BLUE HOLDINGS, INC. PREFERRED STOCK RESCISSION AND PURCHASE AGREEMENT
THIS
PREFERRED STOCK RESCISSION AND PURCHASE AGREEMENT (this “Agreement”),
is
made as of November 28, 2007 (the “Effective
Date”),
by
and among Blue Holdings, Inc., a Nevada corporation, (the “Company”),
and
▇▇▇▇ ▇▇▇▇ (“Investor”).
WHEREAS,
on
November 13, 2007 (the “Original
Effective Date”),
the
Company agreed to issue and sell to the Investor, pursuant to the terms of
that
certain Series A Convertible Preferred Stock Purchase Agreement dated as of
the
Original Effective Date (the “Original
Purchase Agreement”),
up to
an aggregate of 1,000,000 shares (the “Preferred
Shares”)
of the
Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the
“Series
A Preferred Stock”),
in
exchange for the cancellation of certain indebtedness due and owing to the
Investor on the Effective Date;
WHEREAS,
on the
Original Effective Date, the parties concluded the purchase and sale of Series
A
Preferred Stock contemplated by the Original Purchase Agreement;
WHEREAS,
notwithstanding the conclusion of the purchase and sale of Series A Preferred
Stock contemplated by the Original Purchase Agreement, the Company has not,
as
of the Effective Date, issued or delivered the Preferred Shares, or any
certificates representing such shares;
WHEREAS,
effective as of the Original Effective Date, the parties desire to rescind
and
unwind the purchase and sale of Series A Preferred Stock contemplated by the
Original Purchase Agreement in such a manner as is necessary to (i) permit
such
purchase and sale to be deemed rescinded and unwound, and null and void, on
and
as of the Original Effective Date, and (ii) allow the Federal income tax
doctrine of rescission to be applied to the unwinding of such purchase and
sale;
WHEREAS,
on or
prior to the date hereof, the Company has amended and restated the Certificate
of Designations, Preferences, Rights and Limitations of Series A Convertible
Preferred Stock (the “Certificate”),
which, in the form attached hereto as Exhibit
B,
is
applicable to the New Series A Preferred Stock (as defined below);
WHEREAS,
on and
as of the Effective Date, the Company desires to issue and sell to the Investor,
pursuant to the terms of this Agreement, an aggregate of 1,000,000 shares (the
“New
Preferred Shares”)
of the
Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the
“New
Series A Preferred Stock”),
having the designations, preferences, rights and limitations set forth in the
Certificate, in exchange for (i) the cancellation of certain indebtedness due
and owing to the Investor on the Effective Date (and taking into account the
rescission described above), and (ii) the additional cash investment by Investor
of $125,000; and
WHEREAS,
Investor wishes to rescind and unwind the purchase and sale of Series A
Preferred Stock contemplated by the Original Purchase Agreement, and to purchase
the New Preferred Shares, on the terms and subject to the conditions set forth
in this Agreement.
NOW,
THEREFORE,
in
consideration of the premises, representations, warranties and the mutual
covenants contained in this Agreement, the parties agree as
follows:
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1.
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RESCISSION
OF ORIGINAL PURCHASE
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1.1 Rescission.
1.1.1 Effective
as of the Original Effective Date, (i) the parties hereby rescind and unwind
the
purchase and sale of Series A Preferred Stock contemplated by the Original
Purchase Agreement; and (ii) the Original Purchase Agreement, and the purchase
and sale of Series A Preferred Stock contemplated by the Original Purchase
Agreement, shall be deemed null and void and of no further force and
effect.
1.1.2 The
foregoing rescission shall be effective so as to allow the Federal income tax
doctrine of rescission to be applied thereto, and, each party acknowledges
and
agrees that it has been returned to its situation existing immediately prior
to
the consummation of the purchase and sale of Series A Preferred Stock
contemplated by the Original Purchase Agreement, including, for the avoidance
of
doubt, that any and all outstanding amounts due and owing to Investor
immediately prior to the Original Effective Date shall be deemed due and owning
on and as of Original Effective Date and as of immediately prior to the
Effective Date hereof.
1.1.3 Investor
hereby represents and warrants that it did not receive a certificate from the
Company representing the Preferred Shares upon the consummation of the purchase
and sale of Series A Preferred Stock contemplated by the Original Purchase
Agreement. Investor hereby transfers and assigns to the Company all right,
title
and interest in and to the Preferred Shares, to the extent held by Investor,
and
relinquishes all claims to ownership of the Preferred Shares and any and all
rights therein.
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2.
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AUTHORIZATION
AND SALE OF NEW PREFERRED
SHARES
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2.1 Issuance,
Sale and Delivery of the New Preferred Shares at the
Closing.
At the
Closing (as defined in Section 2.2 hereof), on the terms and subject to the
conditions of this Agreement, the Company shall issue and sell to Investor,
and
Investor shall purchase from the Company, that number of New Preferred Shares
set forth opposite the name of Investor under the heading “Number of Preferred
Shares to be Purchased” on Exhibit A hereto, at a price of $2.681682 per share
for the aggregate purchase price set forth opposite the name of Investor under
the heading “Aggregate Purchase Price for Preferred Shares” on Exhibit A
hereto.
2.2 Closing.
The
Closing shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Markiles, LLP,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at such date and time as may be agreed upon
between the Company and the Investors (such closing being called the
“Closing” and
such
date and time being called the “Closing
Date”).
At the
Closing, the Company shall issue and deliver to Investor a stock certificate
or
certificates in definitive form, registered in the name of Investor,
representing the New Preferred Shares being purchased by it at the Closing.
As
payment in full for the New Preferred Shares being purchased by it under this
Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date, Investor shall deliver to the
Company by such method as may be reasonably acceptable to the Company, cash,
cashier’s check, wire transfer of immediately available funds, or a promissory
note or other evidence of indebtedness for cancellation, as applicable, in
the
amount and as set forth opposite the name of Investor under the heading
“Aggregate Purchase Price for Preferred Shares” on Exhibit A. All amounts shall
be paid to the account of the Company as shall have been designated in writing
a
reasonable time in advance to the Investor by the Company.
2
2.3 Issuance,
Sale and Delivery of the New Preferred Shares at the
Closing.
The
Company has authorized the number of New Preferred Shares of New Series A
Preferred Stock having the rights, preferences, privileges and restrictions
set
forth in the Certificate, which, in the form attached hereto as Exhibit B,
shall
be adopted and filed with the Secretary of State of the State of Nevada on
or
before the Closing.
2.4 Conversion
Shares.
Shares
of Common Stock issuable upon conversion of the New Preferred Shares are
referred to herein as the “Conversion
Shares.”
Each
share of New Series A Preferred Stock shall be convertible, at the option of
the
Investor, at any time after the date of issuance of such share, into such number
of shares of Common Stock as is determined by dividing (i) the purchase price
per share of New Series A Preferred Stock, plus all accrued but unpaid Dividends
(as defined in the Certificate) on each such share, by (ii) the Conversion
Price
in effect on the date the certificate is surrendered for conversion. The initial
“Conversion
Price”
per
share for the New Series A Preferred Stock shall be $0.58 and shall be subject
to adjustment as set forth in the Certificate. For the avoidance of doubt,
the
Conversion Price represents the consolidated closing bid price for a share
of
the Common Stock immediately prior to the execution of this
Agreement.
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3.
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REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY
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3.1 Organization
and Standing; Qualifications.
The
Company is a corporation validly existing and in good standing under the laws
of
the State of Nevada. The Company has all requisite power and authority to own
and operate its properties and assets, and to carry on its business as conducted
and as proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to so
qualify could, singly or in the aggregate, have a material adverse effect on
the
business, assets, liabilities, financial condition or results of operations
of
the Company as presently conducted or proposed to be conducted.
3.2 Corporate
Power.
The
Company has all requisite power and authority to execute and deliver this
Agreement, to sell and issue the New Preferred Shares hereunder, to issue the
Conversion Shares and to carry out and perform its obligations under the terms
of this Agreement.
3.3 Authorization.
3.3.1 All
corporate action on the part of the Company, its officers, directors and
stockholders, necessary for (i) the authorization, execution and delivery of
the
Agreement by the Company, (ii) the authorization, sale, issuance and delivery
of
the New Preferred Shares and the Conversion Shares, (iii) the filing of the
Certificate, and (iv) the performance of all of the Company’s obligations under
the Agreement has been taken. The Agreement has been duly and validly executed
and delivered by the Company and constitutes the valid and binding obligation
of
the Company, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of
general application affecting enforcement of creditors’ rights
generally.
3
3.3.2 The
New
Preferred Shares, when sold, issued and delivered in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and shall have the rights, preferences, privileges and
restrictions described in the Certificate, and shall be free of any liens,
preemptive or similar rights, encumbrances or restrictions on transfer;
provided, however, that the New Preferred Shares may be subject to restrictions
on transfer under state and/or federal securities laws. The Conversion Shares
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate, will be duly and validly issued,
fully paid, and nonassessable and shall be free of any liens, preemptive or
similar rights, encumbrances or restrictions on transfer; provided, however,
that the Conversion Shares may be subject to restrictions on transfer under
state and/or federal securities laws.
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4.
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REPRESENTATIONS
AND WARRANTIES OF THE
INVESTORS
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Investor
hereby represents and warrants to the Company with respect to the purchase
of
the New Preferred Shares to be purchased by it as follows:
4.1 Experience.
Investor acknowledges that it is able to bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the New Preferred Shares and the Conversion Shares and is able to bear the
economic risk of its investment in the New Preferred Shares and Conversion
Shares for an indefinite period of time.
4.2 Disclosure
of Information. Investor further represents that it has had an
opportunity to ask questions of and receive answers from the Company regarding
the terms and conditions of the offering of the New Preferred Shares and the
business, prospects, properties and financial condition of the
Company.
4.3 Investment.
Investor is acquiring the New Preferred Shares and the Conversion Shares for
investment for its own account, not as a nominee or agent, and not with the
view
to, or for resale in connection with, any distribution thereof. It understands
that the New Preferred Shares have not been, and the Conversion Shares will
not
be, (except for specific registration rights granted to the Investor),
registered under the Securities Act by reason of a specific exemption from
the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and
the
accuracy of Investor’s representations as expressed herein.
4.4 Accredited
Investor. Investor is an “accredited investor” as defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
4
4.5 Legends.
It is understood that the certificates evidencing the New Preferred Shares
and
the Conversion Shares may bear one or all of the following legends:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE 144
OF
SUCH ACT.”
Any
other
legend required by the securities laws of the State of California.
4.6 Authorization.
The
execution, delivery and performance by Investor of the Agreement has been duly
authorized by all requisite action of Investor. The Agreement, when executed
and
delivered by Investor, shall constitute valid and legally binding obligations
of
Investor, enforceable in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors’ rights
generally.
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5.
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INVESTOR’S
CONDITIONS TO CLOSING
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Investor’s
obligation to purchase the New Preferred Shares at the Closing is, at the option
of Investor, subject to the fulfillment of the following conditions on or before
the Closing:
5.1 Representations
and Warranties True and Correct. The representations and warranties
made by the Company in Section 2 hereof shall be true and correct as of the
Closing, with the same effect as if made as of the Closing.
5.2 Covenants.
All covenants, agreements and conditions contained in this Agreement to be
performed by the Company on or prior to the Closing shall have been performed
or
complied with.
5.3 Certificate.
Prior to the Closing, the Company shall have prepared and executed the
Certificate in the form set forth in Exhibit B. The Certificate shall have
been
filed with and accepted by the Secretary of State of the State of Nevada and
shall have become effective.
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6.
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COMPANY’S
CONDITIONS TO EACH
CLOSING
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The
Company’s obligation to sell and issue any New Preferred Shares at the Closing
to Investor is, at the option of the Company, subject to the fulfillment of
the
following conditions as of the Closing:
6.1 Representations
and Warranties True and Correct.
The
representations and warranties made by Investor in Section 3 hereof shall be
true and correct when made, and shall be true and correct at the Closing.
5
6.2 Covenants.
All covenants, agreements and conditions contained in this Agreement to be
performed by Investor on or prior to the Closing shall have been performed
or
complied with.
6.3 Certificate.
The Secretary of State of the State of Nevada shall have accepted the
Certificate for filing.
6.4 Purchase
Price Paid.
Investor
shall have delivered to the Company the purchase price for the New Preferred
Shares set forth in Exhibit A hereto.
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7.
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COVENANTS.
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7.1 Reserve
for Conversion Shares. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, for
the purpose of effecting the conversion of the New Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the New Preferred Shares from time to time outstanding or
otherwise to comply with the terms of this Agreement. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the New Preferred Shares or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
The Company will obtain any authorization, consent, approval or other action
by
or make any filing with any court or governmental authority that may be required
under applicable state securities laws in connection with the issuance of shares
of Common Stock upon conversion of the New Preferred Shares.
7.2 Further
Assurances. The Company shall cure promptly any defects in the
creation and issuance of the New Preferred Shares and the Conversion Shares,
and
in the execution and delivery of the Agreements. The Company, at its expense,
shall execute and deliver promptly to the Investor upon request all such other
and further documents, agreements and instruments as may be reasonably necessary
to permit the Company to comply with its covenants and agreements herein, and
shall make any recordings, file any notices and obtain any consents as may
be
necessary or appropriate in connection therewith.
7.3 Regulation
D Filings. The Company shall file on a timely basis all notices of
sale required to be filed with the Securities and Exchange Commission pursuant
to Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”),
with
respect to the transactions contemplated by this Agreement.
7.4
Piggyback
Registrations.
7.4.1 Right
to Include Conversion Shares.
Each
time that the Company proposes for any reason to register any of its Common
Stock under the Securities Act, either for its own account or for the account
of
a stockholder or stockholders, other than Registration Statements on Forms
S-4
or S-8 (or similar or successor forms) (a “Proposed
Registration”),
the
Company shall promptly give written notice of such Proposed Registration to
the
Investor (which notice shall be given in no event less than ten (10) days prior
to the expected filing date of the Proposed Registration) and shall offer
Investor the right to request inclusion of Investor’s Conversion Shares in the
Proposed Registration. The rights to piggyback registration may be exercised
on
an unlimited number of occasions.
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7.4.2 Piggyback
Procedure.
Investor shall have twenty (20) days from the date of receipt of the Company’s
notice referred to in Section 6.4.1 above to deliver to the Company a written
request specifying the number of Conversion Shares Investor intends to sell
and
Investor’s intended method of disposition. Investor shall have the right to
withdraw Investor’s request for inclusion of Investor’s Conversion Shares in any
Proposed Registration pursuant to this Section 7.4 by giving written notice
to
the Company of such withdrawal; provided,
however,
that
the Company may ignore a notice of withdrawal made within less than one full
business day prior to the date the Proposed Registration is scheduled to become
effective. Subject to Section 7.4.4 below, the Company shall use its reasonable
best efforts to include
in such Proposed Registration all such Conversion Shares so requested to be
included therein; provided,
however,
that
the Company may at any time withdraw or cease proceeding with any such Proposed
Registration if it shall at the same time withdraw or cease proceeding with
the
registration of all other shares of Common Stock originally proposed to be
registered.
7.4.3 Selection
of Underwriters.
The
managing underwriter for any Proposed Registration that involves an underwritten
public offering shall be one or more reputable nationally recognized investment
banks selected by the Company.
7.4.4 Priority
for Piggyback Registration.
7.4.4.1 Notwithstanding
any other provision of this Section 7.4, if the managing underwriter of an
underwritten public offering determines and advises the Company and the Investor
in writing that the inclusion of all Conversion Shares proposed to be included
by the Investor in the underwritten public offering would materially and
adversely interfere with the successful marketing of the Company’s securities in
the Proposed Registration, then the Investor shall not be permitted to include
any Conversion Shares in excess of the amount, if any, of Conversion Shares
which the managing underwriter of such underwritten public offering shall
reasonably and in good faith agree in writing to include in such public offering
in addition to the amount of securities to be registered for the Company. No
party, other than the Company and the Investor, shall be permitted to include
their shares in any such Proposed Registration unless such shares are also
limited on a pro rata basis equal to the ratio which such party’s requested
shares bear to the total number of Conversion Shares requested to be included
in
such Proposed Registration by Investor. The securities to be included in a
Proposed Registration initiated by the Company shall be allocated:
first,
to the Company; second, pari
passu
to the
Investor, and third, to any others requesting registration of securities of
the
Company.
7.4.4.2 Notwithstanding
any portion of the foregoing to the contrary, in no event shall the shares
to be
sold by the Investor be reduced below twenty percent (20%) of the total amount
of securities included in the Proposed Registration. No stockholder of the
Company shall be granted piggyback registration rights which would reduce the
number of shares to be included by the Investor in such registration without
the
consent of the Investor.
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7.4.4.3 If
as a
result of the provisions of this Section 7.4, Investor shall not be entitled
to
include more than 50% of its Conversion Shares in a registration that Investor
has requested to be so included, Investor may withdraw Investor’s request to
include Conversion Shares in such Proposed Registration.
7.4.5 Underwritten
Offering.
In the
event that the Proposed Registration by the Company is, in whole or in part,
an
underwritten public offering of securities of the Company, any request under
this Section 7.4 shall specify that the Conversion Shares be included in the
underwriting on the same terms and conditions as the shares, if any, otherwise
being sold through the underwriters under such registration.
7.4.6 Transfer.
The
foregoing registration rights may be transferred to any transferee that acquires
all of the Series A Preferred Stock.
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8.
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MISCELLANEOUS
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8.1 Closing.
Investor
expressly acknowledges and agrees that immediately following the Closing,
Investor shall have deemed its conditions to closing identified in Section
5
hereof to have been satisfied or waived.
8.2 Governing
Law. This Agreement shall be governed in all respects by the
internal laws of the State of California, without giving effect to principles
of
conflicts of law, as applied to agreements entered into among California State
residents to be performed entirely within California. Each party hereto
irrevocably and unconditionally (i) agrees that any action, suit or claim
brought hereunder must be brought in the courts of the United States in the
State of California or the state courts of the State of California which shall
serve as the exclusive jurisdiction and venue for any and all disputes arising
out of and/or relating to this Agreement; (ii) consents to the jurisdiction
of
any such court in any such suit, action or proceeding; and (iii) waives any
objection which such party may have to the laying of venue of any such suit,
action or proceeding in any such court.
8.3 Successors
and Assigns. Except as otherwise provided herein, the provisions of
this Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
(including to any transferee of any New Preferred Shares or Conversion Shares
that is an affiliate of the Investor). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto
or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.4 Amendment.
Any provision of this Agreement may be amended, waived, modified, discharged
or
terminated only with the written consent of the Company and the Investor. Any
amendment or waiver affected in accordance with this Section 8.4 shall be
binding upon the Company and Investor and future holders of all such securities.
Investor may waive his rights or the Company’s obligations with respect to its
New Preferred Shares hereunder without obtaining the consent of any other
natural person or Person.
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8.5 Notices.
All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given (a) upon personal delivery to the party to be notified,
(b) five (5) days after deposit in the United States mail, by registered or
certified mail, postage prepaid and properly addressed to the party to be
notified as set forth in the Company records, or (c) when received if
transmitted by telecopy (to be followed by U.S. mail), electronic or digital
transmission method. In each case notice shall be sent to the addresses set
forth on the Company’s records or at such other address as a party may designate
by ten (10) days’ advance written notice to the other parties
hereto.
8.6 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one and the same
instrument.
8.7 Severability.
In the event that any provision of this Agreement becomes or is declared by
a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision.
8.8 Titles
and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.9 Survival
of Agreement.
All
covenants and agreements made in this Agreement shall survive the execution
and
delivery hereof and the issuance, sale and delivery of the New Preferred Shares,
and the issuance and delivery of the Conversion Shares. For the avoidance of
doubt, the representations and warranties made in this Agreement shall not
survive the execution and delivery hereof.
8.10 Attorneys'
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of the Agreements, the prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.11 Facsimile
Signatures.
This
Agreement may be executed and delivered by facsimile and, upon such delivery,
the facsimile will be deemed to have the same effect as if the original
signature had been delivered to the other party. Investor agrees to deliver
to
the Company the original signature copy by express overnight delivery. The
failure to deliver the original signature copy and/or the nonreceipt of the
original signature copy shall have no effect upon the binding and enforceable
nature of this Agreement.
8.12 Entire
Agreement. This Agreement, together with the Exhibits hereto, the
certificates, documents, instruments and writings that are delivered pursuant
hereto and each of the other Agreements, constitutes the entire agreement and
understanding of the parties hereto in respect of its subject matters and
supersedes all prior understandings, agreements, or representations by or among
the parties hereto, written or oral, to the extent they relate in any way to
the
subject matter hereof or the transactions contemplated hereby.
Company
Signature Page to Preferred Stock Rescission and Purchase
Agreement
9
IN
WITNESS WHEREOF,
the
parties have executed this Preferred Stock Rescission and Purchase Agreement
on
the day and year first set forth above.
| Blue Holding, Inc. | ||
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| /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | ||
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By: ▇▇▇▇▇
▇▇▇▇▇▇
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Title: Chief
Executive Officer
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10
Investors
Signature Page to Preferred Stock Rescission and Purchase
Agreement
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INVESTOR:
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| ▇▇▇▇ ▇▇▇▇ | |||
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By:
▇▇▇▇ ▇▇▇▇
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EXHIBIT
A
Schedule
of Investors
|
Closing
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||||
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Investor
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Number
of New Preferred Shares
To
Be Purchased
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Aggregate
Purchase Price
For
New Preferred Shares
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▇▇▇▇
▇▇▇▇*
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1,000,000
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$2,681,682**
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* Investor
may be ▇▇▇▇ ▇▇▇▇ or any accredited investor designee thereof that executes
a
joinder hereto.
** Represents
(i) the cancellation of indebtedness due and owing to Investor, in the aggregate
principal and interest amount of $2,556,682, and (ii) the delivery of $125,000
by wire transfer of immediately available funds.
EXHIBIT
B
AMENDED
AND RESTATED
CERTIFICATE
OF DESIGNATIONS,
PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES
A CONVERTIBLE PREFERRED STOCK
OF
Pursuant
to Section 78.195 of the General Corporation Law
of
the
State of Nevada
Blue
Holdings, Inc., a Nevada corporation (hereinafter called the “Corporation”),
hereby certifies that, pursuant to the authority expressly vested in the Board
of Directors of the Corporation by the Articles of Incorporation, as amended
(the “Articles
of Incorporation”),
and
in accordance with the provisions of Section 78.195 of the General Corporation
Law of the State of Nevada, the Board of Directors has duly adopted the
following resolutions:
RESOLVED,
that the
Corporation previously filed with the Secretary of State of the State of Nevada
on November 14, 2007 a Certificate of Designations, Preferences, Rights and
Limitations of Series A Convertible Preferred Stock of the Corporation (the
“Original
Certificate of Designations”);
RESOLVED
FURTHER, that, pursuant to the Articles of Incorporation (which authorizes
5,000,000 shares of preferred stock, $0.001 par value per share (“Preferred
Stock”)),
the
Board of Directors hereby amends and restates the Original Certificate of
Designations to amend and restate the powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of the Series A Convertible
Preferred Stock; and
RESOLVED
FURTHER, that the Corporation is authorized to issue Series A Convertible
Preferred Stock on the following terms and with the provisions herein set
forth:
(1)
Designation
and Number of Shares.
Of the
5,000,000 shares of Preferred Stock authorized pursuant to the Fourth Article
of
the Corporation's Articles of Incorporation, 1,000,000 shares are hereby
designated as Series A Convertible Preferred Stock (the “Series
A Preferred Stock”).
(2)
Par
Value.
Each
share of Series A Preferred stock will have a par value of $0.001 per share.
(3)
Dividends.
(a)
Dividend
Accrual.
The
holder of record of each share of Series A Preferred Stock of the Corporation
(a
“Holder”)
shall
be entitled to receive a cumulative share dividend (a “Dividend”)
equal
to the Dividend Rate (as defined below), payable only when, as and if declared
by the Board of Directors. Such dividends will accrue and accumulate annually
whether or not they have been declared. The “Dividend
Rate”
shall
mean six percent (6%) of the Purchase Price. For purposes of this Certificate
of
Designations, the “Purchase
Price”
for
each share of Series A Preferred Stock shall be $2.681682 per
share.
(b)
Further
Dividends.
After
payment of any such Dividends, and subject to the rights of any series of
Preferred Stock with preference or priority over or on a parity with the Common
Stock or Series A Preferred Stock with respect to the right to receive any
dividends, any additional dividends shall be distributed among all holders
of
Common Stock pro rata.
(c)
Dividend
Payment.
(i) No
Dividend distribution shall be made with respect to accrued or declared but
unpaid dividends on any Series A Preferred Stock unless and until such shares
are (i) converted to Common Stock pursuant to Section
6,
or (ii)
delivered in a Liquidation Event.
(ii) So
long
as any shares of Series A Preferred Stock are outstanding, the Corporation
shall
not declare, pay or set aside for payment any dividend or other distribution
in
respect of its Common Stock until all Dividends declared and unpaid with respect
to the Series A Preferred Stock have been paid.
(ii) Notwithstanding
any provision to the contrary set forth in this Certificate of Designations,
no
payment shall be made with respect to declared but unpaid Dividends on any
Series A Preferred Stock that are converted into Common Stock.
(4)
Liquidation.
(a)
Liquidation
Preference.
In the
event of any liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary (a “Liquidation
Event”),
subject to the rights of any other series of Preferred Stock that are in
existence or may, from time to time, come into existence, the cash and other
assets of the Corporation available for distribution to shareholders shall
be
distributed among the holders of the Series A Preferred Stock, prior to any
amount being distributed to or among the holders of common stock, $0.001 par
value per share, of the Corporation (the “Common
Stock”),
such
that for each share of Series A Preferred Stock, a holder of Series A Preferred
Stock shall be entitled to receive an amount equal to the Purchase Price, as
adjusted for any stock dividends, combinations or splits with respect to such
shares, plus all accrued but unpaid Dividends on each such share (pursuant
to
Section
3(a))
(the
“Liquidation
Preference”).
The
cash value of any remaining cash and other distributable property that is
available for distribution to the holders of equity of the Corporation (after
payment of the Liquidation Preference to the Series A Preferred Stock and any
other liquidation preference amount to any other class of equity securities
of
the Corporation) shall be distributed among among all holders of Common Stock
pro rata.
(b)
Merger;
Sale.
The
following events shall be deemed to constitute a Liquidation Event under this
Section
4:
(i) the
sale, lease, transfer, exclusive license or other disposition of all or
substantially all of the assets of the Corporation, or (ii) the acquisition
of
the Corporation by another entity by means of merger, consolidation, share
exchange, reorganization or otherwise pursuant to which shares of capital stock
of the Corporation are converted into cash, securities or other property of
the
acquiring entity or any of its affiliates and which results in the holders
of
voting securities (excluding shares of the surviving entity held by holders
of
the capital stock of the Corporation acquired by means other than the exchange
or conversion of the capital stock of the Corporation for shares of the
surviving entity) of the Corporation immediately prior to such merger,
consolidation, share exchange, reorganization or sale of assets beneficially
owning, directly or indirectly, less than a majority of the combined voting
power of the surviving entity resulting from such merger, consolidation, share
exchange, reorganization or sale of assets (any of the foregoing transactions,
a
“Deemed
Liquidation Event ”).
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(c)
Valuation
of Consideration.
If the
consideration received by the Corporation is other than cash in connection
with
any of the events set forth above, its value shall be deemed its fair market
value as determined in good faith by the Board; provided,
however,
that if
the consideration consists of securities, the fair market value of such
securities shall be valued as follows:
(i) if
traded
on a securities exchange or through the NASDAQ Stock Market, the value shall
be
deemed to be the average of the closing prices of the securities on such
exchange or system over the thirty (30) day period ending three (3) days prior
to the closing;
(ii) if
actively traded over-the-counter, the value shall be deemed to be the average
of
the closing bid or sale prices (whichever is applicable) over the thirty (30)
day period ending three (3) days prior to the closing; and
(iii) if
there
is no active public market, the value shall be the fair market value thereof,
as
determined in good faith by the Board.
(d)
Alternative
Amount.
Notwithstanding Section
4(a)
above,
each holder of Series A Preferred Stock shall have the right to elect the
conversion benefits of the provisions of Section 6
or other
applicable conversion provisions in lieu of receiving the Liquidation Preference
pursuant to Section
4(a).
(5)
Redemption.
The
Series A Preferred Stock does not have any redemption rights.
(6)
Conversion.
(a)
Right
to Convert.
Each
share of Series A Preferred Stock shall be convertible, at the option of the
Holder, at any time after the date of issuance of such share, at the office
of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
(i)
the Purchase Price plus all accrued but unpaid Dividends on each such share
(pursuant to Section
3(a),
by (ii)
the Conversion Price, determined as hereafter provided, in effect on the date
the certificate is surrendered for conversion (such quotient is referred to
as
the “Conversion
Rate”).
The
initial “Conversion
Price”
per
share for the Series A Preferred Stock shall be $0.58 and shall be subject
to
adjustment as set forth in Section
6(d).
For the
avoidance of doubt, the Conversion Price represents the consolidated closing
bid
price for a share of the Common Stock prior to the signing of the definitive
agreement applicable to the transaction pursuant to which each Holder acquired
their shares of Series A Preferred Stock.
3
(b)
Automatic
Conversion.
Each
share of Series A Preferred Stock shall automatically be converted into shares
of Common Stock at the Conversion Rate at the time in effect immediately upon
the date specified by written consent or agreement of the holders of a majority
of the then outstanding Series A Preferred Stock.
(c)
Mechanics
of Conversion.
Before
any Holder of Series A Preferred Stock shall be entitled to convert the same
into shares of Common Stock, the Holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any
transfer agent for the Series A Preferred Stock, and shall give written notice
to the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate
or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
Holder of Series A Preferred Stock, or to the nominee or nominees of such
Holder, a certificate or certificates for the number of shares of Common Stock
to which such Holder shall be entitled as aforesaid. Such conversion shall
be
deemed to have been made immediately prior to the close of business on the
date
of such surrender of the shares of Series A Preferred Stock to be converted,
and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or
holders of such shares of Common Stock as of such date. If the conversion is
in
connection with an underwritten offering of securities, the conversion may,
at
the option of any holder tendering shares of Series A Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale
of
securities pursuant to such offering, in which event the persons entitled to
receive the Common Stock upon conversion of the shares of Series A Preferred
Stock shall not be deemed to have converted such shares of Series A Preferred
Stock until immediately prior to the closing of such sale of
securities.
(d)
Adjustments
to Conversion Rate and Reorganization. The Conversion Rate for the number of
shares of Common Stock into which the Series A Preferred Stock shall be
converted on a conversion shall be subject to adjustment from time to time
as
hereinafter set forth:
(i) Stock
Dividends - Recapitalization, Reclassification, Split-Ups.
If,
prior to the date of a conversion, the number of outstanding shares of Common
Stock is increased by a stock dividend on the Common Stock payable in shares
of
Common Stock or by a stock split, recapitalization or reclassification of shares
of Common Stock or other similar event, then, on the effective date thereof,
the
Conversion Rate will be adjusted so that the number of shares of Common Stock
issuable on the conversion of the Series A Preferred Stock shall be increased
in
proportion to such increase in outstanding shares of Common Stock.
(ii) Aggregation
of Shares.
If
prior to the date of conversion, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination, reverse stock split or
reclassification of shares of Common Stock or other similar event, then, upon
the effective date thereof, the number of shares of Common Stock issuable on
the
conversion of the Series A Preferred Stock shall be decreased in proportion
to
such decrease in outstanding shares of Common Stock.
4
(iii) Change
Resulting from Reorganization or Change in Par Value, etc.
In case
of any reclassification or reorganization of the outstanding shares of Common
Stock which solely affects the par value of the shares of Common Stock, or
in
the case of any merger or consolidation of the Corporation with or into another
corporation (other than a consolidation or merger in which the Corporation
is
the continuing corporation and which does not result in any reclassification
or
reorganization of the outstanding shares of Common Stock), or in the case of
any
sale or conveyance to another corporation or entity of the property of the
Corporation as an entirety or substantially as an entirety in connection with
which the Corporation is dissolved, the holders of the Series A Preferred Stock
shall have the right thereafter (unless otherwise converted) to receive upon
the
conversion of the Series A Preferred Stock the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or other transfer, by a holder of the number of shares
of Common Stock into which the Series A Preferred Stock is convertible
immediately prior to such event; and if any reclassification also results in
a
change in shares of Common Stock, then such adjustment also shall be
made.
(iv) Successive
Changes.
The
provisions of this Section shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
(7)
Voting
Rights.
The
holders of record of shares of Series A Preferred Stock shall be entitled to
the
following voting rights:
(a)
Those
voting rights required by applicable law and as provided in Section 0
hereof;
(b)
The
right
to vote together with the holders of the Common Stock, as a single class, upon
all matters submitted to holders of Common Stock for a vote. Each
share of Series A Preferred Stock will carry a number of votes equal to the
number of shares of Common Stock issuable in a conversion based on the then
applicable Conversion Rate; and
(c)
Whenever
holders of Series A Preferred Stock are required or permitted to take any action
by vote, such action may be taken without a meeting on written consent, setting
forth the action so taken and signed by the holders of the outstanding capital
stock of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
such shares entitled to vote thereon were present and voted. Each share of
the
Series A Preferred Stock shall entitle the holder thereof to one vote on all
matters to be voted on by the holders of the Series A Preferred Stock, as set
forth in this Section
7(c).
(8)
No
Impairment.
The
Corporation will not, by amendment of its Articles of Incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this section and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Series A Preferred Stock against
impairment.
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(9)
No
Fractional Shares and Certificate as to Adjustments.
No
fractional shares shall be issued upon the conversion of any share or shares
of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. The number of shares
issuable upon conversion shall be determined on the basis of the total number
of
shares of Series A Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(10)
Notices
of Record Date.
In the
event of any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or any other
right, the Corporation shall mail to each holder of Series A Preferred Stock,
at
least ten (10) days prior to the date specified therein, a notice specifying
the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(11)
Notices.
Any
notice required by the provisions of this Certificate of Designations to be
given to the holders of shares of Series A Preferred Stock shall be deemed
given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the
Corporation.
(12)
Protective
Provisions.
So long
as any shares of Series A Preferred Stock are outstanding, the Corporation
shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, voting as a separate class: (i) amend,
alter or repeal the preferences, privileges, special rights or other powers
of
the Series A Preferred Stock, as set forth herein, in a manner adverse to
the holders thereof;
(ii) create,
issue, or obligate itself to issue any new class or series of stock or any
other
equity security (including any security convertible into or exercisable for
any
equity security) ranking senior to the Series A Preferred Stock as to
dividend rights, redemption rights, conversion rights or liquidation
preferences;
(iii) reclassify
any existing class or series of outstanding shares into a class or series of
stock or any other equity security (including any security convertible into
or
exercisable for any equity security) ranking senior to, or on a parity with,
the
Series A Preferred Stock as to dividend rights, redemption rights, conversion
rights or liquidation preferences;
or
(iv) amend
its
Certificate of Incorporation or Bylaws in any manner that adversely affects
the
preferences, privileges, restrictions or other rights of the holders of
Series A Preferred Stock.
(13)
Return
of Status as Authorized Shares.
Upon a
conversion or any other redemption or extinguishment of the Series A Preferred
Stock, the shares converted, redeemed or extinguished will be automatically
returned to the status of authorized and unissued shares of Preferred Stock,
available for future designation and issuance pursuant to the terms of the
Articles of Incorporation.
6
RESOLVED
FURTHER, that the statements contained in the foregoing resolutions amending
and
restating the terms applicable to the said Series A Convertible Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon
the
effective date of said series, be deemed to be included in and be a part of
the
Articles of Incorporation of the Corporation pursuant to the provisions of
Sections 104 and 151 of the General Corporation Law of the State of
Nevada.
IN
WITNESS WHEREOF,
the
undersigned has executed this Certificate of Designation of the Series A
Convertible Preferred Stock on this 28th day of November, 2007.
| By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | |||
|
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ |
|||
| Title: Chief Executive Officer |
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