AMENDMENT NO. 1 TO SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT
99.6
AMENDMENT
NO. 1
TO
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 to the SERIES B
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated September 4, 2009 (“Amendment”), among
Echo Metrix, Inc., a Delaware corporation (the “Company”) and Rock
Island Capital, LLC, a Florida limited liability company (“Rock Island” or the
“Buyer”).
BACKGROUND
Pursuant to that certain Series B
Convertible Preferred Stock Purchase Agreement, dated July 29, 2009, and entered
into by and among the Company and Rock Island (the “Agreement”): (i) the
Company has agreed to sell to Rock Island, and Rock Island has agreed to
purchase from the Company, an aggregate of 550,055 shares of the Company’s
Series B Preferred Stock for an aggregate price of $5,000,000. The
parties now desire to enter into this Amendment to modify the terms of the
Agreement as more specifically set forth herein
All capitalized terms used but not
defined herein shall have the meanings assigned them in the
Agreement.
NOW, THEREFORE, in consideration of the
mutual promises of the parties and the terms and conditions hereof, the parties
hereby agree to amend the Agreement as follows:
1. Amendment to Section
2.1. Section 2.1 of the Agreement shall be amended to replace
the reference to “December 2, 2009” with a reference to “January 8,
2010”.
2. Amendment to Section
2.2. Section 2.2 of the Agreement shall be deleted in its entirety and,
in lieu thereof, the following new Section 2.2 is inserted:
2.2 Issuance and Delivery of the
Purchase Shares.
(a) Following receipt by the
Company of each tranche of the Purchase Price in accordance with Section 2.4
below, the Company shall issue and deliver to the Buyer (i) certificates
representing the pro rata portion of the Purchase Shares equal to the value of
the amount paid in such tranche, and (ii) warrants to purchase such number of
shares of Common Stock equal to the number of shares of Common Stock into which
the Purchase Shares delivered in accordance with subsection (i) above are
convertible (the “Purchase
Warrants”). Hereinafter, as applicable context permits,
references to Purchase Shares in this Agreement may also include references to
the Purchase Warrants.
(b) Provided that by
January 8, 2010, the Company has received an aggregate of $5,000,000 (the
“Aggregate Purchase Price”) pursuant to the Agreement (as amended), and provided
further that the Buyer or the members of the Buyer as of September 9, 2009,
(including any member of the Buyer to whom rights or securities purchased under
the Agreement were assigned as of September 9, 2009),still beneficially own at
least 66% of the 550,055 shares of the Company’s Series B Preferred Stock
purchased pursuant to the Agreement the Company shall, within five days of its
receipt of the Aggregate Purchase Price issue to the Buyer warrants to purchase
20,000,000 shares of Common Stock at an exercise price of $0.15 per share with a
term of five years. These warrants shall be immediately exercisable
and not subject to any vesting schedule.
This
obligation in Section 2.2(b) to issue warrants at the Closing is in lieu of the
obligation to issue warrants referenced on Schedule 1 to the
Agreement. Such reference to issuing warrants on Schedule 1 to the
Agreement is hereby deleted in its entirety.
3. Amendment to Section
2.4. Section 2.4 of the Agreement shall be deleted in its
entirety and, in lieu thereof, the following new Section 2.4 is
inserted:
2.4 Delivery of Purchase
Price. The aggregate Purchase Price shall be paid by the Buyer
to the Company by wire transfer in the following
three tranches: (1) the sum of $2,000,000.00 shall be wire
transferred to the Company in accordance with the wire transfer instructions
attached hereto on or before September 9, 2009 (of which the Company
acknowledges $1,000,000 has been received); (2) the sum of $2,000,000.00 shall
be wire transferred to the Company no later than December 2, 2009; and (3) the
sum of $1,000,000.00 shall be wire transferred to the Company no later than
January 8, 2010.
4. Amendment to Section
2.5. Section 2.5 of the Agreement shall be deleted in its
entirety and, in lieu thereof, the following new Section 2.5 is
inserted:
2.5 Use of
Proceeds. The Company shall use the net proceeds from the
issuance of the Purchase Shares for repayment of existing indebtedness., and
general working capital purposes.
5. Amendment to Section
2.6. Section 2.6 of the Agreement shall be deleted in its
entirety and, in lieu thereof, the following new Section 2.6 is
inserted
2.6
Board of
Directors.
(a) On
September 9, 2009, provided that the Buyer pays the installment of the Purchase
Price that is due and payable on such date in accordance with Section 2.4, the
Company shall allow the Buyer to designate one member for service on
the board of directors of the Company on such date, provided that such election
is subject to Delaware law, the Rules and Regulations of the Securities and
Exchange Commission and the procedures delineated in the Company’s current
by-laws and articles of incorporation as filed with the SEC. The
Buyer shall also have the right to remove such designee and to fill any vacancy
caused by the resignation, death or removal of such designee. Notwithstanding
the foregoing, following January 8, 2010, the Buyer’s right to appoint one
member of the board of directors pursuant to this Section 2.6(a) shall cease and
any right of the Buyer to appoint directors shall be pursuant to Section 2.6(b)
below and not this Section 2.6(a).
(b)
Provided
that by January 8, 2010, the Company has received the Aggregate Purchase Price
pursuant to the Agreement (as amended), and provided further that the Buyer or
the members of the Buyer as of September 9, 2009, (including any member of the
Buyer to whom rights or securities purchased under the Agreement were assigned
as of September 9, 2009), still beneficially own at least 66% of the 550,055
shares of the Company’s Series B Preferred Stock purchased pursuant to the
Agreement, the Company shall, allow the Buyer to designate for election to the
Company’s Board of directors such number of directors as will constitute a
majority of the members of the Company’s Board of Directors and such members
will at all times while the Buyer or the members of the buyer as of September 9,
2009 (including any member of the Buyer to whom rights or securities purchased
under the Agreement were assigned as of September 9, 2009), still beneficially
own at least 66% of the 550,005 shares of the Company’s Series B Stock purchased
pursuant to the Agreement, constitute a majority of the board of directors of
the Company. Such elections are subject to Delaware law, the Rules
and Regulations of the Securities and Exchange Commission and the procedures
delineated in the Company’s current by-laws and articles of incorporation as
filed with the SEC. The Buyer shall also have the right to remove
such designees and to fill any vacancy caused by the resignation, death or
removal of such designees. Seller represents that the total number of
directors currently sitting on the board of directors of the Company is fixed at
seven.
6.
Amendment to Section
2.7. Section
2.7 shall be deleted in its entirety and, in lieu thereof, the following new
Section 2.7 is inserted:
2.7. Preemptive
Rights. Provided
that by January 8, 2010, the Company has received the Aggregate Purchase Price
and provided further that the Buyer or the members of the Buyer as of September
9, 2009 (including any member of the Buyer to whom rights or securities
purchased under the Agreement were assigned as of September 9, 2009), still
beneficially own at least 66% of the 550,055 shares of the Company’s Series B
Preferred Stock purchased pursuant to the Agreement, if the Company issues
options or warrants at a stated exercise price, except with respect to an Exempt
Issuance, the Buyer shall have the right to purchase common shares at the same
exercise price. Provided that by January 8, 2010, the Company has received the
Aggregate Purchase Price, if the Company shall issue shares, options or warrants
in exchange for services, or other assets, except with respect to an Exempt
Issuance, the Buyer shall have the right to purchase an equivalent number of
shares at the price of fifteen cents ($0.15) per share for a period of one (1)
year following the date that shares are issued to third parties. ”Exempt
Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any securities issued pursuant to this
Agreement and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance
shall only be to a person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
7.
Amendment to Section
2.8. Section
2.8 shall be amended to delete subsections (i), (ii), (iv), and (v) in its
entirety and, in lieu thereof, the following new Section 2.8 shall be inserted:
:
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(i)
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[intentionally
omitted]
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(ii)
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[intentionally
omitted]
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(iv)
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[intentionally
omitted]
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(v) [intentionally
omitted]
8.
Amendment of Article
VII. Article
VII, Registration
Rights, of the Agreement shall be deleted in its entirety and, in lieu
thereof, the following new Article VII, Registration Rights,
is inserted:
Provided
that by January 8, 2010, the Company has received the Aggregate Purchase Price
pursuant to the Agreement (as amended), and provided further that the Buyer or
the members of the Buyer as of September 9, 2009 (including any member of the
Buyer to whom rights or securities purchased under the Agreement were
assigned as of September 9, 2009), still beneficially own at least 66% of
the 550,055 shares of the Company’s Series B Preferred Stock purchased pursuant
to the Agreement, within thirty days of the receipt of the Aggregate Purchase
Price by the Company, and subject to any limitations imposed by Rule 415 (“Rule 415”) under the
Securities Act or by the SEC with respect to interpretations thereof or
thereunder, the Company shall prepare and file with the SEC a registration
statement on Form S-1 (the “Registration
Statement”), covering the resale of the shares of Common Stock issuable
upon Warrants actually issued pursuant to the Agreement (as amended
(collectively, the “Registrable Securities”), and
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as soon as possible but, in any event, no
later than ninety (90) days following the filing of such Registration Statement
(150 days if the Securities and Exchange Commission issues
comments).
The
Company shall use its best efforts to cause the Registration Statement to remain
effective under the Act, including, without limitation, the prompt filing of
post-effective amendments and supplements, to permit the Purchaser or any
transferees therefrom to dispose of Registrable Securities in such registration
for a period commencing as of the Closing and ending on the earliest to occur of
(i) the date on which all such Registrable Securities which have not been
previously sold to the public pursuant to the Registration Statement can be sold
to the public under Rule 144, and (ii) the date on which all such Registrable
Securities have been sold to the public pursuant to the Registration Statement
in accordance with the intended method of distribution thereof.
All costs
and expenses of any registration and qualification of the Registrable Securities
pursuant to this Article VI shall be borne by the Company, other than (i) any
costs and expenses of counsel, accountants, or other advisors retained by the
Purchaser and (ii) all transfer, franchise, capital or other taxes, if any,
applicable to the Registrable Securities which shall be paid by the
Buyer.
9. Amendment to Section
8.1. Section 8.1 of the Agreement shall be deleted in its
entirety and, in lieu thereof, the following new Section 8.1 is
inserted:
8.1 By
Buyer. In the event that the Buyer shall fail to pay the first
tranche payment of $2,000,000 on or before September 9, 2009 (of which the
Company acknowledges $1,000,000 has been received), this Agreement shall become
null and void and of no further force and effect. In the event that
Buyer shall fail to pay the second or third tranche payments beyond applicable
cure periods, from and after such date, the Company may terminate the Agreement
and the same shall become null and void, provided, however, that the Company
shall, in any event, retain the portion of the Purchase Price paid and the Buyer
shall retain the portion of the Purchase Shares and Purchase Warrants issued
pursuant to such earlier payment. If Buyer shall fail to pay the
second or third tranche payment, the Company shall have no right to pursue any
other remedy against Buyer except as set forth in this Section 8.1.
10. Exhibit
A. Exhibit A to the Agreement (the Certificate of
Designations) is hereby amended in its entirety to be deleted and replaced with
the Certificate of Designations that is attached hereto as Exhibit
A.
11. No Other
Changes. All other terms and conditions of the Agreement shall
remain in full force and effect as provided in the Agreement.
12. Execution in
Counterparts. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13. Applicable
Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
principles of conflicts of laws thereof.
14. Headings. The
headings contained in this Amendment are for convenience of reference only and
shall not affect the construction of this Amendment.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the date set forth opposite their respective
names.
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By:
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/s/Xxxxxxx Xxxxxx
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| Name: Xxxxxxx Xxxxxx | |
| Date: 9/9/09 | |
| Title: Chief Executive Officer | |
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ROCK
ISLAND CAPITAL, LLC
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By:
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/s/Xxxxxxx Xxxxxxxxx
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| Name: Xxxxxxx Xxxxxxxxx | |
| Date: 9/9/09 | |
| Title: Managing Member | |
Amendment No. 1 to Series B
Convertible Preferred Stock Purchase Agreement
EXHIBIT
A
CERTIFICATE
OF DESIGNATION
OF
SERIES
B PREFERRED STOCK
of
__________________________________
Pursuant
to Section 151(g) of the General
Corporation
Law of the State of Delaware
____________________________________
Echo
Metrix, Inc., a Delaware corporation (the “Company”), hereby certifies
that pursuant to the authority conferred upon the Board of Directors of the
Company (the “Board”) by
its certificate of incorporation (the “Certificate of
Incorporation”), and pursuant to the provisions of Section 151(g) of the
General Corporation Law of Delaware, the Board, by unanimous written consent,
adopted the following recitals and resolution, which resolution remains in full
force and effect as of the date hereof:
WHEREAS,
pursuant to the Certificate of Incorporation, the Company is authorized to issue
up to 25,000,000 shares of preferred stock, par value $0.0001 per share (the
“Preferred Stock”), with
such designations, preferences, rights and qualifications, limitations or
restrictions as may be determined by the Board from time to time, of which
1,526,718 shares are designated as Series A Convertible Preferred Stock, par
value $0.0001 per share (“Series A Preferred Stock”) and
901,237 shares of such Series A Preferred Stock are issued
and outstanding;
NOW
THEREFORE, BE IT
RESOLVED,
that pursuant to the authority expressly granted to and vested in the Board by
the provisions of the Certificate of Incorporation, there hereby is created, out
of the 25,000,000 shares of Preferred Stock authorized by the Certificate of
Incorporation, a series of Preferred Stock consisting of 550,055 shares, which
series shall have the following powers, designations, preferences and rights, as
well as the qualifications, limitations and restrictions:
1. Designation. This
series of Preferred Stock shall be designated as the “Series B Preferred
Stock.”
2. Authorization. The
Company shall have the authority to issue 550,055 shares of the Series B
Preferred Stock, par value $0.0001 per share, of the Company (the “Series B Preferred
Stock”).
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3. Dividend
Provisions.
(a) The
holders of Series B Preferred Stock shall be entitled to cumulative dividends in
preference to any dividends on the Common Stock at the rate of 7% of $9.09 (the
“Purchase Price”) per
annum payable quarterly. Dividends shall begin to accrue on the day following
the date of issuance of the Series B Preferred Stock and shall be payable on the
first day following the end of each of the Company’s fiscal quarters (each, a
“Dividend Date”) with
the first Dividend Date being January 1, 2010. If a Dividend
Date is not a business day, then the dividend shall be due and payable on the
business day immediately following such Dividend Date. Dividends
shall be payable in shares of Common Stock (“Dividend
Shares”). Dividends shall be paid in a number of fully paid
and nonassessable shares (rounded up to the nearest whole share) of Common Stock
equal to the quotient of (i) the amount of interest payable divided by the
average of the volume weighted average price for each day during the period
commencing thirty (30) days preceding but not including the Dividend
Date. If any Dividend Shares are to be issued on a Dividend Date,
then the Company shall, within five (5) business days of the applicable Dividend
Date, issue and deliver to such holder of Series B Preferred Stock a
certificate, registered in the name of such holder or its designee, for the
number of shares of Common Stock to which such holder shall be
entitled.
(b) After
payment of any dividends pursuant to Section 3(a), any additional dividends
shall be distributed among all holders of Common Stock and all holders of Series
B Preferred Stock in proportion to the number of shares of Common Stock which
would be held by each such holder of Series B Preferred Stock if all shares of
Series B Preferred Stock were converted to Common Stock at the then effective
conversion rate.
4. Liquidation
Preference.
(a) In
the event of a Liquidation Event (as defined below), the holders of Series B
Preferred Stock shall be entitled to receive, pari passu with the payment
or distribution of assets to the Series A Preferred Stock but prior
and in preference to any distribution of any of the assets of the Company to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (A) the Purchase Price plus an annualized
internal rate of return (“IRR”) of 8% for the period
from the issuance date of the issued and outstanding Series B Preferred Stock to
the date when all amounts under this Section 4(a) are paid in full, and
(B) an amount equal to all declared but unpaid dividends for each
outstanding share of Series B Preferred Stock (the “Preference Amount”),
proportionally adjusted for Recapitalizations. If upon the occurrence
of such an event, the assets and funds thus distributed among the holders of the
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full Preference Amount, then the entire assets and funds of this
Company legally available for distribution to stockholders shall be distributed
ratably among the holders of the Series B Preferred Stock in proportion to the
full Preference Amount each such holder is otherwise entitled to receive under
this Section 4(a).
(b) Upon
completion of the distributions required by Section 4(a), all of the
remaining assets of the Company available for distribution to stockholders shall
be distributed among the holders of the Company’s Series A Preferred Stock,
Series B Preferred Stock and the Common Stock pro rata based on the number of
shares of Common Stock held by each holder, assuming full conversion of all such
Series A Preferred Stock and Series B Preferred Stock.
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(c) For
purposes of this Section 4, unless the holders of at least a majority of
the voting power of the Series B Preferred Stock then outstanding, voting
together as a single class on an as-converted basis, give prior written consent,
a “Liquidation Event” shall be deemed to be occasioned by a liquidation,
dissolution or winding up of the Company, either voluntary or
involuntary.
5. Conversion. The
holders of the Series B Preferred Stock shall have conversion rights as follows
(the “Conversion
Rights”):
(a) Right to
Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time, at the office of
the Company or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing the
Purchase Price by the conversion price (the “Conversion Price”), determined
as hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price shall be $0.0909,
which implies that each share of Series B Preferred Stock is initially
convertible into Common Stock on a
1-to-100 basis; provided, however, that the Conversion Price shall be
subject to adjustment as set forth in this Section 5.
(b) Mechanics of
Conversion. Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he, she or it
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Company or of any transfer agent, and shall give written notice to
the Company at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Company
shall, as soon as practicable thereafter and in any event within three business
days after such notice, issue and deliver at such office to such holder of
Series B Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten public offering of the
Company’s Common Stock, the conversion may, at the option of any holder
tendering Series B Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of the Company’s Common Stock pursuant
to such offering, in which event the persons entitled to receive the Common
Stock upon conversion of the Series B Preferred Stock shall not be deemed to
have converted such Series B Preferred Stock until immediately prior to the
closing of such public offering.
(c) Conversion Price Adjustments
of Preferred Stock. The Conversion Price of the Series B
Preferred Stock shall be subject to adjustment from time to time as
follows:
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(i)
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In
the event the Company should at any time or from time to time fix a record
date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as “Common Stock
Equivalents”) without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion
or exercise thereof), then, as of such record date (or the date of such
dividend distribution, split or subdivision if no record date is fixed),
the Conversion Prices shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding and those issuable with
respect to such Common Stock
Equivalents.
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(ii)
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If
the number of shares of Common Stock outstanding at any time is decreased
by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price for
the Series B Preferred Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of such Series B
Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
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(d) Other
Distributions. In the event the Company shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Company or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 5(c)(i), then, in each such
case for the purpose of this Section 5(d), the holders of the Series B
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Company into which their shares of such Series B Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Company entitled to receive such
distribution.
(e) Recapitalizations. If
at any time or from time to time there shall be a recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in Section 3(b) or this Section 5),
provision shall be made so that the holders of the Series B Preferred Stock
shall thereafter be entitled to receive upon conversion of such Series B
Preferred Stock the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of the number of shares of Common
Stock deliverable upon conversion of the Series B Preferred Stock held by such
holder would have been entitled on such recapitalization.
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(f) No
Impairment. The Company will not, by amendment of this
Certificate of Designation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 5 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment.
(g) No Fractional Shares and
Certificate as to Adjustments.
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(i)
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No
fractional shares shall be issued upon the conversion of any share of
Series B Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall round the
number of fractional shares up to the nearest number of whole
shares.
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(ii)
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Upon
the occurrence of each adjustment or readjustment of the Conversion Price
of any Series B Preferred Stock pursuant to this Section 5(g)(ii),
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 the Series B 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 the written request at any time of any holder of Series B Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the
Conversion Price at the time in effect, and (C) the number of shares
of Common Stock and the amount, if any, of other property that at the time
would be received upon the conversion of a share of such Series B
Preferred Stock.
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(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, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Company shall mail to each holder
Series B Preferred Stock, at least twenty (20) 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, distribution or right, and the amount
and character of such dividend, distribution or right.
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(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
Series B 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 Series B 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 Series B Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Series B 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
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to the certificate of
incorporation of the Corporation, as amended.
(j) Waiver of Adjustment to
Conversion Prices. Notwithstanding anything herein to the
contrary, any downward adjustment of the Conversion Price of the Series B
Preferred Stock may be waived, either prospectively or retroactively and either
generally or in a particular instance by the vote or written consent of the
holders of not less than 75% of the outstanding shares of the Series B Preferred
Stock. Any such waiver shall be binding upon all current and future
holders of shares of such Series B Preferred Stock.
(k) Mandatory
Conversion. If the Company has not received an aggregate of
$5,000,000 (the “Aggregate
Investment Amount”) from Rock Island Capital LLC (“Rock Island”) holders
of the Series B Preferred Stock on or before January 8, 2010 in accordance with
the terms of that certain Series B Convertible Preferred Stock Purchase
Agreement, dated July 29, 2009 (the “Purchase
Agreement”), entered into by and among the Company and the
initial holder of the Series B Preferred Stock and/or its assigns, then the
Company may at any time thereafter give the holders of the Series
B Preferred Stock written notice of a mandatory conversion of the
Series B Preferred Stock and, if the unpaid portion of Aggregate Investment
Amount is not paid to the Company in accordance with the Purchase Agreement
within ten (10) days following the receipt of such written notice by the holders
of the Series B Preferred Stock, all outstanding shares of Series B
Preferred Stock will automatically, and without any action on the part of any
person being required, convert into shares of the Company's Common Stock at the
Conversion Price determined in accordance with the other provisions of this
Section 5 and such shares of Series B Preferred Stock shall be null and void.
..
6. Voting Rights and Board of
Directors.
(a) General. Provided
that by January 8, 2010, the Company has received the Aggregate Investment
Amount in accordance with the Purchase Agreement and provided further that Rock
Island or the members of Rock Island as of September 9, 2009 (including
any member of Rock Island to whom rights or securities
purchased under the Purchase Agreement were assigned as of September 9,
2009), beneficially own at least 66% of the 550,055 shares of the
Company’s Series B Preferred Stock purchased pursuant to the Purchase Agreement
(the the “ Voting Threshold”), the holders of outstanding Series B
Preferred Stock shall have the right to two (2) votes for each share of Common
Stock into which such share of Series B Preferred Stock could then be
converted. With respect to such votes and except as otherwise
expressly provided herein or as required by applicable law, provided the Voting
Threshold has been met, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any
stockholders’ meeting in accordance with the Bylaws of the Company, and shall be
entitled to vote, together with holders of Common Stock as a single class, with
respect to any matter upon which holders of Common Stock have the right to
vote.
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(b) Reserved.
(c) RESERVED.
.
7. Protective
Provisions. Provided that by January 8, 2010, the Company has
received the Aggregate Investment Amount in accordance with the Purchase
Agreement and provided further that Rock Island or the members of
Rock Island as of September 9, 2009) (including any member of Rock Island
to whom rights or securities purchased under the Purchase Agreement were
assigned as of September 9, 2009), still beneficially own at least 66% of
the 550,055 shares of the Company’s Series B Preferred Stock purchased pursuant
to the Purchase Agreement, the Company shall not, without first obtaining the
approval of the holders of at least two-thirds of the then outstanding shares of
Series B Preferred Stock voting together as a single class:
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(i)
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increase
or decrease the authorized size of the Board or any committee thereof or
create any new committee of the
Board;
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(ii)
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propose
to amend or waive any provision of the Company’s constitutional
documents;
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(iii)
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except
with respect to an Exempt Issuance, sell or issue any equity or debt
security or warrant, option or other right to purchase any equity or debt
security (with the exception of any shares issued upon
conversion of shares of the Series B Preferred Stock or warrants issuable
pursuant to the Purchase Agreement) or declare or pay any dividend or
distribution or redeem or make, or engage in a transaction that results
in, any acquisition, sale of a substantial portion of equity or assets,
merger, consolidation, plan of arrangement, redomiciling, joint venture or
partnership arrangements or form any new subsidiary (including any
“variable interest entity”) or pass any resolution relating to reduction
of share capital, dissolution or liquidation;
or
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(iv)
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engage
or enter into any transaction or agreement with any of the Company’s
affiliates, shareholders, directors or officers, relatives of such
shareholders, directors or officers or affiliates of such relatives or
other related parties.
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For the
avoidance of doubts, this Section 7 does not intend to, nor does it, create and
recognize any additional rights (other than those rights already provided in the
General Corporation Law of the State of Delaware or other applicable laws) to
stockholders that are not holders of the Series B Preferred
Stock. The approval requirement of the holders of the Series B
Preferred Stock as set forth above for any matters listed in this Section 7 does
not, by itself, indicates that such matter must be determined or approved by
stockholders in general.
14
8. “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued pursuant to the Securities
Purchase Agreement between the Company and Rock Island, as amended (the
“Agreement”) and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Certificate of Designations, provided that such securities have not been
amended since the date of this Certificate of Designations to increase the
number of such securities or to decrease the exercise, exchange or conversion
price of such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of
the Company, provided that any such issuance shall only be to a Person (as
defined in the Agreement) which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities
9. Amendments. The
terms, conditions, rights and preferences contained in this Certificate of
Designation may be amended, modified, waived, amended and restated or replaced
in its entirety upon the approval of the Board with the consent of at least
two-thirds of the then outstanding shares of Series B Preferred Stock voting as
a separate class.
* * * * *
15
IN WITNESS WHEREOF, the foregoing
Certificate of Designation has been duly executed on behalf of the Company by
the undersigned on September 9, 2009.
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By:
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/s/ Xxxxxxx Xxxxxx
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Xxxxxxx
Xxxxxx
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Chief
Executive Officer and President
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