Exhibit 2.6
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement")
is made and entered into as of April 19 2004, between Amalgamated Technologies,
Inc, a corporation organized and existing under the laws of the State of
Delaware (the "Company"); the purchaser(s) listed on Schedule 1 hereto (the
"Purchaser"); and Gottbetter & Partners, LLP, a New York Limited Liability
Partnership with an address at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 (the "Escrow Agent").
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchaser and the Purchaser desires to
acquire from the Company 100,000 shares of the Company's Series B Preferred
Stock, $.0001 par value per share (the "Series B Preferred Stock"), with a
Stated Value of one dollar ($1) per share, and an aggregate Stated Value of one
hundred thousand dollars ($100,000), for an aggregate purchase price of one
hundred thousand dollars ($100,000).
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and each Purchaser agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Balance Purchase Price" shall have the meaning set forth in Section
2.2(b).
"Business Day" means any day except Saturday, Sunday and pay which shall be
a legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government actions to close.
"Certificate of Designation" means the Certificate of Designation of the
Series B Preferred Stock annexed as Exhibit A hereto.
"Change of Control" means the acquisition, directly or indirectly, by any
Person of ownership of, or the power to direct the exercise of voting power with
respect to, a majority of the issued and outstanding voting shares of the
Company.
"Closing" shall have the meaning set forth in Section 2.2(a).
"Closing Date" shall have the meaning set forth in Section 2.2(a).
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"Closing Materials" shall have the meaning set forth in Section 2.2(a).
"Common Stock" means shares now or hereafter authorized of the class of
common stock, $.0001 par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory paragraph.
"Control Person" shall have the meaning set forth in Section 4.7(a) hereof.
"Creditors" shall have the meaning set forth in Section 3.1(k) hereof.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Disclosure Documents" means all the documents and materials provided to
the Purchaser and/or its representatives in connection with the Company and this
offering.
"Event of Default" shall have the meaning set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Execution Date" means the date of this Agreement first written above.
"Indemnified Party" shall have the meaning set forth in Section 4.7(b)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 4.7(b)
hereof.
"Losses" shall have the meaning set forth in Section 4.7(a) hereof.
"Material" shall mean having a financial consequence in excess of $25,000.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"Original Issue Date," shall have the meaning set forth in the Certificate
of Designation.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section 2.1(b).
"Purchaser" shall have the meaning set forth in the introductory paragraph.
"Liquidation Price" shall mean an amount equal to the Stated Value of the
Shares outstanding that are subject to conversion multiplied by ten (10).
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"Reporting Issuer" means a company that is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" shall have the meaning set forth in the recital.
"Settlement Payments" shall have the meaning set forth in Section 2.2(b).
"Shares" shall have the meaning set forth in Section 2.1(a).
"Stated Value" means the sum of One dollar ($1) per Share or one hundred
thousand dollars ($100,000) for all of the Shares.
"Transaction Documents" means this Agreement and all exhibits and schedules
hereto and all other documents, instruments and writings required pursuant to
this Agreement.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES
2.1 Purchase and Sale; Purchase Price.
(a) Subject to the terms and conditions set forth herein, the Company shall
issue and sell and the Purchaser shall purchase 100,000 shares of the Company's
Series B Preferred Stock, $.0001 par value per share (the "Shares"). The Series
B Preferred Stock shall have the respective rights, preferences and privileges
as set forth in the Certificate of Designation to be filed by the Company with
the Secretary of State of Delaware on or before the Execution Date.
(b) The purchase price for each Share shall be One Dollar ($1) (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of
Shares to be purchased by the Purchaser is referred to as the "Purchase Price."
2.2 The Closing.
(a) The Closing of the purchase and sale of the Shares (the "Closing") shall
take place simultaneously with the execution and delivery of this Agreement (the
"Closing Date"). On the Closing Date, Purchasers shall deliver to Escrow Agent
the Purchase Price by delivering either 1) a check drawn on a US bank made
payable to "Gottbetter & Partners, LLP, as Escrow Agent" for the full amount of
the Purchase Price; or 2) a wire transfer with immediately available U.S. funds
for the full amount of the Purchase Price less the Deposit plus all wire
transfer fees to:
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Gottbetter & Partners, LLP
XXXX Account
Citibank N.A.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA Routing No.: 000000000
Account No.: 00000000
Reference: (Your Name) for AGMN
As soon as practicable following (i) the execution of this Agreement and (ii)
the Escrow Agent receipt of the Purchase Price, Escrow Agent shall uses its best
efforts to (i) distribute the Purchase Price to the Company's creditors listed
in Schedule 3.1(k) in the amounts listed under the caption settlement payments
(the "Settlement Payments"), and (ii) deliver the Shares to the Purchasers.
Upon full distribution of the Settlement Payments and the Shares, the balance of
the Purchase Price shall be distributed to Company (the "Balance Purchase
Price"). Notwithstanding anything to the contrary set forth in this Agreement,
Escrow Agent shall not make any Settlement Payments unless (i) the Certificate
of designation has been accepted for filing with the Secretary of State of the
State of Delaware, and (ii) Escrow Agent has simultaneously or prior thereto
delivered or arranged for the delivery of the Shares to Purchaser.
At any time and from time to time after the Closing, the Parties shall duly
execute, acknowledge and deliver all such further assignments, conveyances,
instruments and documents, and shall take such other action consistent with the
terms of this Agreement to carry out the transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser, all
of which shall survive the Closing:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries. The Company is duly qualified to do business and
is in good standing in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, have a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company, taken as a whole (a "Material Adverse Effect").
(b) Authorization, Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated hereby and by each other Transaction Document and to otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby has
been duly authorized by all necessary action on the part of the Company. Each
of this Agreement and each of the other Transaction Documents has been or will
be duly executed by the Company and when delivered in accordance with the terms
hereof or thereof will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding capital stock of
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the Company is set forth on Schedule 3.1(c). No shares of the Series B
Preferred Stock have been issued as of the date hereof. No shares of Common
Stock or any other class of the Company's securities are entitled to preemptive
or similar rights, nor is any holder of the Common Stock entitled to preemptive
or similar rights arising out of any agreement or understanding with the Company
by virtue of this Agreement
(d) Issuance of Securities. The Shares have been duly and validly
authorized for issuance, offer and sale pursuant to this Agreement and, when
issued and delivered as provided hereunder against payment in accordance with
the terms hereof, shall be valid and binding obligations of the Company
enforceable in accordance with their respective terms. When issued in
accordance with the terms hereof, the Shares will be duly authorized, validly
issued, fully paid and non-assessable. The Company has no equity or equity
equivalent security outstanding that is substantially similar to the Shares,
including any security having a redeemable feature substantially similar to the
Shares.
(e) No Conflicts. The execution, delivery and performance of this Agreement
and the other Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, to the best
knowledge of the Company, do not and will not (i) conflict with or violate any
provision of its Certificate of Incorporation or bylaws (each as amended through
the date hereof) or (ii) be subject to obtaining any consents except those
referred to in Section 3.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including, but not limited to, those
of other countries and the federal and state securities laws and regulations),
or by which any property or asset of the Company is bound or affected. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority.
(f) Consents and Approvals. Except as specifically set forth in Schedule
3.1(f), the Company is not required to obtain any consent, waiver, authorization
or order of, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement and each of the other Transaction Documents, except for the filing of
the Certificate of Designation with respect to the Series B Preferred Stock with
the Secretary of State of the State of Delaware, which filing shall be effected
on or before the Execution Date (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Schedule 3.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in Schedule
3.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its properties before or by any
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign).
(h) No Default or Violation. Except as set forth in Schedule 3.1(h) hereto,
to the best knowledge of the Company, the Company (i) is not in default under or
in violation of any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is not in violation of any order of any court, arbitrator or
governmental body, or (iii) is not in violation of any statute, rule or
regulation of any governmental authority.
(i) Disclosure Documents. The Disclosure Documents are accurate in all
material respects and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
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(j) Non-Registered Offering. Neither the Company not any Person acting on
its behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
under the Securities Act) which might subject the offering, issuance or sale of
the Shares to the registration requirements of Section 5 of the Securities Act.
(k) Those creditors listed in Exhibit 3.1(k)(a) attached hereto (the
"Creditors") are the only individuals or entities with any claims against the
Company. The Company does not have any obligations or liabilities of any nature
(matured or unmatured, fixed or contingent). The Company is not a party to any
agreement other than those agreements detailed on Exhibit 3.1(k)(b).
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Authority. The Purchaser has the requisite power and authority to enter
into and to consummate the transactions contemplated hereby and by the other
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The acquisition of the Shares to be purchased by the Purchaser
hereunder has been duly authorized by all necessary action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and constitutes the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to, or affecting generally
the enforcement of, creditors rights and remedies or by other general principles
of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares to be
purchased by it hereunder, and will acquire the Shares for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Shares, or any part thereof or interest therein, without prejudice,
however, to such Purchaser's right, subject to the provisions of this Agreement,
at all times to sell or otherwise dispose of all or any part of such Shares in
compliance with applicable federal and state securities laws.
(c) Experience of Purchaser. The Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the Shares to be acquired by it hereunder, and has so
evaluated the merits and risks of such investment.
(d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able
to bear the economic risk of an investment in the Shares to be acquired by it
hereunder and, at the present time, is able to afford a complete loss of such
investment.
(e) Access to Information. The Purchaser acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the Shares offered hereunder and the merits and risks of
investing in such securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Shares; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment and to verify the accuracy and completeness of the information
that it has received about the Company.
(f) Reliance. The Purchaser understands and acknowledges that (i) the
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Shares are being offered and sold to it hereunder are being offered and sold
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act and (ii) the availability of such exemption depends in
part on, and that the Company will rely upon the accuracy and truthfulness of,
the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Manner of Offering. The Shares are being issued pursuant to section
4(2) of the Securities Act.
4.2 Notice of Certain Events. The Company shall, on a continuing basis,
advise the Purchaser promptly after obtaining knowledge of, and, if requested by
the Purchaser, confirm such advice in writing, of any event that makes any
statement of a material fact made by the Company in Section 3.1 or in the
Disclosure Documents untrue or that requires the making of any additions to or
changes in Section 3.1 or in the Disclosure Documents in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading,
4.3 Modification to Disclosure Documents. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it
becomes necessary or advisable to amend or supplement any of the Disclosure
Documents in order to make the statements therein, in the light of the
circumstances at the time such Disclosure Documents were delivered to the
Purchaser, not misleading, or if it becomes necessary to amend or supplement any
of the Disclosure Documents to comply with applicable law, the Company shall
promptly prepare an appropriate amendment or supplement to each such document in
form and substance reasonably satisfactory to both the Purchaser and Company so
that (i) as so amended or supplemented, each such document will not include an
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances existing
at the time it is delivered to the Purchaser, not misleading and (ii) the
Disclosure Documents will comply with applicable law.
4.4 Blue Sky Laws. The Company shall cooperate with the Purchaser in
connection with the exemption from registration of the Shares under the
securities or Blue Sky laws of such jurisdictions as the Purchasers may request;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation where they are not now so
qualified. The Company agrees that it will execute all necessary documents and
pay all necessary state filing or notice fees to enable the Company to sell the
Shares to the Purchaser.
4.5 Integration. The Company shall not and shall use its best efforts to
ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the Shares in
a manner that would require the registration under the Securities Act of the
sale of the Shares to the Purchaser.
4.6 Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Shares other
than the Disclosure Documents and any amendments and supplements thereto
prepared in compliance herewith or (ii) solicit any offer to buy or sell the
Shares by means of any form of general solicitation or advertising.
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4.7 Indemnification.
(a) Indemnification
The Company shall, notwithstanding termination of this Agreement and
without limitation as to time, indemnify and hold harmless the Purchaser and its
officers, directors, agents, employees and affiliates, each Person who controls
or the Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (each such Person, a "Control Person") and the
officers, directors, agents, employees and affiliates of each such Control
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of, or relating to, a breach
or breaches of any representation, warranty, covenant or agreement by the
Company under this Agreement or any other Transaction Document.
The Purchaser shall, notwithstanding termination of this Agreement and
without limitation as to time, indemnify and hold harmless the Company, its
officers, directors, agents and employees, each Control Person and the officers,
directors, agents and employees of each Control Person, to the fullest extent
permitted by application law, from and against any and all Losses, as incurred,
arising out of, or relating to, a breach or breaches of any representation,
warranty, covenant or agreement by the Purchaser under this Agreement or the
other Transaction Documents.
(b) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose and such counsel employed by
the Indemnified Party shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party.
No right of indemnification under this Section shall be available as to a
particular Indemnified Party if there is a non-appealable final judicial
determination that such Losses arise solely out of the negligence or bad faith
of such Indemnified Party in performing the obligations of such Indemnified
Party under this Agreement or a breach by such Indemnified Party of its
obligations under this Agreement.
(c) Contribution. If a claim for indemnification under this Section is
unavailable to an Indemnified Party or is insufficient to hold such Indemnified
Party harmless for any Losses in respect of which this Section would apply by
its terms (other than by reason of exceptions provided in this Section), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Party on the other and the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether there was a judicial
determination that such Losses arise in part out of the negligence or bad faith
of the Indemnified Party in performing the obligations of such Indemnified Party
under this Agreement or the Indemnified Party's breach of its obligations under
this Agreement. The amount paid or payable by a party as a result of any Losses
shall be deemed to include any attorneys' or other fees or expenses incurred by
such party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party.
(d) Non-Exclusivity. The indemnity and contribution agreements contained in
this Section are in addition to any obligation or liability that the
Indemnifying Parties may have to the Indemnified Parties.
4.8 Notice and Consultation Before Securities Issuances. Until such time
the Share are converted by the Purchasers, the Company shall not offer or issue
any equity, equity equivalent security or debt that with a floating conversion
price, or any equity lines of credit (the "New Securities"), without first
giving thirty (30) days notice thereof to the Purchaser and therafter consulting
in good faith with the Purchaser concerning such issuance. After such
consultation between the Company and the Purchaser, the Company may offer or
sell the New Securities on such terms and conditions as the Company deems
appropriate.
4.9 No Violation of Applicable Law. Notwithstanding any provision of this
Agreement to the contrary, if the conversion of the Shares otherwise required
under this Agreement or the Certificate of Designation would be prohibited by
the relevant provisions of Delaware law, such conversion shall be effected as
soon as it is permitted under such law.
4.10 Conversion Restrictions. Notwithstanding any provision of this
Agreement to the contrary, if any conversion of the Shares otherwise required
under this Agreement or the Certificate of Designation would be prohibited in
the absence of consent from any lender to the Company, or by the holders of any
class of securities of the Company, the Company shall use its best efforts to
obtain such consent as promptly as practicable after any such conversion is
required. Nothing contained in this Section 4.10 shall be construed as a waiver
by the Purchaser of any rights they may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
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4.11 Liquidated Damages. The Company understands and agrees that a material
breach by the Company of any Section of this Agreement, the Certificate of
Designation or any other Transaction Document or an Event of Default as
contained in this Agreement or any other Transaction Document will result in
substantial economic loss to the Purchaser, which loss will be extremely
difficult to calculate with precision. Therefore, if, for any reason, the
Company commits a material breach or fails to cure any Event of Default within
the time, if any, given to cure such Event of Default, as compensation and
liquidated damages for such breach or default, and not as a penalty, the Company
agrees to pay the Purchaser the Stated Value of all shares then held by the
Purchaser multiplied by ten (10) (the "Liquidation Price").
ARTICLE V
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any party hereto commences legal action to enforce its rights under
this Agreement or any other Transaction Document, the non-prevailing party shall
pay all reasonable costs and expenses (including but not limited to reasonable
attorney's fees, accountant's fees, appraiser's fees and investigative fees)
incurred in enforcing such rights. In the event of an uncured Event of Default
by any party hereunder, interest shall accrue on all unpaid amounts due the
aggrieved party at the rate of ten percent (10%) per annum, compounded annually.
Whenever the Company is obligated or elects to purchase or redeem the
Purchaser's Shares under any provision of this Agreement or the Certificate of
Designation, and the Liquidation Price is not paid to the Purchaser by the tenth
(10th) day after the Liquidation Price is due and payable to the Purchaser, the
Company shall thereafter pay interest to the Purchaser on the unpaid portion of
the Liquidation Price at the rate of ten percent (10%) per annum, until the
Liquidation Price is paid in full.
ARTICLE VI
ESCROW AGENT DUTIES
6.1 Terms of Escrow. As soon as practicable following (i) the execution of
this Agreement and (ii) the Escrow Agent receipt of the Purchase Price, Escrow
Agent shall uses its best efforts to (i) distribute the Purchase Price to the
Company's creditors listed in Schedule 3.1(k) in the amounts listed under the
caption settlement payments (the "Settlement Payments"), and (ii) deliver the
Shares to the Purchasers. Upon full distribution of the Settlement Payments,
and the Shares, the balance of the Purchase Price shall be distributed to
Company (the "Balance Purchase Price"). Notwithstanding anything to the contrary
set forth in this Agreement, Escrow Agent shall not make any Settlement Payments
unless (i) the Certificate of designation has been accepted for filing with the
Secretary of State of the State of Delaware, and (ii) Escrow Agent has
simultaneously or prior thereto delivered or arranged for the delivery of the
Shares to Purchaser.
6.2 Duties and Obligations of the Escrow Agent.
(a) Purchasers and Sellers hereto agree that the duties and obligations of
Escrow Agent are only such as are herein specifically provided and no other.
Escrow Agent's duty is to manage the distribution of the Purchase Price to
Creditors and the Balance Purchase Price to Sellers in accordance with the terms
of this Agreement only, and Escrow Agent shall incur no liability whatsoever,
except as a direct result of its willful misconduct or gross negligence.
(b) Escrow Agent shall not be bound in any way by the terms of any other
70
agreement to which Sellers and Purchasers are parties, whether or not it has
knowledge thereof, and Escrow Agent shall not in any way be required to
determine whether or not any other agreement has been complied with by Sellers
and Purchasers, or any other party thereto. Escrow Agent shall not be bound by
any modification, amendment, termination, cancellation, rescission or
supersession of this Agreement which would affect Escrow Agents obligations
hereunder, unless the same shall be in writing and signed jointly by Seller and
Purchasers, and agreed to in writing by the Escrow Agent.
(c) If Escrow Agent shall be uncertain as to its duties or rights hereunder
or shall receive instructions, claims or demands which, in its opinion, are in
conflict with any of the provisions of this Agreement, it shall be entitled to
refrain from taking any action, other than to keep safely all property held in
escrow or to take certain action, until it shall be directed otherwise in
writing by Sellers and Purchasers or by a final judgment of a court of competent
jurisdiction.
(d) Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine. Escrow Agent shall not be responsible for the sufficiency or accuracy
of the form, execution, validity or genuineness of documents or securities now
or hereafter deposited hereunder, or of any endorsement thereon, or for any lack
of endorsement thereon, or for any description therein; nor shall Escrow Agent
be responsible or liable in any respect on account of the identity, authority or
rights of the persons executing or delivering or purporting to execute or
deliver any such document, security or endorsement.
(e) Escrow Agent shall not be required to institute legal proceedings of any
kind and shall not be required to defend any legal proceedings which may be
instituted against it or in respect of the distribution of the Purchase Price.
(f) If Escrow Agent at any time, in its sole discretion, deems it necessary
or advisable to relinquish custody of the Purchase Price, it may do so by
delivering the same to any other escrow agent agreeable to Sellers and
Purchasers and, if no such escrow agent shall be selected within three days of
the Escrow Agent's notification to Sellers and Purchasers of its desire to so
relinquish custody of the Purchase Price, then the Escrow Agent may do so by
delivering the Purchase Price to the clerk or other proper officer of a court of
competent jurisdiction as may be permitted by law. The fee of any court
officer shall be borne by Sellers and Purchasers. Upon such delivery, the
Escrow Agent shall be discharged from any and all responsibility or liability
with respect to the Purchase Price and this Agreement.
(g) This Agreement shall not create any fiduciary duty on Escrow Agent's
part to Sellers and Purchasers, nor disqualify Escrow Agent from representing
either party hereto in any dispute with the other, including any dispute with
respect to the Purchase Price.
(h) Escrow Agent represents that it is presently acting as counsel to
Purchasers. The parties agree that the Escrow Agent's engagement as provided
for herein is not and shall not be objectionable for any reason.
(i) Upon the performance of this Agreement, Escrow Agent shall be deemed
released and discharged of any further obligations hereunder.
6.3 Escrow Agent Indemnification.
a) Sellers and Purchasers hereby agree to, jointly and severally, indemnify
and hold Escrow Agent harmless from and against any and all losses, damages,
taxes, liabilities and expenses that may be incurred by Escrow Agent, arising
out of or in connection with its acceptance of appointment as Escrow Agent
71
hereunder and/or the performance of its duties pursuant to this Agreement,
including, but not limited to, all legal costs and expenses of Escrow Agent
incurred defending itself against any claim or liability in connection with its
performance hereunder, provided that Escrow Agent shall not be entitled to any
indemnity for any losses, damages, taxes, liabilities or expenses that directly
result from its willful misconduct or gross negligence.
b) In the event of any legal action between the parties to this Agreement to
enforce any of its terms, the legal fees of the prevailing party shall be paid
by the party(ies) who did not prevail.
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses. Except as set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Shares pursuant hereto. The Purchaser shall be
responsible for any taxes payable by the Purchaser that may arise as a result of
the investment hereunder or the transactions contemplated by this Agreement or
any other Transaction Document. The Company shall pay all costs, expenses, fees
and all taxes incident to and in connection with: (A) the issuance and delivery
of the Shares, (B) the exemption from registration of the Shares for offer and
sale to the Purchaser under the securities or Blue Sky laws of the applicable
jurisdictions, and (C) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), and (D) all
fees and expenses of counsel and accountants of the Company.
7.2 Entire Agreement. This Agreement, together with all of the Exhibits and
Schedules annexed hereto, and any other Transaction Document contains the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters. This Agreement shall be deemed to have been drafted and
negotiated by both parties hereto and no presumptions as to interpretation,
construction or enforceability shall be made by or against either party in such
regard.
7.3 Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
upon facsimile transmission (with written transmission confirmation report) at
the number designated below (if delivered on a Business Day during normal
business hours where such notice is to be received), or the first Business Day
following such delivery (if delivered other than on a Business Day during normal
business hours where such notice is to be received) whichever shall first occur.
The addresses for such communications shall be:
If to the Company: Amalgamated Technologies, Inc.
0000 Xxxxxxx Xxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxx, President and CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
72
If to the Purchaser: See Schedule 1 attached hereto
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 6.3.
7.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
7.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns. The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
7.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
7.8 Governing Law; Venue; Service of Process. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The
parties hereto agree that the internal laws of the State of New York shall
govern this Agreement and the exhibits hereto, including, but not limited to,
all issues related to usury. Any action to enforce the terms of this Agreement
or any of its exhibits, or any other Transaction Document shall be brought
exclusively in the state and/or federal courts situate in the County and State
of New York. Service of process in any action by the Purchaser to enforce the
terms of this Agreement may be made by serving a copy of the summons and
complaint, in addition to any other relevant documents, by commercial overnight
courier to the Company at its principal address set forth in this Agreement.
7.9 Survival. The representations and warranties of the Company and the
Purchaser contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article VII shall survive the Closing.
7.10 Counterpart Signatures. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
7.12 Limitation of Remedies. With respect to claims by the Company or any
person acting by or through the Company, or by the Purchaser or any person
acting through the Purchaser, for remedies at law or at equity relating to or
arising out of a breach of this Agreement, liability, if any, shall, in no
event, include loss of profits or incidental, indirect, exemplary, punitive,
special or consequential damages of any kind.
[ SIGNATURE PAGE FOLLOWS ]
73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first indicated above.
Company:
Amalgamated Technologies, Inc.
By: /s/ Xxxxx Xxxxxx
-------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Executive
Officer
Purchaser:
Xxxxxx Management LLC
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
74
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF
SERIES B CONVERTIBLE
PREFERRED STOCK
OF
AMALGAMATED TECHNOLOGIES, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
AMALGAMATED TECHNOLOGIES, INC., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution was duly approved and adopted by
the Board of Directors of the Corporation (the "Board of Directors") by a
unanimous written consent of the Board of Directors dated as of April 16, 2004
in lieu of a meeting in accordance with Section 141(f) of the Delaware General
Corporation Law, which resolution remains in full force and effect on the date
hereof:
RESOLVED, that pursuant to the authority expressly granted to and vested in the
Board of Directors by the provisions of the Corporation Certificate of
Incorporation, as amended (the "Certificate of Incorporation") and its By-Laws
(the "Bylaws"), and in accordance with Section 151 of the General Corporation
Law of the State of Delaware (the "DGCL"), there is hereby created, out of the
10,000,000 shares of Preferred Stock, par value .0001 per share (the "Preferred
Stock"), of the Corporation remaining authorized, unissued and undesignated, a
series of the Preferred Stock consisting of 100,000 shares, which series shall
have the following powers, designations, preferences and relative,
participating, optional or other rights, and the following qualifications,
limitations and restrictions (in addition to any powers, designations,
preferences and relative, participating, optional or other rights, and any
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock):
SECTION 1: Designation of Amount.
(a) One hundred thousand (100,000) shares of Preferred Stock shall be,
and hereby are, designated the "Series B Convertible Preferred Stock" (the
"Series B Preferred Stock"), par value .0001 per share.
(b) Subject to the requirements of the DGCL, the Certificate of
Incorporation and this Certificate of Designation, the number of shares of
Preferred Stock that are designated as Series B Preferred Stock may be increased
or decreased by vote of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series B Preferred Stock to a number less than
the number of such shares then outstanding plus the number of such shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any other outstanding securities issued by
the Corporation that are convertible into or exercisable for Series B Preferred
Stock. Any shares of Series B Preferred Stock converted, redeemed, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall,
automatically and without further action, be retired and canceled promptly after
the acquisition thereof.
SECTION 2. Certain Definitions.
Unless the context otherwise requires, the terms defined in this Section 2 shall
have, for all purposes of this resolution, the meanings specified (with terms
defined in the singular having comparable meanings when used in the plural).
"Affiliate" shall mean, with respect to any person, any other person directly or
75
indirectly controlling or controlled by or under direct or indirect common
control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i). For the purposes of this
definition, "control," when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Common Stock" shall mean the common stock, par value $.0001 per share, of the
Corporation.
"Conversion Date" shall have the meaning ascribed to such term in Section 6(d).
"Conversion Price" shall mean the Original Purchase Price of each share of
Common Stock, subject to adjustment from time to time in accordance with Section
6(c).
"DGCL" shall have the meaning set forth in the preamble to this Certificate of
Designation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Initial Issue Date" shall mean the date that shares of Series B Preferred
Stock are first issued by the Corporation.
"Original Purchase Price" shall mean the per share purchase price for a share
of Series B Preferred Stock of $1.00, or such other price set forth in the
Purchase Agreement or other subscription agreements pursuant to which Series B
Preferred Stock is sold.
"Person" shall mean any individual, partnership, company, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof, or other
entity.
"Preferred Stock" shall have the meaning set forth in the preamble to this
Certificate of Designation.
"Purchase Agreement" shall mean the Series B Convertible Preferred Stock
Purchase Agreement, dated as of April 19, 2004, by and between the Corporation
and the purchaser identified therein.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall have the meaning set forth in Section 1.
"Series B Recapitalization Event" shall mean any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification, or other
similar event involving a change in the capital structure of the Series B
Preferred Stock.
"Subsidiary" means, with respect to any person, (a) a company a majority of
whose capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such person, by a
subsidiary of such person, or by such person and one or more subsidiaries of
76
such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a company) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
SECTION 3: Voting Rights.
(a) General. Except as otherwise provided by the DGCL and in addition to
any voting rights provided by the DGCL or other applicable law, the holders of
Series B Preferred Stock shall be entitled to vote (or render written consents)
together with the holders of the Common Stock and any other class or series of
capital stock of the Corporation entitled to vote together with the holders of
the Common Stock as a single class on all matters submitted for a vote of (or
written consents in lieu of a vote as permitted by the DGCL, the Certificate of
Incorporation and the Bylaws) holders of Common Stock; and shall have such other
voting rights as are specified in the Certificate of Incorporation and this
Certificate of Designation. When voting together with the holders of Common
Stock, each share of Series B Preferred Stock shall entitle the holder thereof
to cast one vote for each vote that such holder would be entitled to cast had
such holder converted its Series B Preferred Stock into shares of Common Stock
as of the record date for determining the stockholders of the Corporation
eligible to vote on any such matter or, if no such record date is established,
at the date such vote is taken or any written consent of stockholders is
solicited. The holders of Series B Preferred Stock shall be entitled to receive
notice of any stockholders' meeting in accordance with the Certificate of
Incorporation and Bylaws of the Corporation.
(b) Waivers. Except to the extent otherwise provided in this
Certificate of Designation or required by the DGCL, the Requisite Holders may,
via affirmative vote or written consent in lieu thereof, waive any rights of the
holders of the Series B Preferred Stock set forth in this Certificate of
Designation.
SECTION 4: Dividends.
(a) Dividend Amount. If the Board of Directors shall declare a dividend
payable upon the then outstanding shares of Common Stock, the holders of the
outstanding shares of Series B Preferred Stock shall be entitled to the amount
of dividends on the Series B Preferred Stock as would be declared payable on the
largest number of whole shares of Common Stock into which the shares of Series B
Preferred Stock held by each holder thereof could be converted pursuant to the
provisions of Section 6 hereof, such number to be determined as of the record
date for determination of holders of Common Stock entitled to receive such
dividend or, if no such record date is established, as of the date of such
dividend. Such determination of "whole shares" shall be based upon the
aggregate number of shares of Series B Preferred Stock held by each holder, and
not upon each share of Series B Preferred Stock so held by the holder.
(b) Distributions Other than Cash. Whenever the distributions provided for
in this Section 4 shall be payable in property other than cash, the value of
such distribution shall be the fair market value thereof as determined in good
faith by the Board of Directors. All distributions (including distributions
other than cash) made hereunder shall be made pro rata to the holders of Series
B Preferred Stock.
(c) Equitable Adjustments. All numbers relating to the calculation of
dividends shall be subject to an equitable adjustment in the event of any Series
B Recapitalization Event.
77
SECTION 5: Liquidation Preference.
(a) Liquidation Preference of Series B Preferred Stock. In the event of any
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, or in the event of its insolvency, the holders of Series B
Preferred Stock shall be entitled to have set apart for them, or to be paid, out
of the assets of the Corporation available for distribution to stockholders
(whether such assets are capital, surplus or earnings) after provision for
payment of all debts and liabilities of the Corporation in accordance with the
DGCL, before any distribution or payment is made with respect to any shares of
Common Stock or any other class or series of capital stock of the Corporation
designated to be junior to the Series B Preferred Stock and subject to the
liquidation rights and preferences of any class or series of Preferred Stock
designated to be senior to, or on a parity with, the Series B Preferred Stock
with respect to liquidation preferences, an amount equal to the greater of (i)
$10 per share of Series B Preferred Stock (which amount shall be subject to an
equitable adjustment in the event of any Series B Recapitalization Event) and
(ii) such amount as would have been payable on the largest number of whole
shares of Common Stock into which the shares of Series B Preferred Stock held by
each holder thereof could have been converted immediately prior to such event of
liquidation, dissolution or winding up pursuant to the provisions of Section 6
hereof.
(b) Insufficient Assets. If, upon any liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, the assets legally
available for distribution among the holders of the Series B Preferred Stock
shall be insufficient to permit payment to such holders of the full preferential
amount as provided for in Section 5(a) above, then such holders shall share
ratably in any distribution of available assets according to the respective
amounts which would otherwise be payable with respect to the shares of Series B
Preferred Stock held by them upon such liquidating distribution if all amounts
payable on or with respect to such shares were paid in full, based upon the
aggregate liquidation value payable upon all shares of Series B Preferred Stock
then outstanding.
(c) Cash-Out Election.
(i) Each holder of Series B Preferred Stock may elect, by written
notice to the Company given within 10 days after any such transaction is
consummated, to treat any of the following transactions as a liquidation,
dissolution or winding up of the Corporation for the purposes of this Section 5:
(1) a consolidation or merger of the Corporation with or into any other
corporation or corporations, (2) a sale of all or substantially all of the
assets of the Corporation, (3) the issuance and/or sale by the Corporation in a
single or integrated transaction of shares of Common Stock (or securities
convertible into shares of Common Stock) constituting a majority of the shares
of Common Stock outstanding immediately following such issuance (treating all
securities convertible into shares of Common Stock as having been fully
converted and all options and other rights to acquire shares of Common Stock or
securities convertible into shares of Common Stock as having been fully
exercised) and (4) any other form of acquisition or business combination where
the Corporation is the target of such acquisition and where a change in control
occurs such that the person or entity seeking to acquire the Corporation has the
power to elect a majority of the Board of Directors as a result of the
transaction (each such event an "Acquisition"); provided, however, that each
holder of Series B Preferred Stock shall have the right to elect the benefits of
the provisions of Section 6(c)(iv) hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
Section 5.
(ii) The provisions of this Section 5(d) shall not apply to any
reorganization, merger or consolidation involving (1) only a change in the state
of incorporation of the Corporation, or (2) a merger of the Corporation with or
into a wholly-owned subsidiary of the Corporation that is incorporated in the
United State of America.
(d) Distributions Other than Cash. Whenever the distribution provided
78
for in this Section 5 shall be payable in property other than cash, the value of
such distribution shall be the fair market value thereof as determined in good
faith by the Board of Directors. All distributions (including distributions
other than cash) made hereunder shall be made pro rata to the holders of Series
B Preferred Stock.
(e) Equitable Adjustments. The amounts to be paid or set aside for payment
as provided above in this Section 5 shall be proportionately increased or
decreased in inverse relation to the change in the number of outstanding shares
resulting from any Series B Recapitalization Event.
SECTION 6: Conversion Rights.
(a) General. Subject to and upon compliance with the provisions of this
Section 6, each holder of shares of Series B Preferred Stock shall be entitled,
at its option, at any time, to convert all or any such shares of Series B
Preferred Stock into the number of fully paid and nonassessable shares of Common
Stock equal to the number obtained by dividing (i) the Original Purchase Price
of such Series B Preferred Stock, plus the amount of any accumulated but unpaid
dividends as of the Conversion Date by (ii) the Conversion Price in effect at
the close of business on the Conversion Date (determined as provided in this
Section 6).
(b) Fractions of Shares. No fractional shares of Common Stock shall be
issued upon conversion of shares of Series B Preferred Stock. If more than one
share of Series B Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock to be issued
shall be computed on the basis of the aggregate number of shares of Series B
Preferred Stock so surrendered. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any shares of Series
B Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fractional share in an amount equal to the product of such fraction
multiplied by the fair market value of one share of Common Stock on the
Conversion Date as determined in good faith by the Board of Directors.
(c) Adjustments to Conversion Price. The Conversion Price shall also be
subject to adjustment from time to time as follows:
(i) Upon Stock Dividends, Subdivisions or Splits. If, at any time after the
date hereof, the number of shares of Common Stock outstanding is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split up
of shares of Common Stock, then, following the record date for the determination
of holders of Common Stock entitled to receive such stock dividend, or to be
affected by such subdivision or split up, the Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of Series B Preferred Stock shall be increased in proportion to such
increase in outstanding shares.
(ii) Upon Combinations. If, at any time after the date hereof, the number
of shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, following the record date to determine shares affected by such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of Series
B Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(iii) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Series B Preferred Stock shall be changed
into the same or different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination or shares of stock dividend provided for elsewhere in
79
this Section 6(c), or the sale of all or substantially all of the Corporation's
properties and assets to any other person), then and in each such event the
holder of each share of Series B Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change by holders of the number of shares of Common Stock into which such
shares of Series B Preferred Stock might have been converted, as the case may
be, immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(iv) Capital Reorganization, Merger or Sale of Assets. If at any time or
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification, or exchange of shares
provided for elsewhere in this Section 6) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of such reorganization, merger, or consolidation or
sale, provision shall be made so that holders of Series B Preferred Stock, as
the case may be, shall thereafter be entitled to receive upon conversion of the
Series B Preferred Stock, the number of shares of stock or other securities or
property of the Corporation, or of the successor corporation resulting from such
merger, consolidation or sale, to which such holder would have been entitled if
such holder had converted its shares of Series B Preferred Stock immediately
prior to such capital reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 6(c) with respect to the rights of the holders of the
Series B Preferred Stock after the reorganization, merger, consolidation or sale
to the end that the provisions of this Section 6(c), including adjustment of the
Conversion Price then in effect for the Series B Preferred Stock and the number
of shares issuable upon conversion of the Series B Preferred Stock) shall be
applicable after that event in as nearly equivalent a manner as may be
practicable.
(v) Deferral in Certain Circumstances. In any case in which the provisions
of this Section 6(c) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may defer until the
occurrence of such event (1) issuing to the holder of any Series B Preferred
Stock converted after such record date and before the occurrence of such event
the shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event and issuing to such holder only the shares of
capital stock issuable upon such conversion before giving effect to such
adjustments, and (2) paying to such holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 6(b) above; provided,
however, that the Corporation shall deliver to such holder an appropriate
instrument or due bills evidencing such holder's right to receive such
additional shares and such cash.
(d) Exercise of Conversion Privilege. In order to exercise the conversion
privilege, the holder of any share of Series B Preferred Stock shall surrender
the certificate evidencing such share of Series B Preferred Stock, duly endorsed
or assigned to the Corporation in blank, at any office or agency of the
Corporation maintained for such purpose, accompanied by written notice to the
Corporation at such office or agency that the holder elects to convert such
Series B Preferred Stock or, if less than the entire amount thereof is to be
converted, the portion thereof to be converted. Series B Preferred Stock shall
be deemed to have been converted immediately prior to the close of business on
the date (the "Conversion Date") of surrender of such shares of Series B
Preferred Stock for conversion in accordance with the foregoing provisions, and
at such time the rights of the holder of such shares of Series B Preferred Stock
as a holder shall cease, and the person or persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such Common Stock as and after such time. As
promptly as practicable on or after the Conversion Date, the Corporation shall
issue and shall deliver at any office or agency of the Corporation maintained
for the surrender of Series B Preferred Stock a certificate or certificates for
the number of full shares of Common Stock issuable upon conversion, together
with payment in lieu of any fraction of a share, as provided in Section 6(b).
In the case of any certificate evidencing shares of Series B Preferred Stock
that is converted in part only, upon such conversion the Corporation shall also
80
execute and deliver a new certificate evidencing the number of shares of Series
B Preferred Stock that are not converted.
(e) Notice of Adjustment of Conversion Price. Whenever the provisions of
Section 6(c) require that the Conversion Price be adjusted as herein provided,
the Corporation shall compute the adjusted Conversion Price in accordance with
Section 6(c) and shall prepare a certificate signed by the Corporation's chief
executive officer or chief financial officer setting forth the adjusted
Conversion Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at each
office or agency maintained for such purpose for conversion of shares of Series
B Preferred Stock and mailed by the Corporation at its expense to all holders of
Series B Preferred Stock at their last addresses as they shall appear in the
stock register.
(f) Corporation to Reserve Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the authorized
but unissued Common Stock or out of the Common Stock held in treasury, for the
purpose of effecting the conversion of Series B Preferred Stock, the full number
of shares of Common Stock then issuable upon the conversion of all outstanding
shares of Series B Preferred Stock. Before taking any action that would cause
an adjustment reducing the conversion price below the then par value (if any) of
the shares of Common Stock deliverable upon conversion of the Series B Preferred
Stock, the Corporation will take any corporate action that, in the opinion of
its counsel, is necessary in order that the Corporation may validly and legally
issue fully paid and non assessable shares of Common Stock at such adjusted
conversion price.
(g) Taxes on Conversions. The Corporation will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Series B
Preferred Stock pursuant hereto. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock in a name other than that of
the holder of the share(s) of Series B Preferred Stock to be converted, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax, or has established
to the satisfaction of the Corporation that such tax has been paid.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation,
Preferences and Rights to be signed by Xxxxx Xxxxxx, its President, and attested
by Xxxxx Xxxxxx, its Secretary, this 19th of April, 2004
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title: President
Attested:
By: /s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx, Secretary
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Schedule 1
Purchaser(s)
NAME AND ADDRESS
OF PURCHASER PURCHASE PRICE NO. OF SHARES
------------------------- -------------- ----------------
Xxxxxx Management LLC $100,000 100,000
------------------------- -------------- ----------------
82
Schedule 3.1(c)
Capitalization
Derivative Securities
The Company has authorized capital stock consisting of 200,000,000 shares of
common stock, $0.0001 par value per share (the "Common Stock") and 10,000,000
shares of preferred stock, $.0001 per value per share (the "Preferred Stock"),
of which 4,026,666 shares of Common Stock and no shares of Preferred Stock are
presently issued and outstanding.
Non-Derivative Securities
The Company has issued 99,933 common stock purchase warrants issued and
outstanding, each to purchase one share of common stock at an exercise price of
$2.75 per share.
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Schedule 3.1(d)
Equity and Equity Equivalent Securities
None.
84
Schedule 3.1(e)
Conflicts
None.
85
Schedule 3.1(f)
Consents and Approvals
None.
86
Schedule 3.1(g)
Litigation
None.
87
Schedule 3.1(h)
Defaults and Violations
None.
88
Schedule 3.1(k)(a)
List of Creditors
Creditors Total Due Settlement Payments
----------------------------------------------- ---------- -------------------
Parenteau Corporation $18,082 $18,082
Viking Investment Group II, Inc. $ 1,000 $ 1,000
Gottbetter & Partners, LLP $29,853 $29,853
Continental Stock Transfer & Trust Company $ 1,934 $ 1,934
Xxxxxx & Company $15,000 $15,000
NJ Division of Taxation $ 363 $ 363
Xxxxx Most $ 3,768 $ 3,768
----------------------------------------------- ---------- -------------------
Total $70,000 $70,000
----------------------------------------------- ---------- -------------------
89
EXHIBIT 3.1(k)(b)
The Company is a party to a non-exclusive, ten year, worldwide license to
use, manufacture, have manufactured for it, modify, promote and sell certain of
the technology owned by Fullcomm, Inc., a New Jersey corporation, including
products incorporating the technology. The technology which is the subject of
the license agreement between the Company and Fullcomm, Inc. relates to source
codes for key pieces of encryption/security hardware. The annual license fee
payable by the Company to Fullcomm, Inc. is $1.
90
