CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
RUFFTOWN ENTERTAINMENT, INC.
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Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The undersigned officers of Rufftown Entertainment, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, do hereby certify:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the said Board of Directors
authorized the series of Preferred Stock hereinafter provided for and
established the voting powers thereof and has adopted the following resolution
creating a series of Five Thousand (5,000) shares of Preferred Stock designated
as Series A Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a new series of Preferred Stock of the Corporation
is hereby created and designated as Series A Convertible Preferred Stock, par
value $.001 per share (the "Series A Preferred Stock").
The designation and amount and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of
Series A Preferred Stock, and the qualifications, limitations or restrictions
thereof are as set forth below:
1. DEFINITIONS. For purposes of this resolution, the following
definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the
Corporation.
(b) "COMMON STOCK" shall mean the Common Stock, $0.001 par
value per share, of the Corporation.
(c) "COMMON STOCK DIVIDEND" shall mean a stock dividend
declared and paid on the Common Stock that is payable in shares of Common Stock.
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(d) "DISTRIBUTION" shall mean the transfer of cash or property
by the Corporation to one or more of its stockholders without consideration
regardless of whether such transfer is in the form of a dividend or otherwise
(except a dividend in shares of Corporation's stock), but not including
Permitted Repurchases (as defined below).
(e) "DIVIDEND RATE" shall mean $96.00 per share, which is ten
percent (10%) of the Original Issue Price (as defined below), per annum for the
Series A Preferred Stock (as defined below).
(f) "ORIGINAL CONVERSION RATIO" shall mean one share of Voting
Common Stock for every one share of Series A Preferred Stock.
(g) "ORIGINAL ISSUE DATE" shall mean the date on which the
first share of Series A Preferred Stock is issued by the Corporation.
(h) "ORIGINAL ISSUE PRICE" shall mean $960.00 per share for
the Series A Preferred Stock.
(i) "PERMITTED REPURCHASES" shall mean the repurchase by the
Corporation of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other person performing
services for the Corporation or a subsidiary of the Corporation that are subject
to a stockholders agreement, restricted stock purchase agreement or stock option
agreements under which the Corporation has the option to repurchase such shares:
(i) at such holder's cost, upon the occurrence of certain events, such as the
termination of employment or services or (ii) at any price pursuant to the
Corporation's exercise of a right of first refusal to repurchase such shares.
(j) "Certificate of Incorporation" shall mean the original
Certificate of Incorportion as amended from time to time,other than as may be
amended by this Certificate of Designation.
(k) "SERIES A PREFERRED STOCK" shall mean the Series A
Preferred Stock, $0.001 par value per share, of the Corporation. (l) "VOTING
COMMON STOCK" shall mean the class of Common Stock designated as Voting Common
Stock.
2. DIVIDEND RIGHTS.
(a) DIVIDEND PREFERENCE. The holders of issued and outstanding
Series A Preferred Stock shall be entitled to receive, out of any funds and
assets of the Corporation legally available therefor, cumulative dividends at
the annual Dividend Rate for the Series A Preferred Stock, if and when such
dividends are authorized by the Corporation's Board of Directors, prior and in
preference to the payment of any dividend or other Distribution on the Common
Stock. Such dividends shall accrue on each share of Series A Preferred Stock
from the date on which such shares of Series A Preferred Stock is issued by the
Corporation, and shall accrue from day-to-day until Distributions in the full
preferential amount specified in SECTION 3 have been paid, whether such
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dividends are earned or declared. Unless the full amount of any accrued and
unpaid cumulative dividends accrued on the Series A Preferred Stock shall have
been paid or declared in full and a sum sufficient for the payment thereof
reserved and set apart, no dividend shall be paid or declared, and no
Distribution shall be made, on any Common Stock; PROVIDED, HOWEVER, that this
restriction shall not apply to Permitted Repurchases. All dividends shall be
paid in cash.
(b) PARTICIPATION RIGHTS. If, after dividends in the full
preferential amount specified in this SECTION 2 for the Series A Preferred Stock
have been paid or declared and set apart and Distributions in the full
preferential amount specified in SECTION 3 have been paid, then any additional
dividends declared by the Board out of funds legally available shall be made in
accordance with the Certificate of Incorporation.
(c) PAYMENT ON CONVERSION. If the Corporation shall have any
accrued and unpaid dividends with respect to any Series A Preferred Stock, then
immediately prior to, and upon a conversion of any of the Series A Preferred
Stock as provided in SECTION 6, the Corporation shall, subject to the legal
availability of funds and assets therefor, pay in cash the full amount of any
dividends accrued and unpaid on such shares.
3. DISTRIBUTION PREFERENCE. The holders of issued and outstanding
Series A Preferred Stock shall be entitled to receive, out of any funds and
assets of the Corporation legally available therefore, the aggregate of the
ORIGINAL ISSUE PRICE of the Series A Preferred Stock, (($960 per share) of any
Distributions authorized by the Corporation's Board of Directors, prior and in
preference to the payment of any dividend or other Distribution on the Common
Stock. Unless the full amount of such Distributions in one or more Distributions
shall have been paid or declared in full and a sum sufficient for the payment
thereof reserved and set apart, no dividend shall be paid or declared, and no
Distribution shall be made, on any Common Stock; PROVIDED, HOWEVER, that this
restriction shall not apply to Permitted Repurchases. If Distributions in the
full preferential amount specified in this SECTION 3 have been paid, then any
additional Distributions authorized by the Board out of funds legally available
therefore shall be made in accordance with the Certificate of Incorporation.
4. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the funds and
assets of the Corporation that may be legally distributed to the Corporation's
stockholders (the "AVAILABLE FUNDS AND ASSETS"), shall be distributed to
stockholders as set forth in this Section 4. Other than Section 4 (b) this
Section 4, shall not be applicable once the Series A Preferred Stockholders have
received the full amount provided for in the first sentence of Section 4(a).
(a) LIQUIDATION PREFERENCES. The holders of each share of
Series A Preferred Stock then outstanding shall be entitled to be paid out of
the Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution), of any
Available Funds and Assets or any shares of Common Stock, an amount per share
equal to (i) the aggregate Original Issue Price of the Series A Preferred Stock
then outstanding, minus (ii) the aggregate amount of Distributions paid to the
holders of the Series A Preferred Stock pursuant to SECTION 3 prior to such
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date, plus all accrued but unpaid dividends thereon. If upon any liquidation,
dissolution or winding up of the Corporation the Available Funds and Assets
shall be insufficient to permit the payment to holders or the Series A Preferred
Stock or their full preferential amounts described in this subsection, then all
remaining Available Funds and Assets shall be distributed among the holders of
the then outstanding Series A Preferred Stock pro rata in proportion to the
amount of stock owned by such holder on an as converted basis.
(b) PRO RATA PARTICIPATION RIGHTS. Except as provided in
subsection (c) below, if there are any Available Funds and Assets remaining
after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Series A Preferred Stock of their full
preferential amounts described above in this SECTION 4, then the entire
remaining Available Funds and Assets, if any, shall be distributed in accordance
with the Certificate of Incorporation.
(c) MERGER OR SALE OF ASSETS. A (i) consolidation or merger of
the Corporation with or into any other corporation or corporations in which the
holders of the Corporation's outstanding shares immediately before such
consolidation or merger do not immediately after such consolidation or merger
retain stock representing a majority of the voting power of the surviving
corporation of such consolidation or merger, or (ii) a sale of all or
substantially all of the assets of the Corporation, shall each be deemed to be a
liquidation, dissolution or winding up of the Corporation as those terms are
used in this SECTION 4. Notwithstanding anything to the contrary contained in
the preceding sentence, by vote or written consent of the holders of a majority
of the Series A Preferred Stock then outstanding, such holders may (y) waive the
right to treat any of the foregoing events as a deemed liquidation, or (z) elect
to convert such Series A Preferred Stock to Voting Common Stock pursuant to
SECTION 6 below in lieu of a deemed liquidation pursuant to this SECTION 4(C).
(d) NON-CASH CONSIDERATION. If any assets of the Corporation
distributed to stockholders in connection with any liquidation, dissolution, or
winding up of the Corporation are other than cash, then the value of such assets
shall be their fair market value as reasonably determined by the Board in good
faith, EXCEPT THAT any securities to be distributed to stockholders in a
liquidation, dissolution, or winding up of the Corporation shall be valued as
follows:
(1) The method of valuation of securities not subject
to investment letter or other similar restrictions on free marketability shall
be as follows:
(i) if the securities are then traded on a
national securities exchange or the NASDAQ Stock Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter,
then the value shall be deemed to be the average of the closing bid prices over
the 30-day period ending three (3) days prior to the closing of such merger,
consolidation or sale; and
(iii) if there is no active public market,
then the value shall be the fair market value thereof, as determined in good
faith by the Board.
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(2) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in SECTION
4(D)(1)(I),(II) OR (III) to reflect the approximate fair market value thereof,
as reasonably determined in good faith by the Board.
5. VOTING RIGHTS.
(a) NUMBER OF VOTES. Each holder of shares of Series A
Preferred Stock shall be entitled to the number of votes equal to the number of
whole shares of Voting Common Stock into which such shares of Series A Preferred
Stock could be converted pursuant to the provisions of SECTION 6 below at the
record date for the determination of the stockholders entitled to vote on such
matters or, if no such record date is established, the date such vote is taken
or any written consent of stockholders is solicited.
(b) GENERAL. Subject to the foregoing provisions of this
SECTION 5, each holder of Series A Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of the holders of Voting Common
Stock, and shall be entitled to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation (as in effect at the time in
question) and applicable law, and shall be entitled to vote, together with the
holders of Voting Common Stock, with respect to any question upon which holders
of Voting Common Stock have the right to vote, except as may otherwise be
provided by applicable law. Except as otherwise expressly provided herein or as
required by law, the holders of the Series A Preferred Stock and the holders of
Voting Common Stock shall vote together and not as separate classes.
(c) BOARD OF DIRECTORS; MEETINGS.
(1) BOARD SIZE. As of the Original Issue Date, the
authorized number of directors of the Corporation's Board shall be one (1). The
Corporation shall not alter the authorized number of directors in its
Certificate of Incorporation, Bylaws or otherwise, without first obtaining the
written consent or the affirmative vote at a meeting of the holders of at least
a majority of the then outstanding shares of the Series A Preferred Stock,
consenting or voting (as the case may be) separately as a class.
(2) SPECIAL MEETINGS. Notwithstanding anything to the
contrary contained in the Bylaws of the Corporation: (i) holders of 25% or more
of the Series A Preferred Stock, shall be entitled to call a special meeting of
the Board of Directors or stockholders of the Corporation on such notice as is
required by the Bylaws of the Corporation for special meetings.
(3) QUARTERLY MEETING. The Board of Directors shall
be required to meet at least once each calendar quarter at a location and time
that is convenient to all Directors.
(d) SPECIAL VOTING RIGHTS. So long as any shares of Series A
Preferred Stock are issued and outstanding, the Corporation shall not, without
the approval by vote or written consent of the holders of a majority of the
Series A Preferred Stock then outstanding, voting as a separate series:
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(1) amend its Certificate of Incorporation in any
manner that would alter or change any of the rights, preferences, privileges or
restrictions of the Series A Preferred Stock;
(2) reclassify any outstanding shares of securities
of the Corporation into shares having rights, preferences or privileges senior
or on a parity with the Series A Preferred Stock;
(3) authorize or issue any additional capital stock;
(4) merge or consolidate with or into any
corporation;
(5) sell all or substantially all of the
Corporation's assets in a single transaction or series of related transactions;
(6) liquidate or dissolve; or
(7) amend the Corporation's Bylaws to alter any
rights of the holders of the Series A Preferred Stock.
6. CONVERSION. The outstanding shares of Series A Preferred Stock shall
be convertible into shares of Voting Common Stock as follows:
(a) MANDATORY CONVERSION BY THE CORPORATION. After the date on
which the holders of the Series A Preferred Stock have received Distributions
equal to the Original Purchase Price and payment of all accrued but unpaid
dividends, each share of Series A Preferred Stock shall be automatically
converted into fully paid and nonassessable shares of Voting Common Stock
PROVIDED, HOWEVER, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless (i) the certificates evidencing ownership of such shares of Series A
Preferred Stock are either delivered to the Corporation or its transfer agent as
provided below, (ii) the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement reasonably satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates or
(iii) if the shares of Series A Preferred Stock are not certificated, the
Corporation or its transfer agent cancels ownership of such shares of Series A
Preferred Stock on the Company's books and records. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Voting Common Stock into which the
shares of Series A Preferred Stock surrendered were convertible on the date on
which such conversion occurred.
(b) OPTIONAL CONVERSION BY THE HOLDERS.
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(1) At any time after the Original Issue Date, at the
option of the holder thereof, each share of Series A Preferred Stock shall be
convertible, at any time or from time to time prior to the close of business on
the business day before any date fixed for conversion of such shares pursuant to
SECTION 6(A), into fully paid and nonassessable shares of Voting Common Stock as
provided herein.
(2) Each holder of Series A Preferred Stock who
elects to convert the same into shares of Voting Common Stock shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
Corporation or any transfer agent for the Series A Preferred Stock or Common
Stock, and shall give written notice to the Corporation at such office that such
holder elects to convert the same and shall state therein the number of shares
of Series A Preferred Stock being converted. Thereupon, the Corporation shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled upon such conversion. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificate or certificates representing the shares of Series A Preferred Stock
to be converted, and the person entitled to receive the shares of Voting Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Voting Common Stock on such date.
(c) CONVERSION RATIO. Each share of Series A Preferred Stock
shall be convertible in accordance with SECTION 6(A) or SECTION 6(B) above into
that number of shares of Voting Common Stock determined by multiplying the
number of shares of Series A Preferred Stock being converted by the Conversion
Ratio then in effect (the "CONVERSION RATIO"), which shall be the Original
Conversion Ratio, as adjusted from time to time as provided below.
(d) ADJUSTMENT UPON COMMON STOCK EVENT. Upon the happening of
a Common Stock Event (as hereinafter defined), the Conversion Ratio of the
Series A Preferred Stock shall, simultaneously with the happening of such Common
Stock Event, be adjusted by multiplying the Conversion Ratio of the Series A
Preferred Stock in effect immediately prior to such Common Stock Event by a
fraction, (i) the denominator of which shall be the number of shares of Common
Stock issued and outstanding immediately prior to such Common Stock Event, and
(ii) the numerator of which shall be the number of shares of Common Stock issued
and outstanding immediately after such Common Stock Event, and the product so
obtained shall thereafter be the Conversion Ratio for the Series A Preferred
Stock. The Conversion Ratio for a series of Preferred Stock shall be readjusted
in the same manner upon the happening of each subsequent Common Stock Event. As
used herein, the term "COMMON STOCK EVENT" shall mean (i) the issue by the
Corporation of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii)
a combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
(e) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at
any time or from time to time after the Original Issue Date the Corporation pays
a dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Corporation other than shares of Common Stock, then
in each such event, provision shall be made so that the holders of the Series A
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Voting Common Stock receivable upon conversion thereof, the amount
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of securities of the Corporation which they would have received had their Series
A Preferred Stock been converted into Voting Common Stock on the date of such
event (or such record date, as applicable) and had they thereafter, during the
period from the date of such event (or such record date, as applicable) to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period, subject to all other adjustments called for during
such period under this SECTION 6 with respect to the rights of the holders of
the Series A Preferred Stock or with respect to such other securities by their
terms.
(f) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Voting Common Stock issuable upon the conversion of the Series A Preferred
Stock is changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification or otherwise
(OTHER THAN by a Common Stock Event or a stock dividend, reorganization, merger,
consolidation or sale of assets provided for elsewhere in this SECTION 6), then
in any such event each holder of Series A Preferred Stock shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the number of shares of Common Stock into which
such shares of Series A Preferred Stock could have been converted immediately
prior to such recapitalization, reclassification or change, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.
(g) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the Conversion Ratio for the Series A Preferred Stock, the
Corporation, at its expense, shall cause its Chief Financial Officer or other
executive officer to compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of the Series A Preferred Stock at the
holder's address as shown in the Corporation's books.
(h) FRACTIONAL SHARES. No fractional shares of Voting Common
Stock shall be issued upon any conversion of the Series A Preferred Stock. In
lieu of any fractional share to which the holder would otherwise be entitled,
the Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock's fair market value as determined in good faith
by the Board as of the date of conversion.
(i) NOTICES. Any notice required by the provisions of this
SECTION 6 to be given to the holders of shares of the Series A Preferred Stock
shall be deemed given upon the earlier of actual receipt or deposit in the
United States mail, by certified or registered mail, return receipt requested,
postage prepaid, addressed to each holder of record at the address of such
holder appearing on the books of the Corporation.
(j) NO IMPAIRMENT. The Corporation shall not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against impairment.
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(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Voting Common Stock, solely for the purpose of effecting
the conversion of the shares of the Series A Preferred Stock, such number of its
shares of Voting Common Stock as shall from time to time be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock;
and if at any time the number of authorized but unissued shares of Voting Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Voting Common Stock to such number of shares
as shall be sufficient for such purpose.
7. ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Certificate
there is a reference to a specific number of shares of Common Stock or Series A
Preferred Stock of the Corporation of any class or series, then, upon the
occurrence of any subdivision, combination or stock dividend of such class or
Series of stock, the specific number of shares so referenced in this Certificate
shall automatically be proportionally adjusted to reflect the effect on the
outstanding shares of such class or Series of stock by such subdivision,
combination or stock dividend.
8. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series A
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Rights to be signed in its name and on its behalf
on this day of October 2007 by a duly authorized officer of the Corporation.
RUFFTOWN ENTERTAINMENT, INC.
By: _____________________________________
Name: Christopher Schwartz
Title: President