SCHEDULE I
ALL AMERICAN FOOD GROUP, INC.
RESOLUTION ESTABLISHING RIGHTS AND PREFERENCES
FOR CLASS D CONVERTIBLE PREFERRED STOCK AND WARRANTS
COMPRISING UNITS
RESOLVED, that there shall be a series of shares of the Corporation
designated "Class D Convertible Preferred Stock"; that the number of shares of
such series shall be 500 and that the rights and preferences of such series (the
"8% Preferred") and the limitations or restrictions thereon, shall be as set
forth herein;
FURTHER RESOLVED, that there shall be a series of warrants of the
Corporation (the "Warrants"), that the number of warrants shall be 500 and that
the rights and preferences of such series and the limitations or restrictions
thereon shall be as set forth herein; and
FURTHER RESOLVED, that the Corporation issue Units of the Corporation
(the "Units"); that the number of Units shall be 500 and that each Unit shall be
comprised of one share of 8% Preferred and one Warrant.
The following shall be adopted and incorporated by reference into the
foregoing resolutions as if fully set forth therein:
1. Dividends.
(a) The holders of the 8% Preferred shall be entitled to receive out of
any assets legally available therefor cumulative dividends at the rate of $80
per share per annum, accrued daily and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year in preference and priority to
any payment of any dividend on the Common Stock or any other class or series of
stock of the Corporation. Such dividends shall accrue on any given share from
the day of original issuance of such share and shall accrue from day to day
whether or not earned or declared. If at any time dividends on the outstanding
8% Preferred at the rate set forth above shall not have been paid or declared
and set apart for payment with respect to all preceding periods, the amount of
the deficiency shall be fully paid or declared and set apart for payment, but
without interest, before any distribution, whether by way of dividend or
otherwise, shall be declared or paid upon or set apart for the shares of any
other class or series of stock of the Corporation.
(b) Any dividend payable on a dividend payment date may be paid, at the
option of the Corporation, either (i) in cash or (ii) in shares of 8% Preferred
valued at $1,000 per share, if the Common Stock issuable upon conversion of such
shares has been registered for resale under the Securities Act of 1933, as
amended (the "Act"), and the registration statement including a current
prospectus with respect thereto remains in effect at the date of delivery of
such shares, and if the Corporation shall have given written notice of its
intention to pay such dividend in stock to all holders of the 8% Preferred at
least ten (10) days before the record date for such dividend.
2. Liquidation Preference; Redemption.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the 8% Preferred
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of any other class or series of shares,
the amount of $1,000 per share plus any and all accrued but unpaid dividends
(the "Liquidation Preference").
(b) A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation (other than a sale or transfer to a wholly-owned subsidiary
of the Corporation), shall, at the option of the holders of the 8% Preferred, be
deemed a liquidation, dissolution or winding up
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within the meaning of this Section 2 if the shares of stock of the Corporation
outstanding immediately prior to such transaction represent immediately after
such transaction less than a majority of the voting power of the surviving
corporation (or of the acquirer of the Corporation's assets in the case of a
sale of assets). Such option may be exercised by the vote or written consent of
holders of a majority of the 8% Preferred at any time within thirty (30) days
after written notice (which shall be given promptly) of the essential terms of
such transaction shall have been given to the holders of the 8% Preferred in the
manner provided by law for the giving of notice of meetings of shareholders.
(c) The Corporation, at its option, may cause all outstanding shares of
the 8% Preferred to be redeemed at any time beginning two (2) years after the
Closing Date, provided the Corporation has given notice of its intention to
redeem to the holders of the 8% Preferred at least twenty (20) days prior to the
redemption date. On the redemption date, the Corporation shall pay such holders
by cashier's check or wire transfer in immediately available funds the amount of
$1,350 per share, plus all accrued but unpaid dividends and any amounts and
warrants due under Section 1 hereof. Promptly thereafter, the holders shall
surrender the certificate or certificates representing the 8% Preferred, duly
endorsed, at the office of the Corporation or of any transfer agent for such
shares, or at such other place designated by the Corporation.
3. 8% Preferred - Optional Conversion. The holders of the 8% Preferred
shall have optional conversion rights as follows:
(a) Right to Convert. Shares of 8% Preferred shall be convertible, at
the option of the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (x) the
Liquidation Preference of the 8% Preferred determined pursuant to Section 2
hereof on the date the notice of conversion is given, by (y) the Conversion
Price determined as hereinafter provided in effect on the applicable conversion
date.
(b) Mechanics of Conversion. To convert shares of 8% Preferred into
shares of Common Stock under Section 3(a), the holder shall give written notice
to the Corporation (which notice may be given by facsimile transmission) that
such holder elects (with the right to revoke) to convert the shares and shall
state therein date of the conversion, the number of shares to be converted and
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. Promptly thereafter, the holder shall
surrender the certificate or certificates representing the shares to be
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, or at such other place designated by the Corporation;
provided, that the holder shall not be required to deliver the certificates
representing such shares if the holder is waiting to receive all or part of such
certificates from the Corporation. The Corporation shall immediately issue and
deliver to or upon the order of such holder, against delivery of the
certificates representing the shares which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. The Corporation shall cause such issuance to be effected within
five (5) business days and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by such holder within
five (5) business days after the receipt of such notice. The notice of
conversion may be given by a holder at any time during the day up to 5:00 p.m.
South Plainfield, New Jersey time and such conversion shall be deemed to have
been made immediately prior to the close of business on the date such notice of
conversion is given. 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 at the close of
business on such date.
(c) Conversion Required. The Corporation acknowledges and understands
that a delay in the issuance of the Common Stock pursuant to the provisions
hereof could result in economic loss to the holders of the 8% Preferred and
Warrants. As compensation to any holder when the Corporation has failed with
respect to such holder to comply with the Corporation's obligations under this
Section, and not as a penalty, the Corporation shall pay to such holder
liquidated damages of $500 per day plus an amount equal to two percent (2%) of
the total Purchase Price of Units for the first thirty (30) day period after the
date on which the Common Stock should have been issued by the Corporation (i.e.,
the end of the three (3) business day period described in Subsection (b)), plus
amount equal to three percent (3%) of the total Purchase Price of Units for each
subsequent thirty (30) day period thereafter. Amounts payable shall be pro-rated
daily as to a periods of less than thirty (30) days. Such amounts shall be paid
to the holder immediately by cashier's check or wire transfer in immediately
available funds to such account as shall be designated in writing by the holder.
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(d) Determination of Conversion Price.
(i) The "Conversion Price" shall be equal to eighty percent
(80%) of the average of the closing bid prices of the Common Stock as reported
by NASDAQ during the five (5) consecutive trading days preceding the conversion
date (but not including such date).
(ii) The "closing bid price" of the Common Stock on a trading
day shall be the closing bid price of the Common Stock on NASDAQ or any other
principal securities price quotation system or market on which prices of the
Common Stock are reported. The term "trading day" means a day on which trading
is reported on the principal quotation system or market on which prices of the
Common Stock are reported.
(iii) If, during the period of consecutive trading days
provided for above, the Corporation shall declare or pay any dividend on the
Common Stock payable in Common Stock or in rights to acquire Common Stock, or
shall effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, the Conversion Price
shall be proportionately decreased or increased, as appropriate, to give effect
to such event.
(e) Distributions. If the Corporation shall at any time or from time to
time make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation or any of its subsidiaries other than additional
shares of Common Stock, then in each such event provision shall be made so that
the holders of 8% Preferred shall receive, upon the conversion thereof, the
securities of the Corporation which they would have received had they been the
owners on the date of such event of the number of shares of Common Stock
issuable to them upon conversion.
(f) Certificates as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the Conversion Price pursuant to this Section 3,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause the independent
public accountants regularly employed to audit the financial statements of the
Corporation to verify such computation and prepare and furnish to each holder of
8% Preferred a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the reasonable written request at any time of any
holder of 8% Preferred, furnish or cause to be furnished to such holder a like
certificate prepared by the Corporation setting forth (i) such adjustments and
readjustments, and (ii) the number of other securities and the amount, if any,
of other property which at the time would be received upon the conversion of 8%
Preferred with respect to each share of Common Stock received upon such
conversion.
(g) Notice of Record Date. In the event of any taking by the
Corporation 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 security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or 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 Corporation shall mail to each holder of 8%
Preferred at least ten (10) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right and the amount and character of
such dividend, distribution, security or right.
(h) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of 8% Preferred pursuant hereto; provided, however, that the Corporation
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the 8% Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to
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effect the conversion of all outstanding shares of the 8% Preferred, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the 8%
Preferred, the Corporation will take such corporate action as may be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain any requisite shareholder approval.
(j) Fractional Shares. No fractional shares shall be issued upon the
conversion of any share or shares of 8% Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
8% Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors of the
Corporation or an authorized Committee thereof).
(k) Notices. Any notice required by the provisions of this Section to
be given to the holders of shares of 8% Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation.
(l) Reorganization or Merger. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person (other than a sale or transfer to a wholly-owned subsidiary of the
Corporation), and the holders of 8% Preferred do not elect to treat such
transaction as a liquidation, dissolution or winding up as provided in Section 2
hereof, then, as part of such reorganization, consolidation, merger or sale,
provision shall be made so that each share of 8% Preferred shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of 8% Preferred would have been
entitled upon the record date of (or date of, if no record date is fixed) such
event and, in any case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the 8%
Preferred, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any shares
of stock or the securities or property (including cash) thereafter deliverable
upon the conversion of the shares of 8% Preferred.
4. Warrants - Optional Conversion. Each Warrant shall be convertible,
at the option of the holder thereof, into three hundred fifty (350) shares of
Common Stock at a price per share equal to one hundred ten percent (110%) of the
closing bid price of the Common Stock as reported by NASDAQ on the Closing Date
(the "Warrant Conversion Price"). Such right to convert Warrants shall expire at
midnight of the five (5) year period following the date of issuance of such
Warrants. The Warrant Agreement shall reflect the total number of warrants and
shares issued to each holder. Without limiting the applicability of other
provisions contained herein, the provisions of Section 3(c) hereof shall
specifically apply to the Warrants the same as such provisions apply to the 8%
Preferred. The standard terms of the Warrant Agreement shall include, without
limitation, a provision requiring the Warrant Conversion Price to be
proportionately decreased or increased, as appropriate, to give effect to such
events as the Corporation declaring or paying any dividend on the Common Stock
payable in Common Stock or in rights to acquire Common Stock, or effecting a
stock split or reverse stock split, or a combination, consolidation or
reclassification of the Common Stock.
5. Re-issuance of Certificates. In the event of a conversion (or, if
applicable, redemption) of 8% Preferred or Warrants in which less than all of
the shares of 8% Preferred or the Warrants of a particular certificate are
converted or redeemed, as the case may be, the Corporation shall promptly cause
to be issued and delivered to the holder of such certificate, a certificate
representing the remaining shares of 8% Preferred which have not been so
converted or redeemed.
6. Other Provisions. For all purposes of this Resolution, the term
"date of issuance" and the terms "Closing" or "Closing Date" shall mean the day
on which Units, comprised of shares of the 8% Preferred and Warrants, are first
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issued by the Corporation. Any provision herein which conflicts with or violates
any applicable usury law shall be deemed modified to the extent necessary to
avoid such conflict or violation. The term "NASDAQ" herein refers to the
principal market on which the Common Stock of the Corporation is traded. If the
Common Stock is listed on a securities exchange, or if another market becomes
the principal market on which the Common Stock is traded or through which price
quotations for the Common Stock are reported, the term "NASDAQ" shall be deemed
to refer to such exchange or other principal market.
7. Restrictions and Limitations. The Corporation shall not undertake
the following actions without the consent of the holders of a majority of the 8%
Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences, or privileges of the 8% Preferred or
Warrants, (ii) authorize or issue any other preferred equity security senior to
or on a parity with the 8% Preferred as to dividends, liquidation preferences,
conversion rights, redemption rights or other rights, preferences or privileges
for a period of thirty (30) days after Closing, as applicable or (iii) purchase
or otherwise acquire for value any Common Stock or other equity security of the
Corporation either junior or senior to or on a parity with the 8% Preferred
while there exists any arrearage in the payment of cumulative dividends
hereunder.
8. Voting Rights. Except as provided herein or as provided for by law,
the 8% Preferred and Warrants shall have no voting rights.
9. Attorneys' Fees. Any holder of 8% Preferred or Warrants shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with enforcement by such holder
of any obligation of the Corporation hereunder.
10. No Adverse Actions. The Corporation shall not in any manner,
whether by amendment of the Certificate of Incorporation (including, without
limitation, any Certificate of Designation), merger, reorganization,
re-capitalization, consolidation, sales of assets, sale of stock, tender offer,
dissolution or otherwise, take any action, or permit any action to be taken,
solely or primarily for the purpose of increasing the value of any class of
stock of the Corporation if the effect of such action is to reduce the value or
security of the 8% Preferred or Warrants.
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