest(s) contained herein: (a) The Investor (i) has received and thoroughly read and evaluated the accompanying Certificate of Designation ("Certificate") of the Series A Preferred concerning the Company and the Offering. The Investor has neither received nor relied upon any other offering literature or oral communications. (b) The Investor has such knowledge and experience in financial matters and investments that the Investor is capable of evaluating the merits and risks of the Investor's investment in the Company and the Offering. (c) The Investor is acquiring the Series A Preferred and Warrants for the Investor's own account for investment purposes only and not for distribution or resale to others. (d) The Investor's individual net worth as of the date hereof exceeds $1,000,000; (e) EXCEPT AS EXPRESSLY PROVIDED BELOW, THE INVESTOR WILL NOT SELL, PLEDGE OR OTHERWISE TRANSFER ANY OF THE SERIES A PREFERRED OR WARRANTS, IN WHOLE OR IN PART, ACQUIRED BY THE INVESTOR WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, UNLESS SUCH SERIES A PREFERRED OR WARRANTS ARE REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. The Investor further understands that the Company has made no representation that it will register the Series A Preferred or Warrants or make available any exemption from registration requirements under the Act or applicable state securities laws, and the Company has no obligation to do so. Additionally, the Series A Preferred or Warrants may not be sold or disposed of without the submission of a written legal opinion in form and substance satisfactory to the Company and its counsel that such sale or disposition is exempt from federal and state registration requirements. (f) The Investor recognizes that an investment in the Company involves substantial risk. The Investor has read the Certificate and understands all of the risks related to the purchase of the Series A Preferred and the Warrants. The Investor understands that investment in the Series A Preferred and the Warrants is speculative and that the Investor could lose his entire investment in the Series A Preferred or in the Warrants. The Investor represents and warrants that he can sustain such an entire loss. (g) The Investor's overall commitment to investments that are not marketable is not disproportionate to the Investor's net worth, and the Investor has no need for liquidity in the Investor's investment in the Company in that the Investor has other sources of income or funds to provide for the Investor's current needs and possible contingencies. (h) The Investor's legal residence is as set forth on the signature page hereto. (i) The answers provided by the Investor herein, as well as all other information that the Investor has provided to the Company, the Company or its representative(s), either directly or indirectly, concerning the Investor's financial position and knowledge of financial and business matters, are correct and complete as of the date hereof and as of the date of delivery of this Agreement to the Company. 5. Backup Withholding. The Investor certifies under penalties of perjury that (i) the Investor's taxpayer identification number (social security number for an individual Investor) as set forth on the signature page hereof is correct; (ii) the Investor's home address (in the case of an individual) or office address (in the case of an entity) as set forth on the signature page hereof is correct; and (iii) the Investor is not subject to backup withholding either because the Investor has not been notified by the Internal Revenue Service ("IRS") that it is subject to backup withholding as a result of a failure to report all interest or dividends, or because it has been notified by the IRS that it is no longer subject to backup withholding. If the Investor is subject to backup withholding, the Investor should cross through clause (iii) and check the following box: 6. Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by the internal laws of the State of Delaware without reference to its choice of law provisions. 7. Indemnification. The Investor hereby indemnifies and holds harmless the Company and its representative(s) and each of their respective officers, directors, owners and affiliates from and against any liabilities, damages, and expenses, including reasonable attorneys' fees, arising out of or in connection with any misrepresentation or breach of warranty made by the Investor herein. 8. Additional Information. The Investor agrees to furnish such additional information as the Company or its representative(s) requests. Further, the Investor authorizes the Company or any authorized agent/representative of the Company to contact any banker, accountant, lawyer or other person or entity to verify any of the information contained herein. 9. Arbitration. Any dispute, controversy, contest, claim or other matter arising out of or in connection with this Agreement or the interpretation or enforcement hereof shall be settled by binding arbitration held in Newark, New Jersey in accordance with the NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "nasd") RULES OF ARBITRATION, IF ALLOWED BY THE NASD, OR IF DISALLOWED BY THE NASD, BY THE Commercial Arbitration Rules of the American Arbitration Association (the "AAA Rules"). The arbitration shall be conducted by a single arbitrator mutually chosen by the COMPANY and the Investor from among candidates selected in accordance with the AAA Rules. The cost of such arbitration (excluding expenses of legal counsel and witness fees) shall be borne by the parties equally, and each party shall bear the expenses of its own legal counsel and witnesses. Any final award or determination of the arbitrator shall be in writing setting forth the factual and legal grounds for the award or determination. Any award or determination rendered by such arbitrator shall be enforceable in any court having jurisdiction over the parties. Each party shall maintain the confidentiality of any such arbitration proceeding, except as may be reasonably necessary to effectively represent itself in such arbitration proceeding, to enforce the awards or determinations of the arbitrator, or as otherwise required by law or judicial or administrative order or decree. The foregoing shall not be interpreted as a waiver of any of the Investor's rights under federal or applicable state securities laws. 10. Entire Agreement. This Agreement contains the entire agreement between the parties hereto and supersedes all prior and contemporaneous understandings and agreements of the parties whether oral or written, regarding the within contained subject matter. The provisions of this Agreement may not be modified or waived except in writing and the representations, warranties and covenants contained herein shall survive the closing of the purchase of the Series A Preferred and the Warrants by the Investor and any investigation at any time made by any person. [THE NEXT PAGE IS THE SIGNATURE PAGE.] SIGNATURE PAGE FOR INDIVIDUAL INVESTORS If applicable, the Investor hereby authorizes its selling agent to remit funds held in the Investor's account with the selling agent in an amount equal to the purchase price of the Series A Preferred being purchased to the Company prior to closing of the Offering. IN WITNESS WHEREOF, the Investor has hereby executed this Agreement on June 25, 2003. When signing as attorney, executor, administrator or guardian, please give title as such. Carl DeSantis /s/ Carl DeSantis Please Print Your Name Above Please Sign Your Name Above -------------------- Please Print Your Address: Social Security Number Total Number of Shares of Series A Preferred: 9,500 shares Total Purchase Price for Series A Preferred: $9,500,000 Total Number of Warrants: 175,000 Total Purchase Price for the Warrants: [$______] ACCEPTANCE BY INTEGRATED BIOPHARMA, INC. In reliance upon the foregoing Subscription Agreement, and the representations, warranties and covenants contained therein, this Subscription Agreement and the subscription therein are accepted on behalf of the Integrated BioPharma, Inc. by its Chief Executive Officer. INTEGRATED BIOPHARMA, INC. a Delaware corporation Date: June 25, 2003 By: /s/ E. Gerald Kay Name: E. Gerald Kay Title: Chief Executive Officer Exhibit A. Certificate of Designation of the Series A Convertible Preferred Stock CERTIFICATE OF DESIGNATION OF SERIES AND DETERMINATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK OF INTEGRATED BIOPHARMA, INC. Integrated BioPharma, Inc., a Delaware corporation (the "Company"), acting pursuant to ss. 151 of the General Corporation Law of Delaware, does hereby submit the following Certificate of Designation of Series and Determination of Rights and Preferences of its Convertible Preferred Stock, Series A. FIRST: The name of the Company is Integrated BioPharma, Inc. SECOND: By unanimous consent of the Board of Directors of the Company dated June 25, 2003, the following resolutions were duly adopted: WHEREAS the Restated Certificate of Incorporation of the Company (as amended, the "Certificate of Incorporation") authorizes Preferred Stock consisting of 1,000,000 shares, par value $0.002 per share, issuable from time to time in one or more series; and WHEREAS the Board of Directors of the Company is authorized, subject to limitations prescribed by law and by the provisions of Article Fifth of the Company's Certificate of Incorporation to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series; and WHEREAS it is the desire of the Board of Directors to establish and fix the number of shares to be included in a new series of Preferred Stock and the designation, rights, preferences and limitations of the shares of such new series; NOW, THEREFORE, BE IT RESOLVED that pursuant to Article Fifth of the Certificate of Incorporation there is hereby established a new series of 20,000 shares of Series A Convertible Preferred Stock of the Company (the "Series A Preferred Stock") to have the designation, rights, preferences, powers, restrictions and limitations set forth in a supplement of Article Fifth as follows: 1. Designation and Number of Shares. The series will be known as the "Series A Preferred Stock" and will be a series consisting of 20,000 shares of the authorized but unissued preferred stock of the Company. 2. Dividends. On each of July 1, 2004, July 1, 2005, and July 1, 2006, the holders of the Series A Preferred Stock shall be entitled to receive, out of funds legally available therefor, in preference to the payment of dividends to any holders of Common Stock, a dividend, payable in cash or in kind at the option of the Company, equal to $40 per share of Series A Preferred Stock, when and as declared by the Board of Directors of the Company. After June 30, 2006, dividends will no longer accrue. 3. Liquidation Preference. (a) Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of the Series A Preferred Stock shall be entitled to receive prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Common Stock of the Company, an amount equal to (A) $1,000 per share of Series A Preferred Stock held by such holder, plus (B) a further amount equal to any dividends declared or accrued but unpaid on such shares. If, upon such liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to the stockholders of the Company are insufficient to provide for the payment of the full aforesaid preferential amount, such assets as are so available shall be distributed among the holders of the Series A Preferred Stock in proportion to the relative aggregate liquidation preferences of the preferred stock so held. All amounts per share set forth in this subparagraph 3(a) shall be appropriately adjusted for any stock splits, stock combinations, stock dividends or similar recapitalizations. (b) Noncash Distributions. If any of the assets of the Company are to be distributed other than in cash under this paragraph 3 or for any purpose, then the Board of Directors of the Company shall promptly engage independent competent appraisers to determine the value of the assets to be distributed to the holders of preferred stock or Common Stock. The Company shall, upon receipt of such appraiser's valuation, give prompt written notice to each holder of shares of preferred stock or Common Stock of the appraiser's valuation. (c) Consolidation or Merger. A consolidation or merger of the Company with or into any other corporation or corporations or a sale of all or substantially all of the assets of the Company, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this paragraph 3. The provisions of this subparagraph 3(c) shall not apply to any consolidation or merger following which the holders of a majority or more of the capital stock of the resulting or surviving entity, based on voting power in the election of directors, are persons or entities who were stockholders of the Company immediately prior to such consolidation or merger. 4. Voting Rights. (a) General Voting Rights. The holder of each share of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which each share of Series A Preferred Stock could be converted on the record date for the vote or written consent of stockholders and, except as otherwise required by law, shall have voting rights and powers equal to the voting rights and powers of the Common Stock. The holder of each share of Series A Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Company and, except as provided in paragraph 4(b) below with respect to the election of directors by the separate class vote of the holders of Series A Preferred Stock, shall vote with holders of the Common Stock upon all other matters submitted to a vote of stockholders, except those matters required to be submitted to a class or series vote pursuant to paragraph 6 or by law. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares of Common Stock into which shares of preferred stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half rounded upward to one). (b) Voting for the Election of Directors. As long as at least 10,000 shares of Series A Preferred Stock remain outstanding, the holders of such shares of Series A Preferred Stock (voting as a separate class) shall be entitled to elect one (1) director of the Company at any election of directors. 5. Conversion. The Series A Preferred Stock shall be convertible into Common Stock, as follows: (a) Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at the office of the Company at any time after the date of issuance of such share through June 30, 2006. Each share of Series A Preferred Stock shall be convertible into the number of shares of Common Stock which results from dividing $1,000 by the conversion price per share in effect at the time of conversion. The conversion price per share of Series A Preferred Stock ("Conversion Price") shall be (x) $8 through June 30, 2004, (y) $12 from July 1, 2004 through June 30, 2005, and (z) $16 from and after July 1, 2005. The Conversion Price shall be subject to adjustment as hereinafter provided. (b) Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Conversion Price immediately prior to the closing of (i) a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering a firm commitment underwritten offering of the Company's Common Stock with aggregate gross proceeds to the Company, at the public offering price, of at least $5 million, and a price per share not less than the then effective Conversion Price (a "Qualified Offering"); or (ii) upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock to convert all of the outstanding shares of Series A Preferred Stock into Common Stock of the Company. A Qualified Offering and a shareholder vote described in subparagraph (ii) are hereinafter referred to as "Automatic Conversion Events". (c) Mechanics of Conversion. Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock as provided in paragraph 5(a), such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company and shall give written notice to the Company at such office that he elects to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock 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 A 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 on such date. In the event of an Automatic Conversion Event pursuant to paragraph 5(b), the outstanding shares of Series A Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series A Preferred Stock are either delivered to the Company as provided above, or the holder notifies the Company that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. The Company shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series A Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to and shall be contingent upon the Automatic Conversion Event, 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 on such date. (d) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the Conversion Price in effect at the time of conversion. (e) Adjustment of Conversion Price. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as follows: (i) If the Company shall issue any Common Stock or other securities of the Company convertible into or exchangeable for Common Stock (other than "Excluded Stock," as defined below, or stock dividends, subdivisions, split-ups, combinations or dividends, which such events are covered by subparagraphs 5(e)(iii), (iv), and (v)), for a consideration per share less than the Conversion Price for the Series A Preferred Stock as in effect immediately prior to the issuance of such Common Stock (or other securities convertible into or exchangeable for Common Stock), then the Conversion Price for such series shall forthwith be decreased immediately after such issuance to a price equal to the quotient obtained by dividing: (A) an amount equal to the sum of: (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to have been issued pursuant to subdivision (3) of this subparagraph (i)) immediately prior to such issuance multiplied by the Conversion Price in effect immediately prior to such issuance plus (y) the consideration received by the Company upon such issuance, by (B) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to have been issued pursuant to subdivision (3) of this subparagraph (i)) immediately after the issuance of such Common Stock (or other securities convertible into or exchangeable for Common Stock). For purposes of making any such calculation pursuant to this subparagraph (i), the shares of Common Stock issuable upon conversion of the outstanding shares of Series A Preferred Stock, together with any other shares of Common Stock deemed issued and outstanding pursuant to subdivision (3) of this subparagraph (i), shall be deemed issued and outstanding at all times. For the purposes of this subparagraph (i), the following provisions shall also be applicable: (1) In the case of the issuance of Common Stock for cash, the consideration received therefor shall be deemed to be the amount of cash paid therefor without deducting any discounts or commissions paid or incurred by the Company in connection with the issuance and sale thereof. (2) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors of the Company. (3) In the case of the issuance of (i) options to purchase or rights to subscribe for Common Stock (other than Excluded Stock), (ii) securities by their terms convertible or exchangeable for Common Stock (other than Excluded Stock), or (iii) options to purchase or rights to subscribe for such convertible or exchangeable securities: a. the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to be issuable for a consideration equal to the consideration (determined in the manner provided in subdivisions (1) and (2) above), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; b. the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof, shall be deemed to be issuable for a consideration equal to the consideration received by the Company for any such securities and related options or rights, plus the additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subdivisions (1) and (2) above); c. the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such options or rights or securities were issued; d. on any change in the number of shares of Common Stock deliverable upon exercise of any such options or rights or conversion of or exchange for such convertible or exchangeable securities, or on any change in the minimum purchase price of such options, rights or securities, other than a change resulting from any antidilution provisions of such options, rights or securities, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustment (and any subsequent adjustments) made upon (x) the issuance of such options, rights or securities not exercised, converted or exchanged prior to such change, as the case may be, been made upon the basis of such change or (y) the options or rights related to such securities not converted or exchanged prior to such change, as the case may be, been made upon the basis of such change; and e. on the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustment (and any subsequent adjustments) made upon the issuance of such options, rights, convertible or exchangeable securities or options or rights related to such convertible or exchangeable securities, as the case may be, been made upon the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options or rights, upon the conversion or exchange of such convertible or exchangeable securities or upon the exercise of the options or rights related to such convertible or exchangeable securities, as the case maybe. (ii) "Excluded Stock" shall mean: (A) the Series A Preferred Stock; (B) all shares of Common Stock into which shares of the Series A Preferred Stock are convertible; (C) securities issued pursuant to the acquisition of another business entity or business segment of any such entity by the Company by merger, purchase of substantially all of the assets or other reorganization whereby the Company will own more than fifty percent (50%) of the voting power of such business entity or business segment of any such entity; (D) securities issued in connection with any borrowing, direct or indirect, from financial institutions or other persons by the Company, including any type of loan or payment evidenced by any type of debt instrument; (E) securities issued to employees, consultants , officers, directors or other advisors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board of Directors of the Company; (F) securities issued in connection with obtaining lease financing, whether issued to a lender, lessor, guarantor or other person approved by the Board of Directors of the Company; (G) securities issued to leasing companies, landlords, lenders an other providers of goods and services to the Company and approved by the Board of Directors of the Company; (H) securities issued in a public offering pursuant to a registration statement under the Securities Act of 1933, as amended; (I) securities issued in connection with strategic transactions involving the Company and other entities, including (1) joint ventures, manufacturing, marketing or distribution arrangements, and (2) technology license, transfer or development arrangements; provided that such strategic transactions and the issuance of securities in connection therewith has been approved by the Board of Directors of the Company; and (J) any right, option or warrant to acquire any security convertible into the securities described in subparagraphs (A) through (I) above. (iii) If the number of shares of Common Stock outstanding at any time after the date hereof is increased by a stock dividend payable in shares of Common Stock (other than dividends payable pursuant to the Series A Preferred Stock) or by a subdivision or split-up of shares of Common Stock, then, on the date such payment is made or such change is effective, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of the Series A Preferred Stock shall be increased in proportion to such increase of outstanding shares. (iv) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of the Series A Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (v) In case the Company shall declare a cash dividend upon its Common Stock payable otherwise than out of retained earnings or shall distribute to holders of its Common Stock shares of its capital stock (other than Common Stock), stock or other securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights (excluding options to purchase and rights to subscribe for Common Stock or other securities of the Company convertible into or exchangeable for Common Stock), then, in such case, the holders of shares of Series A Preferred Stock shall, concurrent with the distribution to holders of Common Stock, receive a like distribution based upon the number of shares of Common Stock into which such Series A Preferred Stock is then convertible. (vi) in case, at any time after the date hereof, of any capital reorganization, or any reclassification of the stock of the Company (other than a change in par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Company with or into another person (other than a consolidation or merger in which the Company is the continuing entity and which does not result in any change in the Common Stock), or of the sale or other disposition of all or substantially all of the properties and assets of the Company as an entirety to any other person, the shares of Series A Preferred Stock shall, if such event is not deemed a liquidation for purposes of subparagraph 2(c), after such reorganization, reclassification, consolidation, merger, sale or other disposition, be convertible into the kind and number of shares of stock or other securities or property of the Company or of the entity resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold or otherwise disposed to which such holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation, merger, sale or other disposition he had converted his shares of Series A Preferred Stock into Common Stock. The provisions of this subparagraph (vi) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or other dispositions. (vii) All calculations under this paragraph 5 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be. (f) Minimal Adjustments. No adjustment in a Conversion Price need be made if such adjustment would result in a change in a Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in a Conversion Price. (g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of a Conversion Price pursuant to this paragraph 5, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect for the Series A Preferred Stock held, and (iii) the number of shares of Common Stock and the amount if any, of other property which at the time would be received upon the conversion of the Series A Preferred Stock. (h) Notices of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, the Company shall mail to each holder of Series A Preferred Stock at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution. (i) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (j) Notices. Any notice required by the provisions of this paragraph 5 to be given to the holder of shares of the Series A Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his latest address appearing on the books of the Company. 6. Protective Provisions. (a) Approval of Preferred Stock. So long as any shares of the Series A Preferred Stock shall be outstanding, the Company shall not, without obtaining the affirmative vote (by vote or written consent, as provided by law) of holders of at least a majority of the outstanding shares of Series A Preferred Stock: (i) alter or change the rights, preferences or privileges of the Series A Preferred Stock; or (ii) create (by reclassification or otherwise) any new class or series of shares having rights preferences or privileges senior to the Series A Preferred Stock; or (iii) redeem or repurchase any shares of Common Stock (other than pursuant to equity incentive agreements with service providers giving the Company the right to repurchase shares upon the termination of services); or (iv) amend or waive any provision of the Company's Certificate of Incorporation or Bylaws relative to the Series A Preferred Stock. [Remainder of page left blank intentionally] IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its President and attested to by its Secretary this 25th day of June, 2003. INTEGRATED BIOPHARMA, INC. By: /s/ E. Gerald Kay Name: E. Gerald Kay Title: Chief Executive Officer ATTEST: /s/ Eleanor DiMartino Name: Eleanor DiMartino Title: Secretary