IMEDIA INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A 6% CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, David MacEachern and Franklin D. Unruh, do hereby certify
that:
1. They are the Chief Executive Officer and Secretary, respectively, of
iMedia International, Inc., a Delaware corporation (the "Corporation").
2. The Corporation is authorized to issue 20,000,000 shares of preferred
stock, none of which have been issued.
3. The following resolutions were duly adopted by the Board of
Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for a class of its authorized stock known as preferred stock issuable from
time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix
the dividend rights, dividend rate, voting rights, conversion rights, rights
and terms of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any Series and
the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock,
which shall consist of, except as otherwise set forth in the Purchase
Agreement, up to 7,200 shares of the preferred stock which the corporation has
the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or exchange
of other securities, rights or property and does hereby fix and determine the
rights, preferences, restrictions and other matters relating to such series of
preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings
given such terms in the Purchase Agreement. For the purposes hereof, the
following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in Section
7(e).
"Bankruptcy Event" means any of the following events: (a) the
Corporation or any Significant Subsidiary (as such term is defined in Rule
1.02(s) of Regulation S-X) thereof commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Corporation or any Significant Subsidiary
thereof; (b) there is commenced against the Corporation or any Significant
Subsidiary thereof any such case or proceeding that is not dismissed within 60
days after commencement; (c) the Corporation or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the Corporation or
any Significant Subsidiary thereof suffers any appointment of any custodian or
the like for it or any substantial part of its property that is not discharged
or stayed within 60 days; (e) the Corporation or any Significant Subsidiary
thereof makes a general assignment for the benefit of creditors; (f) the
Corporation or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring
of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action
for the purpose of effecting any of the foregoing.
"Base Conversion Price" shall have the meaning set forth in Section
7(b).
"Buy-In" shall have the meaning set forth in Section 6(e)(iii).
"Change of Control Transaction" means the occurrence after the date
hereof of any of (i) an acquisition after the date hereof by an individual or
legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Corporation, by contract or otherwise) of in
excess of 33% of the voting securities of the Corporation, or (ii) the
Corporation merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Corporation and, after giving effect to
such transaction, the stockholders of the Corporation immediately prior to
such transaction own less than 66% of the aggregate voting power of the
Corporation or the successor entity of such transaction, or (iii) the
Corporation sells or transfers its assets, as an entirety or substantially as
an entirety, to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 66% of the aggregate
voting power of the acquiring entity immediately after the transaction, (iv) a
replacement at one time or within a one year period of more than one-half of
the members of the Corporation's board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board
of directors on any date whose nomination to the board of directors was
approved by a majority of the members of the board of directors who are
members on the date hereof), or (v) the execution by the Corporation of an
agreement to which the Corporation is a party or by which it is bound,
providing for any of the events set forth above in (i) or (iv).
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all conditions precedent to (i) the Holders' obligations to pay the
Subscription Amount and (ii) the Corporation's obligations to deliver the
Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's common stock, par value $0.001
per share, and stock of any other class of securities into which such
securities may hereafter have been reclassified or changed into.
"Common Stock Equivalents" means any securities of the Corporation or
the Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Conversion Amount" means the sum of the Stated Value at issue.
"Conversion Date" shall have the meaning set forth in Section 6(a).
"Conversion Price" shall have the meaning set forth in Section 6(b).
"Conversion Shares" means, collectively, the shares of Common Stock into
which the shares of Preferred Stock are convertible in accordance with the
terms hereof.
"Conversion Shares Registration Statement" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Conversion Shares by the Holder, who shall be
named as a "selling stockholder" thereunder, all as provided in the
Registration Rights Agreement.
"Dividend Payment Date" shall have the meaning set forth in Section
3(a).
"Dilutive Issuance" shall have the meaning set forth in Section 7(b).
"Dilutive Issuance Notice" shall have the meaning set forth in Section
7(b).
"Effective Date" means the date that the Conversion Shares Registration
Statement is declared effective by the Commission.
"Equity Conditions" shall mean, during the period in question, (i) the
Corporation shall have duly honored all conversions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if
any, (ii) all liquidated damages and other amounts owing to the Holder in
respect of the Preferred Stock shall have been paid; (iii) there is an
effective Conversion Shares Registration Statement pursuant to which the
Holder is permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents (and the Corporation
believes, in good faith, that such effectiveness will continue uninterrupted
for the foreseeable future), (iv) the Common Stock is trading on the Trading
Market and all of the shares issuable pursuant to the Transaction Documents
are listed for trading on a Trading Market (and the Corporation believes, in
good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for
the issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Triggering Event or event which,
with the passage of time or the giving of notice, would constitute a
Triggering Event, (vii) the issuance of the shares in question (or, in the
case of a redemption, the shares issuable upon conversion in full of the
redemption amount) to the Holder would not violate the limitations set forth
in Section 6(c) and (viii) no public announcement of a pending or proposed
Fundamental Transaction, Change of Control Transaction or acquisition
transaction has occurred that has not been consummated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance or grant of (a) shares of Common
Stock or Common Stock Equivalents to employees, consultants, officers or
directors of the Company pursuant to any stock or option plan duly adopted by
a majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any Securities issued hereunder, or convertible securities,
options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the
exercise or conversion price of any such securities, (c) securities issued
pursuant to acquisitions or strategic transactions, provided any such issuance
shall only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, (d) securities issued upon
conversion of or exercise of outstanding Common Stock Equivalents, and (e) up
to two million shares of Common Stock or Common Stock Equivalents in any
twelve month period, as approved in each case by the Board of Directors.
"Forced Conversion Notice" shall have the meaning set forth in Section
8(a).
"Forced Conversion Notice Date" shall have the meaning set forth in
Section 8(a).
"Fundamental Transaction" shall have the meaning set forth in Section
7(e).
"Holder" shall have the meaning given such term in Section 2.
"Junior Securities" means the Common Stock and all other equity or
equity equivalent securities of the Corporation other than those securities
that are (a) outstanding on the Original Issue Date and (b) which are
explicitly senior or pari passu in rights or liquidation preference to the
Preferred Stock.
"Liquidation" shall have the meaning given such term in Section 5.
"New York Courts" shall have the meaning given such term in Section
10(d).
"Notice of Conversion" shall have the meaning given such term in Section
6(a).
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the Original Issue Date, to which the Corporation and the original Holders
are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, to which the Corporation and
the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Share Delivery Date" shall have the meaning given such term in Section
6(e).
"Stated Value" shall have the meaning given such term in Section 2.
"Subscription Amount" shall mean, as to each Purchaser, the amount to be
paid for the Preferred Stock purchased pursuant to the Purchase Agreement as
specified below such Purchaser's name on the signature page of the Purchase
Agreement and next to the heading "Subscription Amount", in United States
Dollars and in immediately available funds.
"Subsidiary" shall have the meaning given to such term in the Purchase
Agreement.
"Threshold Period" shall have the meaning set forth in Section 8(a).
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" shall have the meaning set forth in the Purchase
Agreement.
"Triggering Event" shall have the meaning set forth in Section 9(a).
"Triggering Redemption Amount" for each share of Preferred Stock means
the sum of (i) the greater of (A) 130% of the Stated Value and (B) the product
of (a) the VWAP on the Trading Day immediately preceding the date of the
Triggering Event and (b) the Stated Value divided by the then Conversion
Price, (ii) all accrued but unpaid dividends thereon and (iii) all liquidated
damages and other amounts due in respect of the Preferred Stock.
"Triggering Redemption Payment Date" shall have the meaning set forth in
Section 9(b).
"Two Year Redemption" shall have the meaning set forth in Section 8(b).
"Two Year Redemption Date" shall have the meaning set forth in Section
8(b).
"Two Year Redemption Amount" shall mean the sum of (i) 100% of the
aggregate Stated Value then outstanding, (ii) accrued but unpaid dividends and
(iii) all liquidated damages and other amounts due in respect of the Preferred
Stock.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the primary
Trading Market on which the Common Stock is then listed or quoted as reported
by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02
p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then
listed or quoted on the Trading Market and if prices for the Common Stock are
then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported;
or (c) in all other cases, the fair market value of a share of Common Stock as
determined by a nationally recognized-independent appraiser selected in good
faith by Purchasers holding a majority of the Stated Value of the shares of
Preferred Stock then outstanding.
Section 2. Designation, Amount and Par Value. The series of preferred stock
shall be designated as its Series A 6% Convertible Preferred Stock (the
"Preferred Stock") and the number of shares so designated shall be up to 7,200
(which shall not be subject to increase without the consent of all of the
holders of the Preferred Stock (each, a "Holder" and collectively, the
"Holders")). Each share of Preferred Stock shall have a par value of $0.001
per share and a stated value equal to $1,000 (the "Stated Value"). Capitalized
terms not otherwise defined herein shall have the meaning given such terms in
Section 1 hereof.
Section 3. Dividends.
a) Dividends in Cash or in Kind. Holders shall be entitled to receive
and the Corporation shall pay, cumulative dividends at the rate per share (as
a percentage of the Stated Value per share) of 6% per annum (subject to
increase pursuant to Section 9(b)), payable quarterly on March 1, June 1,
September 1 and December 1, beginning with the first such date after the
Original Issue Date and on any Conversion Date (except that, if such date is
not a Trading Day, the payment date shall be the next succeeding Trading
Day)("Dividend Payment Date"). The form of dividend payments to each Holder
shall be made in the following order: (i) if funds are legally available for
the payment of dividends and the Equity Conditions have not been met, in cash
only, provided, that the first four quarterly payments following the Original
Issue Date may be made in the form of Common Stock, at the sole election of
the Company, even if there is not an effective Conversion Shares Registration
Statement, provided further, that if the Corporation shall elect to pay any of
such dividend payments in the form of Common Stock, such shares of Common
Stock shall be valued solely for such purpose at 70% of the average of the 20
VWAPs immediately prior to the Dividend Payment Date (ii) if funds are legally
available for the payment of dividends and the Equity Conditions have been
met, at the sole election of the Corporation, in cash or shares of Common
Stock which shall be valued solely for such purpose at 90% of the average of
the 20 VWAPs immediately prior to the Dividend Payment Date; (iii) if funds
are not legally available for the payment of dividends and the Equity
Conditions have been met, in shares of Common Stock which shall be valued at
90% of the average of the 20 VWAPs immediately prior to the Dividend Payment
Date; (iv) if funds are not legally available for the payment of dividends and
the Equity Conditions relating to registration have been waived by such
Holder, as to such Holder only, in unregistered shares of Common Stock which
shall be valued at 90% of the average of the 20 VWAPs immediately prior to the
Dividend Payment Date; and (v) if funds are not legally available for the
payment of dividends and the Equity Conditions have not been met, then, at the
election of such Holder, such dividends shall accrue to the next Dividend
Payment Date or shall be accreted to the outstanding Stated Value. The Holders
shall have the same rights and remedies with respect to the delivery of any
such shares as if such shares were being issued pursuant to Section 6. On the
Closing Date the Corporation shall have notified the Holders whether or not it
may lawfully pay cash dividends. The Corporation shall promptly notify the
Holders at any time the Corporation shall become able or unable, as the case
may be, to lawfully pay cash dividends. If at any time the Corporation has the
right to pay dividends in cash or Common Stock, the Corporation must provide
the Holder with at least 20 Trading Days' notice of its election to pay a
regularly scheduled dividend in Common Stock. Dividends on the Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the Original Issue Date, and shall be deemed to accrue from such
date whether or not earned or declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends. Except as otherwise provided herein, if at any time the Corporation
pays dividends partially in cash and partially in shares, then such payment
shall be distributed ratably among the Holders based upon the number of shares
of Preferred Stock held by each Holder. Any dividends, whether paid in cash or
shares, that are not paid within three Trading Days following a Dividend
Payment Date shall continue to accrue and shall entail a late fee, which must
be paid in cash, at the rate of 18% per annum or the lesser rate permitted by
applicable law (such fees to accrue daily, from the Dividend Payment Date
through and including the date of payment).
b) So long as any Preferred Stock shall remain outstanding, neither
the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities. So long as any Preferred
Stock shall remain outstanding, neither the Corporation nor any Subsidiary
thereof shall directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in Section 6 or
dividends due and paid in the ordinary course on preferred stock of the
Corporation at such times when the Corporation is in compliance with its
payment and other obligations hereunder) upon, nor shall any distribution be
made in respect of, any Junior Securities so long as any dividends due on the
Preferred Stock remain unpaid, nor shall any monies be set aside for or
applied to the purchase or redemption (through a sinking fund or otherwise) of
any Junior Securities or shares pari passu with the Preferred Stock.
c) The Corporation acknowledges and agrees that the capital of the
Corporation (as such term is used in Section 154 of the Delaware General
Corporation Law) in respect of the Preferred Stock and any future issuances of
the Corporation's capital stock shall be equal to the aggregate par value of
such Preferred Stock or capital stock, as the case may be, and that, on or
after the date of the Purchase Agreement, it shall not increase the capital of
the Corporation with respect to any shares of the Corporation's capital stock
issued and outstanding on such date. The Corporation also acknowledges and
agrees that it shall not create any special reserves under Section 171 of the
Delaware General Corporation Law without the prior written consent of each
Holder.
Section 4. Voting Rights. Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights. However, so
long as any shares of Preferred Stock are outstanding, the Corporation shall
not, without the affirmative vote of the Holders of the shares of the
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation, (b) authorize or create any class of stock ranking
as to dividends, redemption or distribution of assets upon a Liquidation (as
defined in Section 5) senior to or otherwise pari passu with the Preferred
Stock, (c) amend its certificate of incorporation or other charter documents
so as to affect adversely any rights of the Holders, (d) increase the
authorized number of shares of Preferred Stock, or (e) enter into any
agreement with respect to the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value per share plus any accrued and unpaid
dividends thereon and any other fees or liquidated damages owing thereon
before any distribution or payment shall be made to the holders of any Junior
Securities, and if the assets of the Corporation shall be insufficient to pay
in full such amounts, then the entire assets to be distributed to the Holders
shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A Fundamental Transaction or Change of Control
Transaction shall not be treated as a Liquidation. The Corporation shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.
Section 6. Conversion.
a) Conversions at Option of Holder. Each share of Preferred Stock
shall be convertible into that number of shares of Common Stock (subject to
the limitations set forth in Section 6(c)) determined by dividing the Stated
Value of such share of Preferred Stock by the Conversion Price, at the option
of the Holder, at any time and from time to time from and after the Original
Issue Date. Holders shall effect conversions by providing the Corporation with
the form of conversion notice attached hereto as Annex A (a "Notice of
Conversion"). Each Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred Stock
owned subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to, nor more than 10
Trading Days after the date the Holder delivers such Notice of Conversion to
the Corporation by facsimile (the "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date
that such Notice of Conversion to the Corporation is deemed delivered
hereunder. The calculations and entries set forth in the Notice of Conversion
shall control in the absence of manifest or mathematical error. To effect
conversions, as the case may be, of shares of Preferred Stock, a Holder shall
not be required to surrender the certificate(s) representing such shares of
Preferred Stock to the Corporation unless all of the shares of Preferred Stock
represented thereby are so converted, in which case the Holder shall deliver
the certificate representing such share of Preferred Stock promptly following
the Conversion Date at issue. Shares of Preferred Stock converted into Common
Stock or redeemed in accordance with the terms hereof shall be canceled and
may not be reissued.
b) Conversion Price. The conversion price for the Preferred Stock
shall equal $0.40 (the "Conversion Price"), subject to adjustment herein.
c) Beneficial Ownership Limitation. A Holder shall not have the right
to convert any portion of the Preferred Stock to the extent that after giving
effect to such conversion, such Holder (together with such Holder's
affiliates), as set forth on the applicable Notice of Conversion, would
beneficially own in excess of 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its affiliates shall include the number
of shares of Common Stock issuable upon conversion of the Preferred Stock with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted Stated Value of Preferred Stock
beneficially owned by such Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities
of the Corporation (including the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by such Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 6(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this Section 6(c) applies,
the determination of whether the Preferred Stock is convertible (in relation
to other securities owned by such Holder together with any affiliates) and of
which shares of Preferred Stock is convertible shall be in the sole discretion
of such Holder, and the submission of a Notice of Conversion shall be deemed
to be such Holder's determination of whether the shares of Preferred Stock may
be converted (in relation to other securities owned by such Holder) and which
shares of the Preferred Stock is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction,
each Holder will be deemed to represent to the Corporation each time it
delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the Corporation
shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 6(c), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in the most recent of the
following: (A) the Corporation's most recent Form 10-QSB or Form 10-KSB, as
the case may be, (B) a more recent public announcement by the Corporation or
(C) any other notice by the Corporation or the Corporation's transfer agent
setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Corporation shall within five Trading
Days confirm orally and in writing to such Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Corporation, including the Preferred Stock, by
such Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of this
Section 6(c) may be waived by such Holder, at the election of such Holder,
upon not less than 61 days' prior notice to the Corporation, and the
provisions of this Section 6(c) shall continue to apply until such 61st day
(or such later date, as determined by such Holder, as may be specified in such
notice of waiver).
d) RESERVED.
e) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after each Conversion Date (the "Share Delivery Date"), the
Corporation shall deliver or cause to be delivered to the Holder (A) a
certificate or certificates which, after the Effective Date, shall be free of
restrictive legends and trading restrictions (other than those required by the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Preferred Stock, and (B) a bank
check in the amount of accrued and unpaid dividends (if the Corporation has
elected or is required to pay accrued dividends in cash). After the Effective
Date, the Corporation shall, upon request of the Holder, deliver any
certificate or certificates required to be delivered by the Corporation under
this Section electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions. If in
the case of any Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the third Trading Day
after the Conversion Date, the Holder shall be entitled to elect by written
notice to the Corporation at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Corporation shall immediately return the certificates representing
the shares of Preferred Stock tendered for conversion.
ii. Obligation Absolute; Partial Liquidated Damages. The
Corporation's obligations to issue and deliver the Conversion Shares upon
conversion of Preferred Stock in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Corporation to the Holder
in connection with the issuance of such Conversion Shares. In the event a
Holder shall elect to convert any or all of the Stated Value of its Preferred
Stock, the Corporation may not refuse conversion based on any claim that such
Holder or any one associated or affiliated with the Holder of has been engaged
in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of this Preferred Stock shall have been sought and obtained and
the Corporation posts a surety bond for the benefit of the Holder in the
amount of 150% of the Stated Value of Preferred Stock outstanding, which is
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder to the extent it obtains judgment. In the
absence of an injunction precluding the same, the Corporation shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Corporation fails to deliver to the Holder such certificate or
certificates pursuant to Section 6(e)(i) within two Trading Days of the Share
Delivery Date applicable to such conversion, the Corporation shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, for each $5,000
of Stated Value of Preferred Stock being converted, $50 per Trading Day
(increasing to $100 per Trading Day after 3 Trading Days and increasing to
$200 per Trading Day 6 Trading Days after such damages begin to accrue) for
each Trading Day after the Share Delivery Date until such certificates are
delivered. Nothing herein shall limit a Holder's right to pursue actual
damages for the Corporation's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
iii. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. If the Corporation fails to deliver to the
Holder such certificate or certificates pursuant to Section 6(e)(i) by a Share
Delivery Date, and if after such Share Delivery Date the Holder purchases (in
an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the
Holder was entitled to receive upon the conversion relating to such Share
Delivery Date (a "Buy-In"), then the Corporation shall pay in cash to the
Holder the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y)
the product of (1) the aggregate number of shares of Common Stock that such
Holder was entitled to receive from the conversion at issue multiplied by (2)
the price at which the sell order giving rise to such purchase obligation was
executed. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the aggregate
sale price giving rise to such purchase obligation is $10,000, under clause
(A) of the immediately preceding sentence the Corporation shall be required to
pay the Holder $1,000. The Holder shall provide the Corporation written notice
indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Corporation. Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Corporation's failure to timely deliver certificates
representing shares of Common Stock upon conversion of the shares of Preferred
Stock as required pursuant to the terms hereof.
iv. Reservation of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the Preferred Stock and payment of dividends on
the Preferred Stock, each as herein provided, free from preemptive rights or
any other actual contingent purchase rights of persons other than the Holder
(and the other Holders of the Preferred Stock), not less than such number of
shares of the Common Stock as shall (subject to any additional requirements of
the Corporation as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions
of Section 7) upon the conversion of all outstanding shares of Preferred
Stock. The Corporation covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Conversion Shares Registration Statement
is then effective under the Securities Act, registered for public sale in
accordance with such Conversion Shares Registration Statement.
v. Fractional Shares. Upon a conversion hereunder, the Corporation
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the VWAP at such
time. If the Corporation elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
vi. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Preferred Stock shall be made without
charge to the Holder hereof for any documentary stamp or similar taxes that
may be payable in respect of the issue or delivery of such certificate,
provided that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate upon conversion in a name other than that of the Holder
of such shares of Preferred Stock so converted and the Corporation shall not
be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Corporation
the amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time
while this Preferred Stock is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock
or any other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation pursuant to this Preferred Sock), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Corporation, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this
Section 7(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Corporation or any Subsidiary
thereof, as applicable, at any time while this Preferred Stock is outstanding,
shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then
Conversion Price (such lower price, the "Base Conversion Price" and such
issuances collectively, a "Dilutive Issuance"), as adjusted hereunder (if the
holder of the Common Stock or Common Stock Equivalents so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price on such date of the
Dilutive Issuance), then the Conversion Price with respect to the shares of
Preferred Stock outstanding shall be reduced to equal the Base Conversion
Price. Notwithstanding the foregoing, no adjustment will be made under this
Section 7(b) in respect of an Exempt Issuance. The Corporation shall notify
the Holder in writing, no later than the Business Day following the issuance
of any Common Stock or Common Stock Equivalents subject to this section,
indicating therein the applicable issuance price, or of applicable reset
price, exchange price, conversion price and other pricing terms (such notice
the "Dilutive Issuance Notice"). For purposes of clarification, whether or not
the Corporation provides a Dilutive Issuance Notice pursuant to this Section
7(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Conversion Price regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of Conversion.
c) Subsequent Rights Offerings. If the Corporation, at any time while
the Preferred Stock is outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holders) entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the VWAP
at the record date mentioned below, then the Conversion Price with respect to
the shares of Preferred Stock outstanding shall be multiplied by a fraction,
of which the denominator shall be the number of shares of the Common Stock
Outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
Outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Corporation in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at
such VWAP. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.
d) Pro Rata Distributions. If the Corporation, at any time while
Preferred Stock is outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase
any security, then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
e) Fundamental Transaction. If, at any time while this Preferred Stock
is outstanding, (A) the Corporation effects any merger or consolidation of the
Corporation with or into another Person, (B) the Corporation effects any sale
of all or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the
Corporation or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (D) the Corporation effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a "Fundamental Transaction"),
then upon any subsequent conversion of this Preferred Stock, the Holder shall
have the right to receive, for each Conversion Share that would have been
issuable upon such conversion immediately prior to the occurrence of such
Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the "Alternate
Consideration"). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in
respect of one share of Common Stock in such Fundamental Transaction, and the
Corporation shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of
this Preferred Stock following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the
Corporation or surviving entity in such Fundamental Transaction shall file a
new Certificate of Designation with the same terms and conditions and issue to
the Holder new preferred stock consistent with the foregoing provisions and
evidencing the Holder's right to convert such preferred stock into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 7(e) and
insuring that this Preferred Stock (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
f) Calculations. All calculations under this Section 7 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
g) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any of this Section 7, the Corporation shall promptly
mail to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Corporation
shall declare a dividend (or any other distribution) on the Common Stock; (B)
the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Corporation shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights; (D)
the approval of any stockholders of the Corporation shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of all or
substantially all of the assets of the Corporation, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; (E) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Corporation;
then, in each case, the Corporation shall cause to be filed at each office or
agency maintained for the purpose of conversion of this Preferred Stock, and
shall cause to be mailed to the Holder at its last address as its shall appear
upon the stock books of the Corporation, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to convert the
Conversion Amount of this Preferred Stock (or any part hereof) during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
Section 8. Forced Conversion and Two Year Redemption.
a) Notwithstanding anything herein to the contrary, if after the
Effective Date (i) the VWAP for each of any 30 consecutive Trading Days
("Threshold Period"), which 30 consecutive Trading Day period shall have
commenced only after the Effective Date, exceeds $1.25 (subject to adjustment
for reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date of
the Purchase Agreement) and (ii) the average daily volume for any 20
consecutive Trading Days within the Threshold Period exceeds 100,000 shares of
Common Stock per Trading Day (subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of the Purchase
Agreement), the Corporation may, within 2 Trading Days after any such
Threshold Period, deliver a notice to all Holders (a "Forced Conversion
Notice" and the date such notice is received by the Holders, the "Forced
Conversion Notice Date") to cause each Holder to immediately convert all or
part of such Holder's Preferred Stock plus all accrued but unpaid dividends
thereon and all liquidated damages and other amounts due in respect of the
Preferred Stock. The Corporation may only effect a Forced Conversion Notice if
all of the Equity Conditions have been met during the Threshold Period through
and including the date that the Conversion Shares are issued to the Holder
pursuant to a Forced Conversion. Any Forced Conversion Notices shall be
applied ratably to all of the Holders in proportion to each Holder's initial
purchases of Preferred Stock hereunder, provided that any voluntary
conversions by a Holder shall be applied against such Holder's pro-rata
allocation thereby decreasing the aggregate amount forcibly converted
hereunder.
b) Two Year Redemption. On the second anniversary of the Original Issue
Date (the "Two Year Redemption Date"), the Corporation shall redeem all of the
then outstanding Preferred Stock, for an amount in cash equal to the Two Year
Redemption Amount (such redemption, the "Two Year Redemption"). The
Corporation covenants and agrees that it will honor all Conversion Notices
tendered up until such amounts are paid in full.
c) Redemption Procedure. The payment of cash pursuant to a Two Year
Redemption shall be made on the Two Year Redemption Date. If any portion of
the cash payment for a Two Year Redemption shall not be paid by the
Corporation by the respective due date, interest shall accrue thereon at the
rate of 18% per annum (or the maximum rate permitted by applicable law,
whichever is less) until the such payment, plus all amounts owing thereon, is
paid in full.
Section 9. Redemption Upon Triggering Events.
a) "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body):
i. the failure of a Conversion Shares Registration Statement to be
declared effective by the Commission on or prior to the 365th day after the
Original Issue Date;
ii. if, during the Effectiveness Period, the effectiveness of the
Conversion Shares Registration Statement lapses for any reason for more than
an aggregate of 60 calendar days (which need not be consecutive days) during
any 12 month period, or the Holder shall not be permitted to resell
Registrable Securities under the Conversion Shares Registration Statement for
more than an aggregate of 60 calendar days (which need not be consecutive
days) during any 12 month period;
iii. the Corporation shall fail to deliver certificates representing
Conversion Shares issuable upon a conversion hereunder that comply with the
provisions hereof prior to the 5th Trading Day after such shares are required
to be delivered hereunder, or the Corporation shall provide written notice to
any Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any shares of
Preferred Stock in accordance with the terms hereof;
iv. one of the Events (as defined in the Registration Rights
Agreement) described in subsections (i), (ii) or (iii) of Section 2(b) of the
Registration Rights Agreement shall not have been cured to the satisfaction of
the Holders prior to the expiration of 30 days from the Event Date (as defined
in the Registration Rights Agreement) relating thereto and the Corporation has
not timely paid any liquidated damages provided therefor (other than an Event
resulting from a failure of a Conversion Shares Registration Statement to be
declared effective by the Commission on or prior to the 365th day after the
Original Issue Date, which shall be covered by Section 9(a)(i));
v. the Corporation shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In within 5 days after notice therefor is
delivered hereunder or shall fail to pay all amounts owed on account of an
Event within five days of the date due;
vi. the Corporation shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder;
vii. the Corporation shall fail to observe or perform any other
material covenant, agreement or warranty contained in, or otherwise commit any
breach of the Transaction Documents which is not otherwise specifically
addressed in this Section 9(a), and such failure or breach shall not, if
subject to the possibility of a cure by the Corporation, have been remedied
within 30 calendar days after the date on which written notice of such failure
or breach shall have been given;
viii. the Corporation shall redeem more than a de minimis number of
Junior Securities;
ix. the Corporation shall be party to a Change of Control
Transaction;
x. there shall have occurred a Bankruptcy Event; or
xi. the Common Stock shall fail to be listed or quoted for trading
on a Trading Market for more than 5 Trading Days, which need not be
consecutive Trading Days.
b) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law)
have the right, exercisable at the sole option of such Holder, to require the
Corporation to redeem all of the Preferred Stock then held by such Holder for
a redemption price, in cash, equal to the Triggering Redemption Amount. The
Triggering Redemption Amount shall be due and payable within 5 Trading Days of
the date on which the notice for the payment therefor is provided by a Holder
(the "Triggering Redemption Payment Date"). If the Corporation fails to pay
the Triggering Redemption Amount hereunder in full pursuant to this Section on
the date such amount is due in accordance with this Section the Corporation
will pay interest thereon at a rate of 18% per annum (or such lesser amount
permitted by applicable law), accruing daily from such date until the
Triggering Redemption Amount, plus all such interest thereon, is paid in full.
For purposes of this Section, a share of Preferred Stock is outstanding until
such date as the Holder shall have received Conversion Shares upon a
conversion (or attempted conversion) thereof that meets the requirements
hereof or has been paid the Triggering Redemption Amount plus all accrued but
unpaid dividends and all accrued but unpaid liquidated damages in cash.
Section 10. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder, including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service,
addressed to the Corporation to the attention of the Chief Executive Officer
at its principal executive offices or such other address or facsimile number
as the Corporation may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Corporation hereunder shall
be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Corporation, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 5:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Certificate of Designation shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to pay the
liquidated damages (if any) on, the shares of Preferred Stock at the time,
place, and rate, and in the coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a Holder's
Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the
Corporation shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in substitution
for a lost, stolen or destroyed certificate, a new certificate for the shares
of Preferred Stock so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such certificate,
and of the ownership hereof, and indemnity, if requested, all reasonably
satisfactory to the Corporation.
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders, employees or
agents) shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the "New York Courts"). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York
Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Certificate of Designation and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Certificate of Designation or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Corporation or the Holder of a breach of
any provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Certificate of Designation. The failure
of the Corporation or the Holder to insist upon strict adherence to any term
of this Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Certificate of
Designation. Any waiver must be in writing.
f) Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is inapplicable to
any person or circumstance, it shall nevertheless remain applicable to all
other persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest.
g) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for convenience only, do
not constitute a part of this Certificate of Designation and shall not be
deemed to limit or affect any of the provisions hereof.
*********************
RESOLVED, FURTHER, that the Chairman, the Chief Executive Officer, the
President or any Vice-President, and the Secretary or any Assistant Secretary,
of the Corporation be and they hereby are authorized and directed to prepare
and file a Certificate of Designation of Preferences, Rights and Limitations
in accordance with the foregoing resolution and the provisions of Delaware
law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
18th day of May 2005.
IMEDIA INTERNATIONAL, INC.
/s/ David MacEachern /s/ Franklin H. Unruh
_______________________________________ __________________________________
Name: David MacEachern Name: Franklin H. Unruh,
Title: Chief Executive Officer Title: Secretary
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series A 6%
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the "Common Stock"), of iMedia International, Inc., a
Delaware corporation (the "Corporation"), according to the conditions hereof,
as of the date written below. If shares are to be issued in the name of a
person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Corporation in accordance therewith.
No fee will be charged to the Holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion: _____________________________________________
Number of shares of Preferred Stock owned prior to Conversion:__________
Number of shares of Preferred Stock to be Converted: ____________________
Stated Value of shares of Preferred Stock to be Converted:______________
Number of shares of Common Stock to be Issued:__________________________
Applicable Conversion Price:____________________________________________
Number of shares of Preferred Stock subsequent to Conversion:___________
[HOLDER]
By:___________________________________
Name:
Title: