ALL AMERICAN FOOD GROUP, INC.
RESOLUTION ESTABLISHING RIGHTS AND
PREFERENCES FOR CLASS F CONVERTIBLE PREFERRED STOCK
RESOLVED, that there shall be a series of shares of the Corporation
designated "Class F Convertible Preferred Stock"; that the number of shares of
such series shall be 6,500 and that the rights and preferences of such series
(the "6% Preferred") and the limitations or restrictions thereon, shall be as
set forth herein;
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 6% Preferred shall be entitled to
receive out of any assets legally available therefor cumulative dividends at
the rate of $12 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.
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 6% 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 Common 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
Common Stock, 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 or an
exemption from such registration is available under Regulation S of the Act.
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 6%
Preferred shall be entitled to receive, prior and in preference to any
distribution of any assets of the Corporation to the holders of the Common
Stock, the amount of $100.00 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 6%
Preferred, be deemed a liquidation, dissolution or winding up 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 6% 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 6% 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 6% 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 6% 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 $100 per share,
plus all accrued but unpaid dividends and any amounts due under Section 1
hereof. Promptly thereafter, the holders shall surrender the certificate or
certificates representing the 6% 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. 6% Preferred - Optional Conversion. The holders of the 6%
Preferred shall have optional conversion rights as follows:
(a) Right to Convert. Shares of 6% 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 6% 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 6%
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) The Company understands that a delay in the issuance of
the Shares of Common Stock beyond the Delivery Date could result in economic
loss to the Buyer. As compensation to the Buyer for such loss, the Company
agrees to pay late payments to the Buyer for late issuance of Shares upon
Conversion in accordance with the following schedule (where "No. Business Days
Late" is defined as the number of business days beyond five (5) business days
from Delivery Date:
Liquidated Damages per
No. Business Days Late $10,000 of 6% Preferred
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1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Buyer, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock within five
business days after the Delivery Date, the Buyer will be entitled to revoke the
relevant Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Buyer shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion.
(d) Delivery of Common Stock Upon Conversion. Upon receipt of
a Notice of Conversion, the Company shall, no later than the later of the (a)
third business day following the Conversion Date, and (b) the date of such
receipt (the "Delivery Period"), issue and deliver to the Buyer (x) that number
of shares of Common Stock issuable upon conversion of that portion of Preferred
Stock being converted. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates
therefor do not bear a legend and the Buyer thereof is not obligated to return
such certificate for the placement of a legend thereon, the Company shall use
its best efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Buyer by crediting the account of
Buyer's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
(e) Determination of Conversion Price.
(i) The "Conversion Price" shall be equal to
the lower of: (a) seventy percent (70%) 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); (b) seventy percent (70%) of the average of the closing bid prices of
the Common Stock for the five (5) consecutive trading days prior to the Closing
Date; or (c) seventy percent (70%) of the closing bid price of the Common Stock
on the trading day immediately preceding the conversion 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.
(f) 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 6% 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.
(g) 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 6% 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 6% 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 6% Preferred with respect to each share of Common Stock received
upon such conversion.
(h) 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 6%
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.
(i) 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 6% 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.
(j) 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 6% Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the 6% 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 6% 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.
(k) Fractional Shares. No fractional shares shall be issued
upon the conversion of any share or shares of 6% Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more
than one share of 6% 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).
(l) Notices. Any notice required by the provisions of this
Section to be given to the holders of shares of 6% 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.
(m) 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 6% 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 6%
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 6%
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 6% 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 6%
Preferred.
4. Re-issuance of Certificates. In the event of a conversion (or, if
applicable, redemption) of 6% Preferred in which less than all of the shares of
6% Preferred 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
6% Preferred which have not been so converted or redeemed.
5. 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 Shares are first 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.
6. Voting Rights. The 6% Preferred shall have the right to vote on all
matters with the holders of the Common Stock (and not as a separate class) on
an "as converted" basis, based on the number of shares of Common Stock into
which the 6% Preferred are convertible on the record date of any such action.
7. Attorneys' Fees. Any holder of 6% Preferred 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.
8. 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 6% Preferred.