|
(i) "Additional Amount"
means, on a per Preferred Share basis, the product of (A) the result of
the following formula: (Dividend Rate)(N/365) and (B) the Stated
Value.
|
| (ii) "AMEX" means the NYSE AMEX Equities. |
|
(iii)
"Approved Stock Plan"
means any employee benefit plan which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities may
be issued to any employee, officer or director for services provided to
the Company.
|
|
(iv)
"Bloomberg" means
Bloomberg Financial
Markets.
|
|
(v)
"Business Day" means any
day other than Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain
closed.
|
|
(vi) "Capital Stock" means:
(A) in the case of a corporation, corporate stock; (B) in the case of an
association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of
corporate stock; (C) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or membership
interests; and (D) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing
Person.
|
|
(vii)
"Change of Control" means
any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of the Common Stock in which holders
of the Company's voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities
and, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity
or entities, or (B) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the
Company.
|
|
(viii)
"Closing Bid Price" and
"Closing Sale
Price" means, for any security as of any date, the last closing bid
price and last closing trade price, respectively, for such security on the
applicable Eligible Market, as reported by Bloomberg, or, if the
applicable Eligible Market begins to operate on an extended hours basis
and does not designate the closing bid price or closing trade price then
the last bid price or the last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
foregoing do not apply, the last bid price or the last trade price,
respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or,
if no last bid price or last trade price is reported for such security by
Bloomberg, the average of the bid prices or ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by
Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing
Bid Price or Closing Sale Price, as the case may be, of such security on
such date shall be the fair market value as mutually determined by the
Company and the Required Holders. If the Company and the
Required Holders are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section
2(d)(iii). All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation
period.
|
|
(ix)
"Conversion Amount" means
the sum of (A) the Additional Amount and (B) the Stated
Value.
|
|
(x)
"Conversion Price" means
$4.60, subject to adjustment as provided
herein.
|
|
(xi)
"Convertible Securities"
means any stock or securities (other than Options) directly or indirectly
convertible into or exchangeable or exercisable for Common
Stock.
|
|
(xii)
"Dividend Rate" means (A)
six percent (6.0%) per annum and (B) for the period from and after the
occurrence of a Triggering Event through such time that such Triggering
Event is cured, fifteen percent (15%) per
annum.
|
|
(xiii)
"Eligible Market" means
the OTC Bulletin Board, the New York Stock Exchange, the NYSE Amex
Equities, The NASDAQ Global Select Market, The NASDAQ Global Market or The
NASDAQ Capital Market.
|
|
(xiv)
"Equity Conditions"
means: (A) on each day during the period beginning sixty (60)
days prior to the applicable date of determination and ending on and
including the applicable date of determination (the "Equity Conditions Measuring
Period"), either (1) the Registration Statement (as defined in the
Registration Rights Agreement) filed pursuant to the Registration Rights
Agreement shall be effective and available for the resale of all of the
Registrable Securities in accordance with the terms of the Registration
Rights Agreement and there shall not have been any Grace Periods (as
defined in the Registration Rights Agreement) or (2) all shares of Common
Stock issued and issuable upon conversion of the Preferred Shares and upon
exercise of the Warrants shall be eligible for sale pursuant to Rule 144
without restriction or limitation and without the need for registration
under any applicable federal or state securities laws; (B) on each day
during the Equity Conditions Measuring Period, the Common Stock is
designated for quotation on an Eligible Market and shall not have been
suspended from trading on such exchange or market (other than suspensions
of not more than two (2) days and occurring prior to the applicable date
of determination due to business announcements by the Company) nor
shall
|
| proceedings for such delisting or suspension by such exchange or market have been commenced, threatened or pending either (1) in writing by such exchange or market or (2) by falling below the minimum listing maintenance requirements of such exchange or market; (C) on each day during the Equity Conditions Measuring Period, the Company shall have delivered Common Stock upon conversion of the Preferred Shares to the Holders on a timely basis as set forth in Section 2(d)(ii) hereof; (D) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 6 hereof or the rules or regulations of the applicable Eligible Market; (E) during the Equity Conditions Measuring Period, the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document (as defined in the Securities Purchase Agreement); (F) during the Equity Conditions Measuring Period, there shall not have occurred either (1) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated or (2) a Triggering Event or an event that with the passage of time or giving of notice would constitute a Triggering Event; (G) the Company shall have no knowledge of any fact that would cause (1) the Registration Statements required pursuant to the Registration Rights Agreement not to be effective and available for the resale of at least all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) all shares of Common Stock issued and issuable upon conversion of the Preferred Shares and upon exercise of the Warrants not to be eligible for sale pursuant to Rule 144 without restriction or limitation and without the need for registration under any applicable federal or state securities laws; and (H) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document. |
|
(xv) "Fundamental Transaction"
means that the Company shall (or in the case of clause (F) any "person" or
"group" (as these terms are used for purposes of Sections 13(d) and 14(d)
of the Exchange Act)), directly or indirectly, in one or more related
transactions, (A) consolidate or merge with or into (whether or not the
Company is the surviving corporation) another Person, or (B) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (C) allow
another Person or Persons to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares
of Voting Stock (not including any shares of Voting Stock held by the
Person or Persons making or party to, or associated or affiliated with the
Person or Persons making or party to, such purchase, tender or exchange
offer), or (D) consummate a stock 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 Voting Stock (not including any shares of Voting 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 purchase
agreement or other business combination), or (E) reorganize, recapitalize
or reclassify its Common Stock, or (F) is or shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Common
Stock.
|
|
(xvi)
"Initial Issuance Date"
means December 1, 2009.
|
|
(xvii) "Liquidation Event" means
the voluntary or involuntary liquidation, dissolution or winding up of the
Company or such Subsidiaries the assets of which constitute all or
substantially all of the assets of the business of the Company and its
Subsidiaries taken as a whole, in a single transaction or series of
transactions.
|
|
(xviii) "Make-Whole Additional
Amount" means, as to any Conversion Amount on any Conversion Date,
as to any Triggering Event Redemption on any Triggering Event Redemption
Date or as to any Change of Control Redemption on any Change of Control
Redemption Date, the amount per applicable Preferred Share of any
Dividends that, but for (i) the Holder's exercise of its conversion right
pursuant to Section 2, (ii) a Triggering Event Redemption pursuant to
Section 3(b), or (iii) a Change of Control Redemption pursuant to Section
7(a), would have accrued with respect to the Conversion Amount being
converted or redeemed under this Certificate of Designations at the then
existing Dividend Rate for the period from the applicable Conversion Date,
Triggering Event Redemption Date or Change of Control Redemption Date, as
the case may be, through the Maturity
Date.
|
|
(xix)
"Maturity Date" means,
with respect to the Preferred Shares, the third anniversary of the Initial
Issuance Date, unless extended pursuant to Section
3(d)(vii).
|
|
(xx)
"N" means the number of
days from, but excluding, the last Dividend Date with respect to which
dividends have been paid in full by the Company on the applicable
Preferred Share, or the Initial Issuance Date if no Dividend Date has
occurred.
|
|
(xxi)
"NYSE" means The New York
Stock Exchange, Inc.
|
|
(xxii)
"Options" means any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
|
|
(xxiii) Parent Entity" of a
Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the
Fundamental Transaction.
|
|
(xxiv)
"Person" means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
|
|
(xxv)
"Principal Market" means
the OTC Bulletin Board.
|
|
(xxvi)
"Redemption Prices"
means, collectively, the Triggering Event Redemption Price, the Maturity
Date Redemption Price and the Change of Control Redemption Price, each of
the foregoing, individually, a Redemption
Price.
|
|
(xxvii)
"Registration Rights
Agreement" means that certain registration rights agreement by and
among the Company and the initial Holders of the Preferred Shares dated as
of the Subscription Date, as such agreement may be amended from time to
time as provided in such agreement.
|
|
(xxviii)
"Required Holders" means
the Holders of Preferred Shares representing at least two-thirds of the
aggregate Preferred Shares then
outstanding.
|
|
(xxix)
"SEC" means the
Securities and Exchange Commission.
|
|
(xxx)
"Securities Purchase
Agreement" means that certain securities purchase agreement by and
among the Company and the initial Holders, dated as of the Subscription
Date, as such agreement further may be amended from time to time as
provided in such
agreement.
|
|
(xxxi)
"Stated Value" means
$1,000.
|
|
(xxxii) "Subscription Date" means
November 27, 2009.
|
|
(xxxiii)
"Subsidiaries" shall have
the meaning as set forth in the Securities Purchase
Agreement.
|
|
(xxxiv)
"Successor Entity" means
the Person, which may be the Company, formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such
Fundamental Transaction shall have been made, provided that if such Person
is not a publicly traded entity whose common stock or equivalent equity
security is quoted or listed for trading on an Eligible Market, Successor
Entity shall mean such Person's Parent
Entity.
|
|
(xxxv) "Tax" means any tax,
levy, impost, duty or other charge or withholding of a similar nature
(including any related penalty or
interest).
|
|
(xxxvi)
"Tax Deduction" means a
deduction or withholding for or on account of Tax from a payment under
this Certificate of
Designations.
|
|
(xxxvii) "Trading Day" means any
day on which the Common Stock is traded on the principal securities
exchange or securities market on which the Common Stock is then traded;
provided that "Trading Day" shall not include any day on which the shares
of Common Stock are scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the shares of Common Stock are suspended
from trading during the final hour of trading on such exchange or market
(or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York
Time).
|
|
(xxxviii)
"Voting Stock" of a
Person means Capital Stock of such Person of the class or classes pursuant
to which the holders thereof have the general voting power to elect, or
the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or
not at the time Capital Stock of any other class or classes shall have or
might have voting power by reason of the happening of any
contingency).
|
|
(xxxix)
"Warrants" shall have the
meaning as set forth in the Securities Purchase
Agreement.
|
|
(xl)
"Weighted Average Price"
means, for any security as of any date, the dollar volume-weighted average
price for such security on the applicable Eligible Market during the
period beginning at 9:30:01 a.m. (or such other time as the applicable
Eligible Market publicly announces as the official open of trading), New
York City Time, and ending at 4:00:00 p.m., New York City Time (or such
other time as the applicable Eligible Market publicly announces as the
official closing of trading), as reported by Bloomberg through its "Volume
at Price" function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the
period beginning at 9:30:01 a.m., New York City Time (or such other time
as the applicable Eligible Market publicly announces as the official open
of trading), and ending at 4:00:00 p.m., New York City Time (or such other
time as the applicable Eligible Market publicly announces as the official
closing of trading), as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for
such
|
| security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for such security on such date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Required Holders. If the Company and the Required Holders are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved pursuant to Section 2(d)(iii) below with the term "Weighted Average Price" being substituted for the term "Closing Sale Price." All such determinations shall be appropriately adjusted for any stock dividend, stock split or other similar transaction during such period. |
|
(b) Holder's Conversion
Right. Subject to the provisions of Section 6 at any
time or times on or after the Initial Issuance Date, any Holder shall be
entitled to convert any whole number of Preferred Shares, plus the amount
of any accrued but unpaid Dividends per Preferred Share then remaining,
into fully paid and nonassessable shares of Common Stock in accordance
with Section 2(d) at the Conversion Rate (as defined
below).
|
|
(c) Conversion. The
number of shares of Common Stock issuable upon conversion of each
Preferred Share pursuant to Section 2(b) shall be determined according to
the following formula (the "Conversion
Rate"):
|
|
No
fractional shares of Common Stock are to be issued upon the conversion of
any Preferred Share, but rather the number of shares of Common Stock to be
issued shall be rounded to the nearest whole
number.
|
|
(d) Mechanics of
Conversion. The conversion of Preferred Shares shall be
conducted in the following
manner:
|
|
(i) Holder's Delivery
Requirements. To convert Preferred Shares into shares of
Common Stock on any date (a "Conversion Date"), the
Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
on or prior to 11:59 p.m., New York City Time, on such date, a copy of a
properly completed notice of conversion executed by the registered Holder
of the Preferred Shares subject to such conversion in the form attached
hereto as Exhibit I (the
"Conversion
Notice") to the Company and the Company's designated transfer agent
(the "Transfer
Agent"); provided, however, if the
Conversion Notice is delivered after 6:00 p.m. New York City Time, it
shall be deemed to be received as of the next Trading Day and (B) if
required by Section 2(d)(viii), surrender to a common carrier for delivery
to the Company as soon as practicable following such date the original
certificates representing the Preferred Shares being converted (or
compliance with the procedures set forth in Section 11) (the "Preferred Stock
Certificates").
|
| (ii) Company's Response. Upon receipt by the Company of copy of a Conversion Notice, the Company shall (I) as soon as practicable, but in any event within one (1) Trading Day, send, via facsimile, a confirmation of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein and (II) on or before the third (3rd) Trading Day following the date of receipt by the Company of such Conversion Notice (the "Share Delivery Date"), (A) (1) provided the Transfer Agent is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled and (B) pay to the Holder in cash by wire transfer (unless another form of consideration is mutually agreed by the Company and any particular Holder) the Make-Whole Additional Amount per Preferred Share converted. If the number of Preferred Shares represented by the Preferred Stock Certificate(s) submitted for conversion, as may be required pursuant to Section 2(d)(viii), is greater than the number of Preferred Shares being converted, then the Company shall, as soon as practicable and in no event later than three (3) Business Days after receipt of the Preferred Stock Certificate(s) (the "Preferred Stock Delivery Date") and at its own expense, issue and deliver to the Holder a new Preferred Stock Certificate representing the number of Preferred Shares not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. |
| (iii) Dispute Resolution. In the case of a dispute as to the determination of the Closing Sale Price, Closing Bid Price, Weighted Average Price or the arithmetic calculation of the Conversion Rate, the Company shall instruct the Transfer Agent to issue to the Holder the number of shares of Common Stock that is not disputed and shall transmit an explanation of the disputed determinations or arithmetic calculations to the Holder via facsimile within one (1) Business Day of receipt of such Holder's Conversion Notice or other date of determination. If such Holder |
| and the Company are unable to agree upon the determination of the Closing Sale Price, Closing Bid Price, Weighted Average Price or arithmetic calculation of the Conversion Rate within two (2) Business Days of such disputed determination or arithmetic calculation being transmitted to the Holder, then the Company shall within one (1) Business Day after approval of the investment bank or outside accountant by the Required Holders submit via facsimile (A) the disputed determination of the Closing Sale Price, Closing Bid Price or Weighted Average Price, as applicable, to an independent, reputable investment bank selected by the Company and approved by the Required Holders or (B) the disputed arithmetic calculation of the Conversion Rate to the Company's independent, outside accountant. The Company shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holders of the results no later than two (2) Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent manifest error. The reasonable expenses of such investment bank or accountant in making such determination shall be paid by the Company in the event the Holder's calculation was correct, or by the Holder in the event the Company's calculation was correct, or equally by the Company and the Holders in the event that neither the Company's or the Holder's calculation was correct. |
| (iv) Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. |
|
(v)
Company's Failure to
Timely Convert.
|
|
(A)
Cash
Damages. If (x) within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Conversion Notice
the Company shall fail to credit a Holder's balance account with DTC or
issue and deliver a certificate to such Holder for the number of shares of
Common Stock to which such Holder is entitled upon such Holder's
conversion of Preferred Shares or (y) within three (3) Trading Days of the
Company's receipt of a Preferred Stock Certificate the Company shall fail
to issue and deliver a new Preferred Stock Certificate representing the
number of Preferred Shares to which such Holder is entitled pursuant to
Section 2(d)(ii), then in addition to all other available remedies which
such holder may pursue hereunder and under the Securities Purchase
Agreement (including indemnification pursuant to Section 9(k) thereof),
the Company shall pay additional damages to such Holder for each day after
the Share Delivery Date that such
|
|
conversion
is not timely effected and/or each day after the Preferred Stock Delivery
Date that such Preferred Stock Certificate is not delivered in an amount
equal to one percent (1.0%) of the product of (I) the sum of the
number of shares of Common Stock not issued to the Holder on or prior to
the Share Delivery Date and to which such Holder is entitled pursuant to
the applicable Conversion Notice and the terms of this Certificate of
Designations, and, in the event the Company has failed to deliver a new
Preferred Stock Certificate to the Holder on or prior to the Preferred
Stock Delivery Date, the number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the Preferred Stock Delivery Date and (II) the Closing
Sale Price of the Common Stock on the Share Delivery Date, in the case of
the failure to deliver Common Stock, or the Preferred Stock Delivery Date,
in the case of failure to deliver a Preferred Stock Certificate, but in no
event in excess of five percent (5.0%). If the Company fails to
pay the additional damages set forth in this Section 2(d)(v)(A) within
five (5) Trading Days of the date incurred, then the Holder entitled to
such payments shall have the right at any time, so long as the Company
continues to fail to make such payments, to require the Company, upon
written notice, to immediately issue, in lieu of such cash damages, the
number of shares of Common Stock equal to the quotient of (X) the
aggregate amount of the damages payments described herein divided by (Y)
the Conversion Price in effect on such Conversion Date as specified by the
Holder in the Conversion Notice. In addition to the foregoing, if on the
Share Delivery Date, the Company shall fail to issue and deliver a
certificate to a Holder or credit such Holder's balance account with DTC
for the number of shares of Common Stock to which such Holder is entitled
upon such Holder's conversion of Preferred Shares, and if on or after such
Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the shares of Common Stock issuable upon such conversion
that the Holder anticipated receiving from the Company (a "Buy-In"), then the
Company shall, within three (3) Trading Days after the Holder's request
and in the Holder's discretion, either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price (including brokerage
commissions and out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (the "Buy-In Price"), at which
point the Company's obligation to deliver such certificate (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing such
Common Stock and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such number of shares
of Common Stock, times (B) the Closing Sale Price on the Conversion
Date. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the
Preferred Shares as required pursuant to the terms
hereof.
|
|
(B)
Void Conversion
Notice; Adjustment of Conversion Price. If for any
reason a Holder has not received all of the shares of Common Stock to
which such Holder is entitled prior to the fifth (5th)
Trading Day after the Share Delivery Date with respect to a conversion of
Preferred Shares, then the Holder, upon written notice to the Company (a
"Void Conversion
Notice"), with a copy to the Transfer Agent, may void its
Conversion Notice with respect to, and retain or have returned, as the
case may be, any Preferred Shares that have not been converted pursuant to
such Holder's Conversion Notice; provided that the voiding of a Holder's
Conversion Notice shall not effect the Company's obligations to make any
payments which have accrued prior to the date of such notice pursuant to
Section 2(d)(v)(A) or otherwise. Thereafter, the Conversion
Price of any Preferred Shares returned or retained by the Holder for
failure to timely convert shall be adjusted to the lesser of (I) the
Conversion Price relating to the voided Conversion Notice and
(II) the lowest Weighted Average Price of the Common Stock during the
period beginning on the Conversion Date and ending on the date such Holder
voided the Conversion Notice, subject to further adjustment as provided in
this Certificate of Designations.
|
|
(C) Conversion
Failure. If for any reason a Holder has not received all
of the shares of Common Stock to which such Holder is entitled prior to
the tenth (10th)
Trading Day after the Share Delivery Date with respect to a conversion of
Preferred Shares (a "Conversion Failure"),
then the Holder, upon written notice to the Company, may require that the
Company redeem all Preferred Shares held by such Holder, including the
Preferred Shares previously submitted for conversion and with respect to
which the Company has not delivered shares of Common Stock, in accordance
with Section 3.
|
|
(vi) Pro Rata Conversion;
Disputes. In the event the Company receives a Conversion
Notice from more than one Holder for the same Conversion Date and the
Company can convert some, but not all, of such Preferred Shares, the
Company shall convert from each Holder electing to have Preferred Shares
converted at such time a pro rata amount of such Holder's Preferred Shares
submitted for conversion based on the number of Preferred Shares submitted
for conversion on such date by such Holder relative to the number of
Preferred Shares submitted for conversion on such date. In the
event of a dispute as to the number of shares of Common Stock issuable to
a Holder in connection with a conversion of Preferred Shares, the Company
shall issue to such Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section
2(d)(iii).
|
|
(vii)
Mandatory Redemption
at Maturity. If any Preferred Shares remain outstanding
on the Maturity Date, the Company shall redeem such Preferred Shares in
cash in an amount equal to the outstanding Conversion Amount for each such
Preferred Share (the "Maturity Date Redemption
Price"). The Company shall pay the Maturity Date
Redemption Price on the Maturity Date by wire transfer of immediately
available funds to an account designated in writing by such
Holder. If the Company fails to redeem all of the Preferred
Shares outstanding on the Maturity Date by payment of the Maturity Date
Redemption Price for each such Preferred Share, then in addition to any
remedy such Holder may have under any Transaction Document, (I) the
applicable Maturity Date Redemption Price payable in respect of such
unredeemed Preferred Shares shall bear interest at the rate of 1.5% per
month, prorated for partial months, until paid in full, and (II) any
Holder shall have the option to require the Company to convert any or all
of such Holder's Preferred Shares and for which the Maturity Date
Redemption Price (together with any interest thereon) has not been paid
into (on a per Preferred Share basis) shares of Common Stock equal to the
number which results from dividing the Maturity Date Redemption Price
(together with any interest thereon) by the Conversion
Price. If the Company has failed to pay the Maturity Date
Redemption Price in a timely manner as described above, then the Maturity
Date may be extended at the option of any applicable Holder for any
Preferred Shares held by such Holder until the date the Holders receive
such shares of Common Stock or Maturity Date Redemption Price and also may
be extended at the option of any applicable Holder for any Preferred
Shares held by such Holder for as long as (A) the conversion of such
Preferred Shares would violate the provisions of Section 6 or (B) a
Triggering Event or an event that with the passage of time or giving of
notice would constitute a Triggering Event shall have occurred and be
continuing or (C) the Equity Conditions have not been satisfied (as
indicated in a notice from the Company to the Holders delivered thirty
(30) Trading Days prior to the Maturity Date) or waived by the applicable
Holder. All redemptions shall be made on a pro-rata basis to
all holders of outstanding Preferred Shares. Except for
mandatory redemption at the Maturity Date, as contemplated above, the
Company does not have the right to require any Holder to redeem any of its
outstanding Preferred Shares or any unpaid Dividends
thereon.
|
|
(viii)
Book-Entry. Notwithstanding
anything to the contrary set forth herein, upon conversion of Preferred
Shares in accordance with the terms hereof, the Holder thereof shall not
be required to physically surrender the certificate representing the
Preferred Shares to the Company unless (A) the full or remaining number of
Preferred Shares represented by the certificate are being converted or (B)
a Holder has provided the Company with prior written notice (which notice
may be included in a Conversion Notice) requesting reissuance of Preferred
Shares upon physical surrender of any Preferred Shares. The
Holder and the Company shall maintain records showing the number of
Preferred Shares so converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of the certificate
representing the Preferred Shares upon each such conversion. In
the event of any dispute or discrepancy, such records of the Company
establishing the number of Preferred Shares to which the record holder is
entitled shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if Preferred Shares
represented by a certificate are converted as aforesaid, a Holder may not
transfer the certificate representing the Preferred Shares unless such
Holder first physically surrenders the certificate representing the
Preferred Shares to the Company, whereupon the Company will forthwith
issue and deliver upon the order of such Holder a new certificate of like
tenor, registered as such Holder may request, representing in the
aggregate the remaining number of Preferred Shares represented by such
certificate. A Holder and any assignee, by acceptance of a
certificate, acknowledge and agree that, by reason of the provisions of
this paragraph, following conversion of any Preferred Shares, the number
of Preferred Shares represented by such certificate may be less than the
number of Preferred Shares stated on the face thereof. Each
certificate for Preferred Shares shall bear the following
legend:
|
|
ANY
TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE
COMPANY'S CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 2(d)(viii)
THEREOF. THE NUMBER OF PREFERRED SHARES REPRESENTED BY THIS
CERTIFICATE MAY BE LESS THAN THE NUMBER OF PREFERRED SHARES STATED ON THE
FACE HEREOF PURSUANT TO SECTION 2(d)(viii) OF THE CERTIFICATE OF
DESIGNATIONS RELATING TO THE PREFERRED SHARES REPRESENTED BY THIS
CERTIFICATE.
|
|
(e) Taxes.
(i) Any
and all payments made by the Company hereunder, including any amounts
received on a conversion or redemption of the Preferred Shares and any
amounts on account of dividends or deemed dividends, must be made by it
without any Tax Deduction, unless a Tax Deduction is required by law. If
the Company is aware that it must make a Tax Deduction (or that there is a
change in the rate or the basis of a Tax Deduction) in respect of any
payment to any Holder, it must notify such Holders promptly.
(ii) If
a Tax Deduction is required to be made by the Company with respect to any
payment to any Holder, the amount of the payment made by the Company will
be increased to an amount which (after making the Tax Deduction, including
any Tax Deduction applicable to additional sums payable pursuant to this
Section 2(e)) results in the receipt by such Holder of an amount equal to
the payment which would have been due if no Tax Deduction had been
required. If the Company is required to make a Tax Deduction, it must make
any payment required in connection with that Tax Deduction within the time
allowed by law.
As
soon as practicable after making a Tax Deduction or a payment required in
connection with a Tax Deduction, the Company must deliver to the Holder
any official receipt or form, if any, provided by or required by the
taxing authority to whom the Tax Deduction was paid.
(iii) In
addition, the Company agrees to pay in accordance with applicable law any
present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any payment made
hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, the Preferred Shares ("Other
Taxes"). As soon as practicable after making a payment
of Other Taxes, the Company must deliver to such Holder any official
receipt or form, if any, provided by or required by the taxing authority
to whom the Tax Deduction was paid.
(iv) The
obligations of the Company under this Section 2(e) shall survive the
Maturity Date of the Preferred Shares and the payment for the Preferred
Shares and all other amounts payable
hereunder.
|
|
(f) Adjustments to
Conversion Price. The Conversion Price will be subject
to adjustment from time to time as provided in this Section
2(f).
|
|
(i) Adjustment of
Conversion Price upon Subdivision or Combination of Common
Stock. If the Company at any time after the Subscription
Date subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at
any time after the Subscription Date combines (by combination, reverse
stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares and the Conversion Price in effect immediately
prior to such combination will be proportionately increased.
(ii) Other
Events. If any event occurs of the type contemplated by
the provisions of this Section 2(f) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the
Holders; provided that no such adjustment will increase the Conversion
Price as otherwise determined pursuant to this Section 2(f).
(iii) Voluntary Adjustment
By Company. The Company may at any time reduce the then
current Conversion Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
(g) Notices.
(i) Immediately
upon any adjustment of the Conversion Price pursuant to Section 2(f), the
Company will give written notice thereof to each Holder, setting forth in
reasonable detail, and certifying, the calculation of such
adjustment. In the case of a dispute as to the determination of
such adjustment, then such dispute shall be resolved in accordance with
the procedures set forth in Section 2(d)(iii).
(ii) The
Company will give written notice to each Holder at least ten (10) Business
Days prior to the date on which the Company closes its books or takes a
record (I) with respect to any dividend or distribution upon the Common
Stock, (II) with respect to any pro rata subscription offer to holders of
Common Stock or (III) for determining rights to vote with respect to any
Fundamental Transaction or Liquidation Event, provided that such
information shall be made known to the public prior to or in conjunction
with such notice being provided to such Holder.
(iii) The
Company will also give written notice to each Holder at least ten (10)
Business Days prior to the date on which any Fundamental Transaction or
Liquidation Event will take place, provided that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to such Holder.
|
| (3) Redemption at Option of Holders. |
|
(a) Triggering
Event. A "Triggering Event" shall
be deemed to have occurred at such time as any of the following
events:
|
|
(i) the
failure of the applicable Registration Statement to be declared effective
by the SEC on or prior to the date that is sixty (60) days after the
applicable Effectiveness Deadline (as defined in the Registration Rights
Agreement);
(ii) while
the Registration Statement is required to be maintained effective pursuant
to the terms of the Registration Rights Agreement, the effectiveness of
the Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the Holder
for sale of all of the Registrable Securities in accordance with the terms
of the Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive Trading Days or for more
than an aggregate of thirty (30) days in any 365-day period (excluding
days during an Allowable Grace Period (as defined in the Registration
Rights Agreement));
(iii) the
suspension from trading or failure of the Common Stock to be listed on an
Eligible Market for a period of five (5) consecutive Trading Days or for
more than an aggregate of ten (10) Trading Days in any 365-day
period;
(iv) the
occurrence of a Public Information Failure (as defined in the Securities
Purchase Agreement) that continues for sixty (60) or more
days;
(v) the
Company's (A) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within ten (10) Business Days
after the applicable Conversion Date or by full satisfaction of the
provisions of Section 2(d)(v)(B) above after delivery of a Void Conversion
Notice by a Holder or (B) notice, written or oral, to any Holder,
including by way of public announcement, or through any of its agents, at
any time, of its intention not to comply, as required, with a request for
conversion of any Preferred Shares into shares of Common Stock that is
tendered in accordance with the provisions of this Certificate of
Designations;
(vi) at
any time following the tenth (10th)
consecutive Business Day that a Holder's Authorized Share Allocation is
less than the number of shares of Common Stock that such Holder would be
entitled to receive upon a conversion of the full Conversion Amount of the
Preferred Shares (without regard to any limitations on conversion set
forth in Section 6 or otherwise);
|
|
(vii) the
Company's failure to pay to the Holder any amounts when and as due
pursuant to this Certificate of Designations or any other Transaction
Document (as defined in the Securities Purchase Agreement);
(viii) the
entry by a court having jurisdiction in the premises of (i) a decree or
order for relief in respect of the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company or any Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Subsidiary under any applicable Federal or State law or
(iii) appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days;
(ix) the
commencement by the Company or any Subsidiary of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company
or any Subsidiary or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company or any
Subsidiary in furtherance of any such action; or
(x) the
Company breaches any representation, warranty, covenant or other term or
condition of any Transaction Document, except, in the case of a breach of
a covenant which is curable, only if such breach remains uncured for a
period of at least five (5) Business
Days.
|
|
(b) Redemption Option Upon
Triggering Event. In addition to all other rights of the
Holders contained herein, after a Triggering Event, each Holder shall have
the right, at such Holder's option, to require the Company to redeem (a
"Triggering Event
Redemption") all or a portion of such Holder's Preferred Shares at
a price per Preferred Share equal to the sum of (i) greater of (A) 125% of
the Conversion Amount and (B) the product of (1) the Conversion Rate in
effect at such time as such Holder delivers a Notice of Redemption at
Option of Holder (as defined below) and (2) the greatest Closing Sale
Price of the Common Stock during the period beginning on the date
immediately preceding such Event of Default and ending on the date the
Holder delivers the Notice of Redemption at Option of Holder and (ii) the
Make-Whole Additional Amount per Preferred Share being redeemed (the
"Triggering Event
Redemption
Price").
(c) Mechanics of
Redemption at Option of Buyer. Within one (1) Business
Day after the occurrence of a qualifying Triggering Event, the Company
shall deliver written notice thereof via facsimile and overnight courier
("Notice of Triggering
Event") to each Holder. At any time after the earlier of
a Holder's receipt of a Notice of Triggering Event and such Holder
becoming aware of a Triggering Event, any Holder of Preferred Shares then
outstanding may require the Company to redeem up to all of such Holder's
Preferred Shares by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option
of Holder") to the Company, which Notice of Redemption at Option of
Holder shall indicate the number of Preferred Shares that such Holder is
electing to redeem.
(d) Payment of Redemption
Price. Upon the Company's receipt of a Notice(s) of
Redemption at Option of Buyer from any Holder, the Company shall within
one (1) Business Day of such receipt notify each other Holder by facsimile
of the Company's receipt of such notice(s). The Company shall
deliver on the fifth (5th)
Business Day after the Company's receipt of the first Notice of Redemption
at Option of Holder (the "Triggering Event Redemption
Date") the applicable Triggering Event Redemption Price to all
Holders that deliver a Notice of Redemption at Option of Holder prior to
the fifth (5th)
Business Day after the Company's receipt of the first Notice of Redemption
at Option of Holder. To the extent redemptions required by this
Section 3 are deemed or determined by a court of competent jurisdiction to
be prepayments of the Preferred Shares by the Company, such redemptions
shall be deemed to be voluntary prepayments. If the Company is
unable to redeem all of the Preferred Shares submitted for redemption, the
Company shall (i) redeem a pro rata amount from each Holder based on the
number of Preferred Shares submitted for redemption by such Holder
relative to the total number of Preferred Shares submitted for redemption
by all Holders and (ii) in addition to any remedy such Holder may have
under this Certificate of Designations and the Securities Purchase
Agreement, pay to each Holder interest at the rate of one and one-half
percent (1.5%) per month (prorated for partial months) in respect of each
unredeemed Preferred Share until paid in full. The Holders and
Company agree that in the event of the Company's redemption of any
Preferred Shares under this Section 3, the Holders' damages would be
uncertain and difficult to estimate because of the parties' inability to
predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the
Holders. Accordingly, any redemption premium due under this
Section 3 is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holders' actual loss of its investment
opportunity and not as a penalty.
|
|
(e) Void
Redemption. In the event that the Company does not pay
any Redemption Price within the applicable time period, at any time
thereafter and until the Company pays such unpaid applicable Redemption
Price in full, a Holder shall have the option to, in lieu of redemption,
require the Company to promptly return to such Holder any or all of the
Preferred Shares that were submitted for redemption by such Holder and for
which the applicable Redemption Price has not been paid, by sending
written notice thereof to the Company via facsimile (the "Void Optional Redemption
Notice"). Upon the Company's receipt of such Void
Optional Redemption Notice, (i) the Redemption Notice of Holder shall be
null and void with respect to those Preferred Shares subject to the Void
Optional Redemption Notice, (ii) the Company shall immediately return any
Preferred Shares subject to the Void Optional Redemption Notice, (iii) the
Conversion Price of such returned Preferred Shares shall be adjusted to
the lesser of (A) the Conversion Price as in effect on the date on which
the Void Optional Redemption Notice is delivered to the Company and (B)
the lowest Weighted Average Price of the Common Stock during the period
beginning on the date on which the Redemption Notice is delivered to the
Company and ending on the date on which the Void Optional Redemption
Notice is delivered to the Company and (iv) the interest amounts in
respect of each unredeemed Preferred Share referred to in clause (d) above
shall cease to accrue.
(f) Disputes;
Miscellaneous. In the event of a dispute as to the
determination of the arithmetic calculation of any Redemption Price, such
dispute shall be resolved pursuant to Section 2(d)(iii) above with the
term "Redemption Price" being substituted for the term "Conversion
Rate". A Holder's delivery of a Void Optional Redemption Notice
and exercise of its rights following such notice shall not effect the
Company's obligations to make any payments which have accrued prior to the
date of such notice. In the event of a redemption pursuant to
this Certificate of Designations of less than all of the Preferred Shares
represented by a particular Preferred Stock Certificate, the Company shall
promptly cause to be issued and delivered to the Holder of such Preferred
Shares a Preferred Stock Certificate representing the remaining Preferred
Shares which have not been redeemed, if necessary.
(4) Other Rights of
Holders.
|
|
(a) Assumption. The
Company shall not enter into or be party to a Fundamental Transaction
unless (i) the Successor Entity assumes in writing (with the
purchase of at least a majority of the outstanding shares of the Company's
Common Stock automatically constituting an assumption in writing) all of
the obligations of the Company under this Certificate of Designations and
the other Transaction Documents in accordance with the provisions of this
Section 4(a) pursuant to written agreements in form and substance
satisfactory to the Required Holders and such written agreements approved
by the Required Holders prior to such Fundamental Transaction, including
agreements to deliver to each Holder of Preferred Shares in exchange for
such Preferred Shares a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this
Certificate of Designations including, without limitation, having a stated
value and dividend rate equal to the stated value and dividend rate of the
Preferred Shares held by such Holder and having similar ranking to the
Preferred Shares, and satisfactory to the Required Holders and
(ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading
on an Eligible Market. Upon the occurrence of any 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 Designations referring to the "Company"
shall refer instead to the Successor Entity), and may exercise every right
and power of the Company and shall assume all of the obligations of the
Company under this Certificate of Designations with the same effect as if
such Successor Entity had been named as the Company
herein. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the Holder confirmation that there shall
be issued upon conversion of the Preferred Shares at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property)
issuable upon the conversion of the Preferred Shares prior to such
Fundamental Transaction, such shares of publicly traded common stock (or
their equivalent) of the Successor Entity, as adjusted in accordance with
the provisions of this Certificate of Designations. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of the Preferred Shares.
(b) Purchase
Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
any class of Common Stock (the "Purchase Rights"), then
the Holders will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could
have acquired if such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Preferred Shares (without
taking into account any limitations or restrictions on the convertibility
of the Preferred Shares) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no
such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(5) Reservation of
Shares.
|
|
(a) The
Company shall have sufficient authorized and unissued shares of Common
Stock for each of the Preferred Shares equal to 130% of the number of
shares of Common Stock necessary to effect the conversion at the
Conversion Rate with respect to the Conversion Amount of each such
Preferred Share as of the Initial Issuance Date. The Company
shall, so long as any of the Preferred Shares are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversions
of the Preferred Shares, such number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the
Preferred Shares then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than 130% of the
number of shares of Common Stock for which the Preferred Shares are at any
time convertible (without regard to any limitations or restrictions on
convertibility of the Preferred Shares pursuant to Section 6 or
otherwise); provided that at no time shall the number of shares of Common
Stock so reserved be less than the number of shares required to be
reserved by reason of the previous sentence (without regard to any
limitations on conversions) (the "Required Reserve
Amount"). The initial number of shares of Common Stock
reserved for conversions of the Preferred Shares and each increase in the
number of shares so reserved shall be allocated pro rata among the Holders
based on the number of Preferred Shares held by each Holder at the time of
issuance of the Preferred Shares or increase in the number of reserved
shares, as the case may be (the "Authorized Share
Allocation"). In the event a Holder shall sell or
otherwise transfer any of such Holder's Preferred Shares, each transferee
shall be allocated a pro rata portion of the number of reserved shares of
Common Stock reserved for such transferor. Any shares of Common
Stock reserved and allocated to any Person which ceases to hold any
Preferred Shares (other than pursuant to a transfer of Preferred Shares in
accordance with the immediately preceding sentence) shall be allocated to
the remaining Holders of Preferred Shares, pro rata based on the number of
Preferred Shares then held by such Holders.
(b) Insufficient
Authorized Shares. If at any time while any of the
Preferred Shares remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance upon conversion of the Preferred Shares
at least a number of shares of Common Stock equal to the Required Reserve
Amount (an "Authorized
Share Failure"), then the Company shall immediately take all action
necessary to increase the Company's authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Preferred Shares then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable
after the date of the occurrence of an Authorized Share Failure, but in no
event later than ninety (90) days after the occurrence of such Authorized
Share Failure, the Company shall hold a meeting of its stockholders for
the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such
proposal. Notwithstanding the foregoing, if at such time of an
Authorized Share Failure, the Company is able to obtain the written
consent of a majority of the shares of its issued and outstanding Common
Stock to approve the increase in the number of authorized shares of Common
Stock, the Company may satisfy this obligation by obtaining such consent
and submitting for filing with the SEC an Information
Statement on Schedule
14C.
|
|
(6) Limitation on
Beneficial Ownership. The Company shall not effect any
conversion of Preferred Shares, and no Holder shall have the right to
convert any Preferred Shares, to the extent that after giving effect to
such conversion, the beneficial owner of such shares (together with such
Person's affiliates) would have acquired, through conversion of Preferred
Shares or otherwise, beneficial ownership of a number of shares of Common
Stock that exceeds 4.99% (the "Maximum Percentage") of
the number of shares of Common Stock outstanding immediately after giving
effect to such conversion. The Company shall not give effect to
any voting rights of the Preferred Shares, and any Holder shall not have
the right to exercise voting rights with respect to any Preferred Shares
pursuant hereto, to the extent that giving effect to such voting rights
would result in such Holder (together with its affiliates) being deemed to
beneficially own in excess of the Maximum Percentage of the number of
shares of Common Stock outstanding immediately after giving effect to such
exercise, assuming such exercise as being equivalent to
conversion. For purposes of the foregoing, the number of
shares of Common Stock beneficially owned by a Person and its affiliates
shall include the number of shares of Common Stock issuable upon
conversion of the Preferred Shares with respect to which the determination
of such sentence is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (A) conversion of the remaining,
nonconverted Preferred Shares beneficially owned by such Person or any of
its affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including,
without limitation, any notes or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained in this
Section beneficially owned by such Person or any of its
affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 6, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Section 6, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the
Company's most recent Form 10-K, Form 10-Q, or Form 8-K, as the case may
be, (2) a more recent public announcement by the Company, or (3) any other
notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time,
upon the written request of any Holder, the Company shall within one (1)
Business Day following the receipt of such notice, confirm orally and in
writing to any 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 Company, including the Preferred Shares, by
such Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written
notice to the Company, the Holder may from time to time increase or
decrease the Maximum Percentage to any other percentage not in excess of
9.99% specified in such notice; provided that (i) any such increase will
not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder providing such written
notice and not to any other Holder.
(7) Change of Control
Redemption Right; Liquidation, Dissolution,
Winding-Up.
|
|
(a) Change of
Control. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not
prior to the public announcement of such Change of Control, the Company
shall deliver written notice thereof via facsimile and overnight courier
to the Holders (a "Change
of Control Notice"). At
any time during the period (the "Change of Control
Period") beginning after a Holder's receipt of a Change of Control
Notice and ending on the date that is twenty (20) Trading Days after the
consummation of such Change of Control, such Holder may require the
Company to redeem (a "Change of Control
Redemption") all or any portion of such Holder's Preferred Shares
by delivering written notice thereof ("Change of Control Redemption
Notice") to the Company, which Change of Control Redemption Notice
shall indicate the Conversion Amount the Holder is electing to
redeem. Any Preferred Shares subject to redemption pursuant to
this Section 7 shall be redeemed by the Company in cash at a price equal
to the sum of (I) the greater of (i) 125% of the Conversion Amount being
redeemed and (ii) the product of (A) the Conversion Amount being redeemed
(B) the quotient determined by dividing (1) the greatest Closing Sale
Price of the Common Stock during the period commencing as of the Trading
Day immediately prior to the public announcement of such proposed Change
of Control and ending as of the Trading Day immediately prior to the
consummation of such Change of Control by (2) the Conversion Price and
(II) the applicable Make-Whole Additional Amount for the Preferred Shares
being redeemed (the "Change of Control Redemption
Price"). The Company shall make payment of the Change of
Control Redemption Price concurrently with the consummation of such Change
of Control if such a Change of Control Redemption Notice is received prior
to the consummation of such Change of Control and within five (5) Trading
Days after the Company's receipt of such notice otherwise (the "Change of Control Redemption
Date"). To the extent redemptions required by this
Section 7(a) are deemed or determined by a court of competent jurisdiction
to be prepayments of the Preferred Shares by the Company, such redemptions
shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 7(a), until the Change of Control
Redemption Price (together with any interest thereon) is paid in full, the
Conversion Amount submitted for redemption under this Section 7 may be
converted, in whole or in part, by the Holder into shares of Common Stock,
or in the event the Conversion Date is after the consummation of the
Change of Control, shares or equity interests of the Successor Entity
substantially equivalent to the Company's Common Stock pursuant to Section
2(c)(i). The parties hereto agree that in the event of the
Company's redemption of any of the Preferred Shares under this Section
7(a), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium
due under this Section 7(a) is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder's actual loss of its
investment opportunity and not as a penalty. In the event that
the Company does not pay the Change of Control Redemption Price on the
Change of Control Redemption Date, then the Holder shall have the right to
void the redemption pursuant to Section
3(e).
|
|
(b) Liquidation. In
the event of a Liquidation Event, the Holders shall be entitled to receive
in cash out of the assets of the Company, whether from capital or from
earnings available for distribution to its stockholders (the "Liquidation Funds"),
before any amount shall be paid to the holders of any of the Capital Stock
of the Company of any class junior in rank to the Preferred Shares in
respect of the preferences as to distributions and payments on the
liquidation, dissolution and winding up of the Company, an amount per
Preferred Share equal to the Conversion Amount; provided that, if the
Liquidation Funds are insufficient to pay the full amount due to the
Holders and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares as
to payments of Liquidation Funds, including the shares of Series B
Preferred Stock (the "Pari Passu Shares"), if
any, then each Holder and each holder of any such Pari Passu Shares shall
receive a percentage of the Liquidation Funds equal to the full amount of
Liquidation Funds payable to such Holder as a liquidation preference, in
accordance with their respective Certificate of Designations, Preferences
and Rights, as a percentage of the full amount of Liquidation Funds
payable to all holders of Preferred Shares and Pari Passu
Shares. After the foregoing distributions, the Holders shall be
entitled, on a pari
passu basis with the holders of Common Stock and treating for the
purpose thereof all of the Preferred Shares as having been converted into
Common Stock pursuant to Section 2, to participate in the distribution of
any remaining assets of the Company to the holders of the outstanding
Common Stock. To the extent necessary, the Company shall cause
such actions to be taken by any of its Subsidiaries so as to enable, to
the maximum extent permitted by law, the proceeds of a Liquidation Event
to be distributed to the Holders in accordance with this Section. All the
preferential amounts to be paid to the Holders under this Section shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any Liquidation Funds of
the Company to the holders of shares of other classes or series of
preferred stock of the Company junior in rank to the Preferred Shares in
connection with a Liquidation Event as to which this Section
applies. The purchase or redemption by the Company of stock of
any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a Liquidation
Event.
|
| CHINA XD PLASTICS COMPANY LIMITED | |||
|
|
By:
|
/s/ Jie Han | |
| Name: Jie Han | |||
| Title: Chief Executive Officer | |||
| Date of Conversion: |
| Number of Preferred Shares to be converted: |
| Stock certificate no(s). of Preferred Shares to be converted: |
| Tax ID Number (If applicable): |
| Please confirm the following information: |
| Conversion Price: |
| Number of shares of Common Stock to be issued: |
| Issue to: |
| Address: |
| Telephone Number: |
| Facsimile Number: |
| Authorization: |
| By: |
| Title: |
| Dated: |
| Account Number (if electronic book entry transfer): |
| Transaction Code Number (if electronic book entry transfer): |
| CHINA XD PLASTICS COMPANY LIMITED | |||
|
|
By:
|
||
| Name: | |||
| Title: | |||