FORM OF SERIES 6-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES 6-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is
made as of the
_____
day of August, 2009 by and among Tri-Isthmus Group, Inc., a Delaware corporation
(the “Company”), and ▇▇▇ ▇▇▇▇ (the “Purchaser”).
The parties hereby agree as follows:
1. Authorization and Sale of Shares and Warrants.
1.1 Authorization. The Company has duly authorized the sale and issuance of up to
5,000 shares (the “Shares”) of its Series 6-A Convertible Preferred Stock, par value $0.01
per share (the “Series 6-A Preferred”), and warrants to purchase up to 3,000,000 shares of
the Company’s common stock, par value $0.01 per share (the “Common Stock”), at an exercise
price of $0.50 per share substantially in the form attached hereto as Exhibit A (the
“Warrants”). For purposes of this Agreement, a “Unit” shall consist of one share
of Series 6-A Preferred and one Warrant to purchase 600 shares of Common Stock.
1.2 Purchase and Sale. Upon the terms and subject to the conditions herein, and in
reliance on the representations, warranties and covenants set forth herein, at the Closing
Purchaser shall purchase from the Company, and the Company shall issue and sell to Purchaser,
_____
Units for a purchase price of $1,000.00 per Unit (the “Purchase Price”).
1.3 Defined Terms Used in this Agreement. The following terms used in this Agreement
shall be construed to have the meanings set forth below.
“Affiliate” means with respect to any person or entity (a “Person”), any
Person which, directly or indirectly, controls, is controlled by, or is under common control with
such Person, including, without limitation, any partner, officer, director, or member of such
Person.
“Balance Sheet” means the Company’s balance sheet as of September 30, 2008 included in
the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008.
“Code” means the Internal Revenue Code of 1986, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Material Adverse Effect” means a material adverse effect on the assets or liabilities
of the Company.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
1
2. Closing; Deliveries.
2.1 Closing. The purchase and sale of the Units shall take place as of the date
hereof (which time is designated as the “Closing”).
2.2 Deliveries; Certificate of Designation.
(a) Purchase Price; Shares and Warrants. At the Closing, the Purchaser shall pay the
Purchase Price to the Company. Company shall deliver to Purchaser certificates representing the
Shares and the Warrants being purchased by Purchaser as soon as reasonably practicable after
Closing.
(b) Certificate of Designation. The Company has previously filed the Certificate of
Designation of the Company, in the form attached hereto as Exhibit B (the “Certificate
of Designation”), which establishes the rights and preferences of the Series 6-A Preferred.
3. Representations and Warranties of the Company. The Company hereby represents and
warrants to Purchaser that the following representations are true and correct as of the date
hereof. For purposes of these representations and warranties, the phrase “to the Company’s
knowledge” shall mean the actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer, or
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Financial Officer.
3.1 Organization, Good Standing, Corporate Power and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its business as presently
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 would have a Material
Adverse Effect.
3.2 Capitalization. As of the date of the Company’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2008, the authorized capital stock of the Company consisted of
(i) 100,000,000 shares of Common Stock, 10,122,929 shares of which are issued and outstanding, and
(ii) 5,000,000 shares of preferred stock, of which (a) 67,600 shares of Series 1-A Preferred Stock,
par value $0.01 per share, (b) 3,900 shares of Series 2-A Preferred Stock, par value $0.01 per
share, (c) 8,987 shares of Series 5-A Preferred Stock, par value $0.01 per share, and (d) 4,607
shares of Series 6-A Preferred, are issued and outstanding. Except as disclosed in the Company’s
SEC Filings (as that term is defined herein) and as contemplated hereby, there are no currently
outstanding subscriptions, options, warrants, commitments, agreements or arrangements for or
relating to the issuance, or sale of, or outstanding securities convertible into or exchangeable
for, any shares of capital stock of any class or other equity interests of the Company. As of the
Closing, and after giving effect to the transactions contemplated hereby, all of the outstanding
shares of capital stock of the Company will have been duly and validly authorized and issued and
will be fully paid
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
2
and non-assessable and will have been offered, issued, sold and delivered in compliance with applicable federal and state securities laws and
not subject to any preemptive rights. When issued in accordance with the terms of the Series 6-A
Preferred and the Warrants, the shares of Common Stock issuable upon exercise of Series 6-A
Preferred and the Warrants will be validly issued, fully paid and non-assessable. The terms
relating to the Warrants are as set forth in Exhibit A attached hereto. The relative
rights, preferences and other terms relating to the Series 6-A Preferred are as set forth in
Exhibit B attached hereto. There are no preemptive rights, rights of first refusal, put or
call rights or obligations or any other purchase or redemption obligations or anti-dilution rights
with respect to the Company’s capital stock or any interests therein, except as disclosed in the
Company’s SEC Filings (as that term is defined herein) or rights set forth herein or in the
Company’s Certificate of Incorporation or the Certificates of Designation establishing such capital
stock.
3.3 Authorization; No Conflict. The execution, delivery and performance by the
Company of this Agreement, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms. The execution of and performance of the
transactions contemplated by this Agreement and the compliance with its provisions by the Company
will not (a) conflict with or violate any provision of the Certificate of Incorporation or Bylaws
of the Company, (b) conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under,
any material contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security Interest (as defined
below) or other arrangement to which the Company is a party or by which the Company is bound or to
which its assets are subject, (c) result in the imposition of any Security Interest upon any assets
of the Company or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets. For purposes of this Agreement,
“Security Interest” means any mortgage, pledge, security interest, encumbrance, charge, or
other lien (whether arising by contract or by operation of law).
3.4 Valid Issuance of Shares. The Shares, when issued, sold and delivered in
accordance with the terms and for the consideration set forth in this Agreement, will be validly
issued, fully paid and non-assessable and free of restrictions on transfer other than restrictions
on transfer under applicable state and federal securities laws and liens or encumbrances created by
or imposed by Purchaser. Assuming the accuracy of the representations of the Purchaser in
Section 4 of this Agreement and subject to the filings described in Section 3.5
below, the Shares will be issued in compliance with all applicable federal and state securities
laws. The Common Stock issuable upon conversion of the Shares and exercise of the Warrants has
been duly reserved for issuance, and upon issuance, will be validly issued, fully paid and
non-assessable and free of restrictions on transfer other than restrictions on transfer under
applicable federal and state securities laws and liens or encumbrances created by or imposed by
Purchaser. Based in part upon the representations of the Purchaser in Section 4 of this
Agreement, and subject to Section 3.5 below, the Common Stock issuable upon conversion of
the Shares and exercise of the Warrants will be issued in compliance with all applicable federal
and state securities laws.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
3
3.5 Governmental Consents and Filings. Assuming the accuracy of the representations
made by the Purchaser in Section 4 of this Agreement, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority is required on the part of the Company in connection
with the consummation of the transactions contemplated by this Agreement, except such filings as
shall have been made prior to and shall be effective on and as of the Closing and such filings
required to be made after the Closing under applicable federal and state securities laws.
3.6 Compliance with Laws. The Company has complied in all material respects with all
laws, regulations and orders applicable to its present and currently proposed business and has all
material permits and licenses required thereby, except where the failure to have such permits or
licenses would not have a Material Adverse Effect.
3.7 Absence of Litigation. Except as disclosed in the Company’s periodic reports
filed with the SEC (the “SEC Filings”), there is no action, suit or proceeding pending or,
to the Company’s knowledge, threatened, against the Company which questions the validity of this
Agreement or the right of the Company to enter into it, or which might result, either individually
or in the aggregate, in a Material Adverse Effect.
3.8 Absence of Liabilities. The Company does not have any material liabilities or
obligations, whether accrued, absolute, contingent or otherwise, of the type required to be
disclosed on a balance sheet other than (i) such matters as are specifically and expressly set
forth on the Balance Sheet or (ii) those which have been incurred by the Company in the ordinary
course of business during the period from the date of the Balance Sheet to the date hereof.
3.9 Material Contracts and Obligations. Except as disclosed in the Company’s SEC
Filings, the Company is not a party to, nor is it bound by any of the following types of
agreements: (a) any agreement under which the Company is restricted from carrying on any business
or other services anywhere in the world; or (b) any agreement for the disposition of a material
portion of the Company’s assets.
3.10 Changes. Except as disclosed in the Company’s SEC Filings, since September 30,
2008, there has not been:
(a) any material change in the assets or liabilities of the Company from that reflected on the
Balance Sheet, except changes in the ordinary course of business that have not caused, in the
aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance, that would have a
Material Adverse Effect;
(c) any waiver or compromise by the Company of a valuable right or of a material debt owed to
it;
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
4
(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and the satisfaction or
discharge of which would not have a Material Adverse Effect;
(e) any material change to a material contract or agreement by which the Company or any of its
assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(g) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company,
with respect to any of its material properties or assets, except liens for taxes not yet due or
payable and liens that arise in the ordinary course of business and do not materially impair the
Company’s ownership or use of such property or assets;
(h) any loans or guarantees made by the Company to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than travel advances and
other advances made in the ordinary course of its business;
(i) any declaration, setting aside or payment or other distribution in respect of any of the
Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of
any of such stock by the Company;
(j) to the Company’s knowledge, any other event or condition of any character, other than
events affecting the economy or the Company’s industry generally, that could reasonably be expected
to result in a Material Adverse Effect; or
(k) any agreement or commitment by the Company to do any of the foregoing.
3.11 Employees. The Company’s only current employees are ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and an
administrative secretary.
3.12 No Stop Order. No stop order suspending or prohibiting the transactions
contemplated by this Agreement has been issued by the SEC or the regulatory authorities of any
state and, to the Company’s knowledge, no proceeding for that purpose has been initiated or is
threatened or contemplated by the SEC or the regulatory authorities of any state.
3.13 Quotation of Common Stock. The Company’s Common Stock continues to be quoted on
the OTC Bulletin Board under the ticker symbol, “TISG.OB”.
3.14 Directors and Officer’s Liability Insurance. The Company has made all payments
under its existing policy of directors and officers’ liability insurance on a timely basis.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
5
4. Representations and Warranties of the Purchaser. Purchaser hereby represents and
warrants to the Company that:
4.1 Authorization. The Purchaser has full power and authority to enter into this
Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute the valid
and legally binding obligation of the Purchaser, enforceable in accordance with its terms.
4.2 Purchase for Own Account; Accredited Investor. This Agreement is made with the
Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that the Shares to be acquired by the
Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further represents that the
Purchaser does not presently have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participations to such Person or to any third Person, with
respect to any of the Shares. The Purchaser has not been formed for the specific purpose of
acquiring the Shares. The Purchaser is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
4.3 Experience. The Purchaser has carefully reviewed the representations concerning
the Company contained in this Agreement and has made detailed inquiry concerning the Company, its
business and its personnel. The officers of the Company have made available to the Purchaser any
and all information which the Purchaser has requested and have answered to the Purchaser’s
satisfaction all inquiries made by the Purchaser; and the Purchaser has sufficient knowledge and
experience in finance and business that it is capable of evaluating the risks and merits of its
investment in the Company and the Purchaser is able financially to bear the risks thereof.
4.4 Restricted Securities. The Purchaser understands that the offer and sale of the
Shares and the Warrants and the offer and sale of the Common Stock issuable upon conversion of the
Shares and exercise of the Warrants have not been registered under the Securities Act, by reason of
a specific exemption from the registration provisions of the Securities Act which depends upon,
among other things, the bona fide nature of the investment intent and the accuracy of the
Purchaser’s representations as expressed herein. The Purchaser understands that the Shares, the
Warrants and the Common Stock issuable upon conversion of the Shares and exercise of the Warrants
are “restricted securities” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Shares, the Warrants and such Common Stock
indefinitely unless the resales of same are registered with the SEC and qualified by state
authorities, or an exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that, except as otherwise provided herein, the Company has no obligation
to register or qualify the offer, sale or resale of the Shares, the Warrants or the Common Stock
issuable upon conversion of the Shares or exercise of the Warrants for resale. The Purchaser
further acknowledges that if an exemption from registration or qualification is available, it may
be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period for the Shares,
the Warrants and the Common Stock issuable upon conversion of the Shares and exercise of the
Warrants, and on requirements relating to the Company which are outside of the Purchaser’s control,
and which the Company is under no obligation and may not be able to satisfy.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
6
4.5 Legends. The Purchaser understands that the Shares, the Warrants and any
securities issued in respect of or exchange for the Shares or exercise of the Warrants, may bear
one or all of the following legends:
(a) “THE OFFER AND SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”
(b) Any legend required by the securities laws of any state to the extent such laws are
applicable to the Shares and the Warrants represented by the certificate so legended.
5. Directors’ and Officers’ Insurance and Indemnification. From and after the Closing and
for a period of six years, the Company will provide standard and customary directors’ and officers’
liability insurance coverage commercially consistent with the then-applicable size of the Company
and its operations to current and former officers and directors of the Company (all such directors
and officers are referred to herein as the “Covered Persons”), including run-off for past
acts. From and after the Closing, the Company will fulfill and honor in all respects the
obligations of the Company pursuant to any indemnification obligations of the Company with respect
to each of the Covered Persons, and any indemnification provisions under the Company’s certificate
of incorporation and bylaws will contain provisions with respect to exculpation and indemnification
that are at least as favorable to the Covered Persons as those contained in the certificate of
incorporation and bylaws of the Company as in effect on the date hereof, which provisions will not
be amended, repealed or otherwise modified for a period of six years from the Closing in any manner
that would adversely affect the rights of the Covered Persons, unless such modification is required
by law. This covenant shall be enforceable by the Covered Persons as third party beneficiaries,
and shall be binding on all successors and assigns of the Company.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
7
6. Registration Rights.
6.1 Registration Obligations. Upon demand by holders owning at least Fifty Percent
(50%) of the outstanding Shares, the Company shall include the shares of Common Stock issuable upon
conversion of the Series 6-A Preferred and exercise of the Warrants (the “Registrable
Securities”) in a registration statement prepared by the Company and filed with the SEC within
thirty (30) days of such demand (the “Registration Statement”); provided, that no
demand shall be made sooner than the six month anniversary of the Closing and the Purchaser
shall be entitled to only one demand to register the resale of the Registrable Securities
pursuant to this Section 6.1. The Registration Statement will be on Form SB-2 or other
appropriate form (as the Company shall determine in its sole discretion) and will permit the
Registrable Securities to be offered on a continuous basis. The Company shall use its commercially
reasonable efforts to cause the Registration Statement to be declared effective under the
Securities Act by the SEC as promptly as possible after the filing thereof. The Company shall use
its commercially reasonable efforts to keep the Registration Statement continuously effective under
the Securities Act until the date which is the earliest of (a) the date on which all Registrable
Securities have been sold, (b) the date on which all Registrable Securities may be sold immediately
without registration of the offer and sale thereof under the Securities Act and without volume
restrictions pursuant to Rule 144(k) of the Securities Act or (c) two years from the date the
Registration Statement is declared effective by the SEC.
6.2 Suspension of Registration Obligations. The Company’s obligations under this
Section 8 shall be suspended if (a) the fulfillment of such obligations would require the
Company to make a disclosure that would be detrimental to the Company and the Company’s Board of
Directors determines that it is in the best interests of the Company to defer such obligations or
(b) the fulfillment of such obligations would require the Company to prepare financial statements
not required to be prepared by the Company to comply with its obligations under the Exchange Act at
the time the Registration Statement is proposed to be filed (the period during which either of the
preceding conditions is in effect is referred to as a “Permitted Black-Out Period”). A
Permitted Black-Out Period will end, as applicable, upon the making of the relevant disclosure by
the Company (or, if earlier, when such disclosure would no longer be necessary or detrimental) or
as soon as it would no longer be necessary to prepare such financial statements to comply with the
Securities Act.
6.3 Expenses; Indemnification. The Company shall pay all costs and expenses incurred
by the Company in connection with the preparation and filing of the Registration Statement, other
than selling commissions and fees which shall be the sole responsibility of the Purchaser. The
Company and the Purchaser shall provide each other with customary indemnification rights in
connection with the Registration Statement prepared and filed with the SEC pursuant to this
Section 6.
7. Indemnification.
7.1 Indemnification by the Company. The Company shall indemnify and hold harmless
Purchaser and its permitted successors and assigns from and against any and all claims, demands,
liabilities, obligations, damages, costs, and expenses (including reasonable attorneys’ fees)
(collectively, “Losses”) arising out of any breach of the Company’s representations,
warranties, covenants or agreements set forth herein; provided, however, that (a)
the Company shall not indemnify Purchaser for any Losses resulting from Purchaser’s negligence or
intentional misconduct or any breach of Purchaser’s representations, warranties, covenants or
agreements hereunder; and (b) the Company’s total liability under this Section 7.1 shall
not exceed the aggregate consideration paid to the Company by the Purchaser for the Units issued
and sold pursuant to this Agreement.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
8
7.2 Indemnification by the Purchaser. The Purchaser will indemnify and hold harmless
the Company and its officers, directors, agents, Affiliates, principal shareholders, successors and
assigns from and against any and all Losses arising out of any breach of the Purchaser’s
representations, warranties, covenants or agreements set forth herein; provided,
however, that the Purchaser shall not indemnify the Company for any Losses resulting from
the Company’s negligence or intentional misconduct or any breach of the Company’s representations,
warranties, covenants or agreements hereunder.
8. Miscellaneous.
8.1 Survival of Representations and Warranties. The representations and warranties of
the Company and the Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one year following the
Closing.
8.2 Successors and Assigns; No Third Party Beneficiaries. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. 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.
8.3 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal substantive laws of the State of Delaware, without regard to its principles of
conflicts of laws.
8.4 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed and delivered by facsimile signature and in two or
more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.5 Notices. All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient, and if not so confirmed, then on the next business day, (c)
five (5) days after having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All communications shall be
sent to the respective parties at their address as set forth on the signature page, or to such
e-mail address, facsimile number or address as subsequently modified by written notice given in
accordance with this Section 8.5. If notice is given to the Company, a copy shall also be
sent to K&L GATES LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: I. ▇▇▇▇▇
▇▇▇▇▇▇▇▇.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
9
8.6 No Finder’s Fees. Each party represents that it neither is nor will be obligated
for any finder’s fee or commission in connection with the transactions contemplated by this
Agreement. Purchaser agrees to indemnify and to hold harmless the Company from any liability for
any commission or compensation in the nature of a finder’s fee arising out of the transactions
contemplated hereby (and the costs and expenses of defending against such liability or asserted
liability) for which Purchaser or any of its representatives is responsible. The Company agrees to
indemnify and hold harmless Purchaser from any liability for any commission or compensation in the
nature of a finder’s or broker’s fee arising out of the transactions contemplated hereby (and the
costs and expenses of defending against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
8.7 Fees and Expenses. All fees and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring such fees or
expenses.
8.8 Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended, terminated or waived only with the written
consent of the Company and the holders of at least a majority of the then-outstanding Shares. Any
amendment or waiver effected in accordance with this Section 8.8 shall be binding upon the
Purchaser and each transferee of the Shares (or the Common Stock issuable upon conversion thereof),
each future holder of all such securities, and the Company.
8.9 Severability. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
8.10 Delays or Omissions. No delay or omission to exercise any right, power or remedy
accruing to any party under this Agreement, upon any breach or default of any other party under
this Agreement, shall impair any such right, power or remedy of such non-breaching or
non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not
alternative.
8.11 Acknowledgement. Each party hereto acknowledges that: (a) it has read this
Agreement; (b) it has been represented in the preparation, negotiation and execution of this
Agreement by legal counsel of its own choice or has voluntarily declined to seek such counsel; and
(c) it understands the terms and consequences of this Agreement and is fully aware of the legal and
binding effect of this Agreement.
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
10
8.12 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the
full and entire understanding and agreement among the parties with respect to the subject matter
hereof, and any other written or oral agreement relating to the subject matter hereof existing
among the parties is expressly canceled.
[SIGNATURE PAGE FOLLOWS]
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
11
IN WITNESS WHEREOF, the parties have executed this Series 6-A Preferred Stock and Warrant
Purchase Agreement as of the date first written above.
| COMPANY: | ||||||
| TRI-ISTHMUS GROUP, INC. | ||||||
| By: | ||||||
| Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. #▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ |
||||||
| PURCHASER: | ||||||
| ▇▇▇ ▇▇▇▇ | ||||||
| Address: | ||||||
SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
[Signature Page]
EXHIBIT A
Form of Warrant
(See attached)
EXHIBIT A TO SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
A-1
EXHIBIT “A”
WARRANT NO. _____
THE OFFER AND SALE OF THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE OFFER AND SALE THEREOF
HAS BEEN REGISTERED UNDER THOSE LAWS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT SUCH DISPOSITION IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
Right to Purchase Shares
of Common Stock of Tri-Isthmus Group, Inc.
of Common Stock of Tri-Isthmus Group, Inc.
TRI-ISTHMUS GROUP, INC.
Common Stock Purchase Warrant
TRI-ISTHMUS GROUP, INC., a Delaware corporation (the “Company”), hereby certifies
that, for value received, , with an address of
(the “Holder”) is entitled, subject to the terms set forth
below, to purchase from the Company at any time on or before 5:00 p.m., Pacific Daylight Time, on
, 2011 (the “Expiration Date”),
( ) fully
paid and nonassessable shares of common stock of the Company, par value $0.01 per share (the
“Common Stock”), at a purchase price per share equal to the Purchase Price, as defined
herein. The number of such shares of Common Stock and the Purchase Price are subject to adjustment
as provided in this Warrant. The initial purchase price for shares subject to this Warrant will be
$0.50 per share (the “Initial Purchase Price”), and will be adjusted from time to time as
provided herein. The Initial Purchase Price or, if such price has been adjusted, the price per
share of Common Stock as last adjusted pursuant to the terms hereof is referred to as the
“Purchase Price” herein.
1. Exercise of Warrant. This Warrant may be exercised by the Holder hereof in full at
any time until the Expiration Date by surrender of this Warrant and the subscription form annexed
hereto (duly executed by the Holder), to the Company, and by making payment in cash or by certified
or official bank check payable to the order of the Company, in the amount obtained by multiplying
(i) the number of shares of Common Stock subject to the Warrant by (ii) the Purchase Price then in
effect.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as practicable after
the exercise of this Warrant, the Company will cause to be issued in the name of and delivered to
the Holder hereof a certificate for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which the Holder shall be entitled on such exercise, plus, in lieu
of any fractional share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as reasonably determined by the Company)
of one full share, together with any other stock or other securities or property (including cash,
where applicable) to which the Holder is entitled upon such exercise. “Other Securities”
shall mean any stock (other than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder at any time shall be entitled to receive, or shall
have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or which
at any time shall be issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Sections 3 or 4.
3. Adjustment.
(a) Initial Purchase Price; Subsequent Adjustment of Price and Number of Purchasable
Shares. The Initial Purchase Price will be adjusted from time to time as provided below. Upon
each adjustment of the Purchase Price, the Holder will thereafter be entitled to purchase, at the
Purchase Price resulting from such adjustment, the number of shares of Common Stock obtained by
multiplying the Purchase Price in effect immediately before such adjustment by the number of shares
of Common Stock purchasable pursuant to this Warrant immediately before such adjustment and
dividing the product by the Purchase Price resulting from such adjustment.
(b) Adjustment for Stock Splits and Combinations. If the Company at any time or from
time to time after the date of this Warrant effects a subdivision of the outstanding shares of
Common Stock, by stock split or otherwise, the Purchase Price then in effect immediately before
that subdivision shall be proportionately decreased; and, conversely, if the Company at any time or
from time to time after the date of this Warrant combines the outstanding shares of Common Stock,
by reverse stock split or otherwise, the Purchase Price then in effect immediately before that
combination shall be proportionately increased. Any adjustment under this Section 3(b) shall
become effective at the close of business on the date the subdivision or combination becomes
effective.
(c) Adjustment for Certain Dividends and Distributions. In the event the Company at
any time or from time to time after the date of this Warrant either makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Common Stock, then and in each
such event the Purchase Price then in effect shall be decreased as of the time of such issuance or,
in the event such a record date is fixed, as of the close of business on such record date, by
multiplying the Purchase Price then in effect by a fraction (1) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the time of such
issuance on the close of business on such record date, and (2) the denominator of which shall be
(i) the total number of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus (ii) the number of shares of
Common Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed
accordingly as of the close of business on such record date or date fixed therefor and thereafter
the Purchase Price shall be adjusted pursuant to this Section 3(c) as of the time of actual payment
of such dividend or distribution. For purposes of the foregoing formula, “the total number of
shares of Common Stock issued and outstanding” on a particular date shall include shares of Common
Stock issuable upon conversion of stock or securities convertible into Common Stock and the
exercise of warrants, options or rights for the purchase of Common Stock which are outstanding on
such date.
2
(d) Adjustments for Other Dividends and Distributions. In the event the Company at
any time or from time to time after the date of this Warrant makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then and in each such
event, provision shall be made so that the Holder shall receive upon exercise hereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount and kind of securities of
the Company which it would have received had this Warrant been exercised for Common Stock as of the
date of such event and had it thereafter, during the period from the date of such event to and
including the date of exercise, retained such securities receivable by it as aforesaid during such
period, subject to all other adjustments called for during such period under this Section 3 with
respect to the rights of the Holder.
(e) Adjustment for Recapitalization, Reclassification, or Exchange. If the Common
Stock issuable upon the exercise of this Warrant is changed into the same or a different number of
shares of any class or classes of stock of the Company, whether by recapitalization,
reclassification or other exchange (other than a subdivision or combination of shares, or a stock
dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in
this Section 3), then and in any such event the Holder shall have the right thereafter to exercise
this Warrant to purchase the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other exchange by holders of the number of shares
of Common Stock which might have been purchased under this Warrant immediately prior to such
recapitalization, reclassification or other exchange, all subject to further adjustment as provided
herein.
(f) Reorganizations, Mergers, Consolidations, Sales of Assets, or Other Change in
Control. If at any time or from time to time there is a capital reorganization of the Common
Stock (other than a subdivision or combination of shares or a stock dividend or a
recapitalization, reclassification or other exchange of shares, provided for elsewhere in this
Section 3 or a merger or consolidation of the Company with or into another corporation, or the sale
of all or substantially all of the Company’s assets to any other person, or any other change in
control that does not involve a change in economic ownership of the Company), then, as a part of
such capital reorganization, provision shall be made so that the Holder shall thereafter be
entitled to receive upon exercise of this Warrant the number of shares of stock or other securities
or property of the Company, or of the successor corporation resulting from such capital
reorganization, to which a holder of the number of shares of Common Stock deliverable upon such
exercise would have been entitled on such capital reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 3 with respect to the
rights of the Holder after the capital reorganization to the end that the provisions of this
Section 3 (including the number of shares deliverable upon exercise of this Warrant) shall continue
to be applicable after that event and shall be as nearly equivalent to the provisions hereof as may
be practicable.
3
(g) Certificate of Adjustment. Upon the occurrence of each adjustment or readjustment
of the Purchase Price and/or the number of shares of Common Stock subject to this Warrant, the
Company at its expense shall promptly compute such adjustment or readjustment in accordance with
the terms hereof, and shall prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.
4. Exercise upon Reorganization, Consolidation, Merger, Change in Control, etc. In
case at any time or from time to time, the Company intends to (i) effect a reorganization, (ii)
consolidate with or merge into any other person, (iii) sell or transfer all or substantially all of
its properties or assets to any other person, (iv) sell the Company through sale of its capital
stock, (v) dissolve, (vi) consummate a public offering of its securities, or (vii) effect any other
change in control; then, the Company shall give at least ten (10) days’ notice to the Holder of
such pending transaction whereby the Holder shall have the right to exercise this Warrant prior to
any such reorganization, consolidation, merger, sale, dissolution, conveyance, offering or change
in control. Any exercise of this Warrant pursuant to notice under this Section shall be
conditioned upon the closing of such reorganization, consolidation, merger, sale, dissolution,
conveyance, offering or other change in control which is the subject of the notice and the exercise
of this Warrant shall not be deemed to have occurred until immediately prior to the closing of such
transaction.
5. Further Assurances. The Company will take all action that may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof,
on the exercise of all or any portion of this Warrant from time to time outstanding.
6. Notices of Record Date, etc. In the event of:
(a) any taking by the Company 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 on, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any transfer of all or substantially all of the assets of the
Company to or the sale, consolidation or merger of the Company with, to or into any other person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding up of the Company; or
4
(d) any other change in control of the Company,
then and in each such event the Company will mail or cause to be mailed to the Holder, at least ten
(10) days prior to such record date, a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger or other change in control, or
dissolution, liquidation or winding up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up, and (iii) the amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be issued or granted, the date
of such proposed issue or grant and the persons or class of persons to whom such proposed issue or
grant is to be offered or made.
7. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company will at
all times reserve and keep available out of its authorized but unissued shares of capital stock,
solely for issuance and delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company exercisable for, convertible
into, exchangeable for or otherwise entitling the Holder to acquire shares of Common Stock (or
Other Securities), and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise, conversion or exchange, the
Company shall take such action as may be necessary to increase its authorized but unissued shares
of Common Stock (or Other Securities) to such number as shall be sufficient for such purposes.
8. Transfer of Warrant. This Warrant cannot be transferred without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
9. No Rights as a Stockholder. This Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a stockholder of the Company.
10. Notices, etc. All notices which are required to be given pursuant to this Warrant
shall be in writing and shall be delivered by certified mail, return receipt requested, first class
postage prepaid, or sent by overnight express or similarly recognized overnight delivery with
receipt acknowledged or by facsimile, with a copy thereof sent by one of the other means.
Notices shall be deemed to have been given at the time delivered and shall be addressed as follows
or to such other address as a party may designate by proper notice hereunder.
If to Holder:
|
To the address set forth on the first page hereof. | |
If to the Company:
|
Tri-Isthmus Group, Inc. | |
| ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., #▇▇▇ | ||
| ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Attn.: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer |
5
11. Securities Laws. By acceptance of this Warrant, the Holder hereby represents to
the Company that this Warrant is being acquired for investment for the Holder’s own account, not as
a nominee or agent, and not with a view to the resale or distribution thereof, and that the Holder
has no present intention of selling, granting any participation in, or otherwise distributing this
Warrant or the Common Stock issuable upon exercise of this Warrant. By acceptance of this Warrant,
the Holder further represents that the Holder does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant participations to such person
or to any third person, with respect to this Warrant or the Common Stock issuable upon exercise of
this Warrant. The Holder is an “accredited investor” as the term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act and has sufficient knowledge and experience in
finance and business that it is capable of evaluating the risks and merits of its investment in the
shares subject to this Warrant and the Holder is able financially to bear the risks thereof. The
Holder understands that the offer and sale of this Warrant and the offer and sale of the Common
Stock issuable upon exercise of this Warrant have not been registered under the Securities Act, by
reason of a specific exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the accuracy of the
Holder’s representations as expressed herein. The Holder further recognizes and acknowledges that
because the offer and sale of this Warrant and the offer and sale of the Common Stock issuable upon
exercise of this Warrant are unregistered, they may not be eligible for resale, and may only be
resold in the future pursuant to an effective registration statement under the Securities Act and
any applicable state securities laws, or pursuant to a valid exemption from such registration
requirements and that the Holder must, therefore, bear the economic risk of such investment
indefinitely.
12. Legend. Unless theretofore registered for resale under the Securities Act, each
certificate for shares of Common Stock issued upon exercise of this Warrant shall bear the
following or a similar legend:
THE OFFER AND SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE OFFER AND SALE OF THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH DISPOSITION IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
13. Miscellaneous. This Warrant and any terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of the State of
Delaware, without regard to conflict of laws principles. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
* * *
6
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its behalf by one of
its officers thereunto duly authorized as of June 8, 2009.
| TRI-ISTHMUS GROUP, INC. |
||||
| By: | ||||
| ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ | ||||
| Chief Executive Officer | ||||
[Signature page to Warrant]
FORM OF SUBSCRIPTION
TRI-ISTHMUS GROUP, INC.
(To be signed only on exercise of Warrant)
TO: TRI-ISTHMUS GROUP, INC.
1. The undersigned Holder of the attached original, executed Warrant of Tri-Isthmus Group,
Inc., a Delaware corporation (the “Company”), hereby elects to exercise its purchase right
under such Warrant with respect to _____ (_____) shares (the “Exercise
Shares”) of Common Stock (as defined in the Warrant), constituting all the shares of Common
Stock subject to the Warrant.
2. The undersigned Holder is hereby paying the aggregate purchase price for such the
Exercise Shares (i) by the enclosed certified or official bank check payable in United
States dollars to the order of the Company in the amount of $_____, or (ii) by wire transfer
of United States funds to the account of the Company in the amount of $_____, which
transfer has been made before or simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company.
3. Please issue a stock certificate or certificates representing the Exercise Shares in the
name of the undersigned Holder.
Dated:_______________________
EXHIBIT B
Certificate of Designation
(See attached)
EXHIBIT B TO SERIES 6-A PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT
B-1
EXHIBIT “B”
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF
SERIES 6-A CONVERTIBLE PREFERRED STOCK
OF
TRI-ISTHMUS GROUP, INC.
RIGHTS AND PREFERENCES OF
SERIES 6-A CONVERTIBLE PREFERRED STOCK
OF
TRI-ISTHMUS GROUP, INC.
Tri-Isthmus Group, Inc., a corporation organized and existing under the laws of the State of
Delaware (the “Company”), hereby certifies as follows:
FIRST: That the name of the Company is Tri-Isthmus Group, Inc., and the original Certificate
of Incorporation of the Company, which has subsequently been amended, was filed with the Secretary
of State of the State of Delaware on November 8, 2000.
SECOND: That the Certificate of Incorporation of the Company authorizes the issuance of
5,000,000 shares of Preferred Stock, with the Board of Directors of the Company authorized to
establish the rights and preferences thereof in accordance with Section 151(g) of the Delaware
General Corporation Law (the “DGCL”).
THIRD: That, on February 6, 2008, the Board of Directors of the Company duly adopted
resolutions setting forth the rights and preferences of the Series 6-A Convertible Preferred Stock.
FOURTH: That the rights and preferences of the Series 6-A Convertible Preferred Stock shall
be as follows:
I. DESIGNATION AND AMOUNT
This series of Preferred Stock of the Company is designated Series 6-A Convertible Preferred
Stock, par value $0.01 per share (the “Series 6-A Preferred Stock”). The number of
authorized shares of Series 6-A Preferred Stock shall be 5,000.
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms shall have the following
meanings:
A. “Board” means the Board of Directors of the Company.
B. “Closing Date” means March 31, 2008.
C. “Closing Price” means (i) if the Common Stock is traded on a securities exchange
such as The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. or on the NASDAQ
National Market System or Small Cap Market, the closing price of the Common Stock on such exchange
or market on a given trading day or, if no sale takes place on that day on such exchange or market,
the average of the official closing bid and asked prices for the Common Stock on that trading day,
or (ii) if the Common Stock is traded on the OTC Bulletin Board, the closing bid price for the
Common Stock on a given trading day.
D. “Common Stock” means the common stock of the Company, par value $0.01 per share.
E. “Conversion Price” shall initially be $0.3125 per share of Series 6-A Preferred
Stock. The Conversion Price shall be subject to adjustment pursuant to Section VII.E.
F. “Effectiveness Period” means the period from the date on which a Registration
Statement is declared effective by the SEC until the date which is the earliest of (a) the date on
which all Registrable Securities have been sold, (b) the date on which all Registrable Securities
may be sold immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(k) of the Securities Act or (c) two years from the date the
Registration Statement is declared effective by the SEC.
G. “Original Issue Price” means $1,000 per share (as adjusted for stock splits, stock
dividends, combinations and the like for the Series 6-A Preferred Stock).
H. “Permitted Black-Out Period” means the period during which (i) the Board determines
that fulfillment of the Company’s obligations to prepare and file a Registration Statement, to
cause such Registration Statement to be declared effective by the SEC or to keep such Registration
Statement continuously effective would require the Company to make a disclosure that would be
detrimental to the Company and that it is in the best interests of the Company to defer such
obligations or (ii) the fulfillment of such obligations would require the Company to prepare
financial statements not required to be prepared by the Company to comply with its obligations
under the Securities Exchange Act of 1934, as amended, at the time the Registration Statement is
proposed to be filed. A Permitted Black-Out Period will end, as applicable, upon the making of the
relevant disclosure by the Company (or, if earlier, when such disclosure would no longer be
necessary or detrimental) or as soon as it would no longer be necessary to prepare such financial
statements to comply with the Securities Act.
I. “Redemption Price” means, with respect to a share of Series 6-A Preferred Stock for
which a Redemption Notice or a Company Redemption Notice has been delivered, an amount equal to:
(i) 120% of the Original Issue Price if the redemption occurs during the first twelve (12) months
following the Closing Date; (ii) 110% of the Original Issue Price if the redemption occurs during
the second twelve (12) months following the Closing Date; (iii) 105% of the Original Issue Price if
the redemption occurs during the period starting on the completion of the twenty-fourth (24) month
following the Closing Date and ending on the completion of the forty-eighth (48) month following
the Closing Date; and (iv) the Original Issue Price if the redemption occurs after completion of
the forty-eighth (48) month following the Closing Date.
J. “Registrable Securities” means the shares of Common Stock issuable upon conversion
of the Series 6-A Preferred Stock and exercise of the warrants issued simultaneously with the
issuance of Series 6-A Preferred Stock (the “Warrants”).
K. “Registration Statement” means a registration statement filed by the Company which
covers the Registrable Securities.
2
L. “SEC” means the United States Securities and Exchange Commission.
M. “Securities Act” means the Securities Act of 1933, as amended.
N. “Triggering Event” means the occurrence of any of the following events: (i) a
Registration Statement is not declared effective by the SEC on or before the date which is fifteen
(15) months following the Closing Date or, during the Effectiveness Period, an effective
Registration Statement is not on file with the SEC for any reason (including, without limitation,
the issuance of a stop order) for a period of twenty (20) consecutive trading days;
provided, that a Triggering Event shall not be deemed to occur if the failure to have an
effective Registration Statement on file is (x) due to factors within the control of the holders of
the Series 6-A Preferred Stock (including a failure to make a demand for registration of the resale
of the Series 6-A Preferred Stock) or (y) the result of a Permitted Black-Out Period; (ii) the
Common Stock is not listed or eligible for quotation on one of the NASDAQ, the OTC Bulletin Board,
Nasdaq Small Cap Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc.,
for a period of five (5) consecutive trading days; (iii) the Company’s issuance of a written notice
to any holder of Series 6-A Preferred Stock, including by way of public announcement, at any time,
of its inability to comply or its intention not to comply with proper requests for conversion of
any Series 6-A Preferred Stock into shares of Common Stock; (iv) the Company’s failure to comply
with a properly tendered Notice of Conversion within ten (10) business days after the receipt by
the Company of such Notice of Conversion; or (v) the Company breaches any provision of this
Certificate of Designation and such breach is not cured within a reasonable period of time
following notice of such breach, except to the extent that such breach would not have a material
adverse effect on any holder of Series 6-A Preferred Stock.
III. DIVIDENDS
The holders of shares of Series 6-A Preferred Stock shall be entitled to receive, out of any
assets legally available therefor, when, as and if declared by the Board and pari passu with the
Series 5-A Preferred Stock, noncumulative dividends in an amount equal to $40 per share annually.
If shares of Series 6-A Preferred Stock are converted or redeemed in accordance with the provisions
of this Certificate of Designation following the declaration of a dividend in accordance with the
provisions herein, no dividends shall be paid on such shares unless the applicable record date for
such dividend has occurred prior to such conversion or redemption. No dividend may be declared and
paid upon shares of Series 6-A Preferred Stock in any fiscal year of the Company unless dividends
have first been paid upon or declared and set aside for payment to the holders of shares of the
Company’s Series 1-A Preferred Stock and Series 2-A Preferred Stock at the rates set forth in the
Certificate of Incorporation and the Certificates of Designation for the Series 2-A Preferred Stock
for such fiscal year of the Company. No undeclared or unpaid dividend shall ever bear interest.
3
IV. LIQUIDATION PREFERENCE
A. Liquidation of the Company. In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, the holders of Series 6-A Preferred
Stock shall be entitled to receive, pari passu with the Series 5-A Preferred Stock, after
distribution of all amounts due to the holders of the Company’s Series 1-A Preferred Stock under
Article 4, Section C.2(a) and C.2(b) of the Company’s Certificate of Incorporation, if any,
(computed as if no shares of Series 6-A Preferred Stock were then outstanding) and distribution of
all amounts due to the holders of the Company’s Series 2-A Preferred Stock under Section 4(a) and
4(b) of the Certificate of Designation for such Series (computed as if no shares of Series 6-A
Preferred Stock were then outstanding), and prior and in preference to any distribution of any of
the assets or surplus funds of the Company to the holders of the Common Stock by reason of their
ownership thereof, a preference amount for each outstanding share of Series 6-A Preferred Stock
held by such holder equal to (i) the Original Issue Price for that outstanding share of Series 6-A
Preferred Stock plus (ii) an amount equal to declared but unpaid dividends on such share, if any,
but only to the extent of the Company’s retained earnings. Nothing in this Section IV will be
construed to adversely affect the rights, preferences, privileges or limitations of the holders of
the Series 1-A Preferred Stock or the Series 2-A Preferred Stock upon a liquidation, dissolution or
winding up of the Company or reduce the amount to which such holders are entitled under the
Company’s Certificate of Incorporation or the Series 2-A Certificate of Designation (assuming for
such purpose that no shares of Series 6-A Preferred Stock were then outstanding).
B. For purposes of this Section IV, a liquidation, dissolution or winding up of the Company
shall be deemed to be occasioned by or to include (i) the acquisition of the Company by another
entity by means of any transaction or series of related transactions (including, without
limitation, reorganization, merger or consolidation, excluding a merger solely to change the
domicile of the Company) or (ii) a sale of all or substantially all of the assets of the Company;
unless, in each case, the Company’s shareholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration for the Company’s acquisition or sale or otherwise) hold a majority of the
voting power of the surviving or acquiring entity. In any of such events, if the consideration
received by the Company is other than cash, its value will be deemed its fair market value. The
fair market value of common stock which is publicly traded on an exchange or the NASDAQ National
Market System or Small Cap Market shall be the average of the daily market prices of that stock
over the twenty (20) consecutive trading days immediately preceding (and not including) the date
the Company or its shareholders receive such stock. The daily market price for each trading day
shall be: (A) the closing price on that day on the principal exchange or NASDAQ on which such
common stock is then listed or admitted to trading, as applicable; or (B) if no sale takes place on
that day on such exchange or NASDAQ, the average of the official closing bid and asked prices for
that stock. Otherwise, the fair market value of such consideration shall be determined in good
faith by the Board and provided in writing by the Company to the holders of the Series 6-A
Preferred Stock within five (5) days of the date of such determination; provided,
however, that the fair market value of such consideration shall be determined by appraisal
in accordance with the following provisions if the holders of at least two-thirds of the then
outstanding Series 6-A Preferred Stock object in writing to the Board’s determination within
fifteen (15) days of their receipt of notice of such determination by the Board. A single
appraiser shall be selected jointly by the holders of a majority of the outstanding
Series 6-A Preferred Stock and the Company. If the holders of the Series 6-A Preferred Stock
and the Company are unable to agree on an appraiser within
4
twenty (20) days of the Board receiving notice of such holders’ objection to the Board’s determination, each shall immediately appoint an
appraiser who shall determine such fair market value. If the lower of the appraised fair market
values is not less than ninety percent (90%) of the higher appraised fair market value, the final
fair market value of such consideration shall be the average of the appraised values. If the lower
of the appraised values is less than ninety percent (90%) of the higher appraised value, the
original appraisers shall appoint a final appraiser who shall pick one of the two prior values
determined by the first two appraisers. All appraisal reports shall be completed no later than
sixty (60) days after the appointment of the appraiser engaged to render such appraisal. All
appraisal fees and costs shall be paid by the Company; provided, however, that if
the final appraised value is no more than ten percent (10%) higher than that determined by the
Board, the appraisal fees and costs shall be subtracted from the liquidation preference to be paid
to the holders of the Series 6-A Preferred Stock.
V. REDEMPTION
A. Redemption at the Option of the Company. The Company, at its option, may redeem
any or all of the outstanding shares of Series 6-A Preferred Stock at any time upon five (5)
business days’ prior written notice to each holder of shares of Series 6-A Preferred Stock (a
“Company Redemption Notice”), at a price per share equal to the (i) Redemption Price then
in effect plus (ii) an amount equal to any declared but unpaid dividends on such share
(collectively, the “Redemption Amount”); provided, that if a holder of Series 6-A
Preferred Stock has delivered a Notice of Conversion to the Company prior to its receipt of the
Company Redemption Notice or delivers a Notice of Conversion within five (5) business days of the
date of the Company Redemption Notice, the shares of Series 6-A Preferred Stock designated to be
redeemed by the Company may be converted into Common Stock by such holder in accordance with the
terms of this Certificate of Designation. In the event the Company elects to redeem less than all
of the outstanding shares of Series 6-A Preferred Stock, the Company shall redeem shares of Series
6-A Preferred Stock on a pro rata basis, based on the number of shares of Series 6-A Preferred
Stock held by each holder relative to the total number of shares of Series 6-A Preferred Stock
outstanding as of the time of such redemption.
B. Redemption on a Triggering Event. If and as long as a Triggering Event shall have
occurred and remain in effect, the holders of a majority of the outstanding shares of Series 6-A
Preferred Stock shall have the right, at such holders’ option, to require the Company to redeem all
of such holders’ shares of Series 6-A Preferred Stock at a price per share equal to the Original
Issue Price plus an amount equal to any declared but unpaid dividends on such share (the
“Holder Redemption Amount”) by delivery of written notice to the Company (a “Redemption
Notice”).
C. Redemption Payments. The Company shall pay a holder of Series 6-A Preferred Stock
the Holder Redemption Amount or the Redemption Amount, by check or wire transfer of immediately
available funds, with respect to each share of Series 6-A Preferred Stock within (i) ten (10)
business days of the Company’s receipt of a Redemption Notice or (ii) ten (10) business
days of the Company’s delivery of a Company Redemption Notice, as the case may be. In the
event the Company is not able to redeem all of the shares of Series 6-A Preferred Stock subject to
Redemption Notices, the Company shall redeem shares of Series 6-A Preferred Stock from such holders
pro rata, based on the total number of shares of Series 6-A Preferred Stock included by such holder
in its Redemption Notice relative to the total number of shares of Series 6-A Preferred Stock in
all Redemption Notices; provided, that the foregoing shall not be deemed to limit the
Company’s obligation to purchase shares of Series 6-A Preferred Stock hereunder.
5
D. Capital Impairment. In the event that Section 160 of the DGCL would be violated by
the redemption of any shares of Series 6-A Preferred Stock that are otherwise subject to redemption
pursuant to Section V.B., the Company: (i) will redeem the greatest number of shares of Series 6-A
Preferred Stock possible without violation of said Section pro rata among the shares of Series 6-A
Preferred Stock which are subject to Redemption Notices; (ii) thereafter shall use its best efforts
to take all necessary steps in order to remedy its capital structure in order to allow further
redemptions without violation of said Section (and not take any action inconsistent with so
remedying such capital structure); and (iii) from time to time thereafter as promptly as possible,
shall redeem remaining shares of Series 6-A Preferred Stock at the request of the holders to the
greatest extent possible without causing a violation of Section 160 of the DGCL.
VI. VOTING RIGHTS
A. The holder of each share of Series 6-A Preferred Stock shall have the right to one vote for
each share of Common Stock into which such share of Series 6-A Preferred Stock could then be
converted (with any fractional share determined on an aggregate conversion basis being rounded down
to the nearest whole share), and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in
accordance with the bylaws of the Company, and shall be entitled to vote, together with holders of
Common Stock, with respect to any question upon which holders of Common Stock have the right to
vote.
B. To the extent that under applicable law the vote of the holders of the Series 6-A Preferred
Stock, voting separately as a class or series, as applicable, is required to authorize a given
action of the Company, the affirmative vote or consent of the holders of a majority of shares of
the Series 6-A Preferred Stock represented at a duly held meeting at which a quorum is present or
by written consent of a majority of the Series 6-A Preferred Stock then outstanding (except as
otherwise may be required by applicable law) shall constitute the approval of such action by the
class.
VII. CONVERSION
A. Right to Convert. Each holder of Series 6-A Preferred Stock may, at its option, at
any time and from time to time, convert any or all of its shares of Series 6-A Preferred Stock into
such number of fully paid and non-assessable shares of Common Stock of the Company (any
such shares issued pursuant to this Section VII, the “Conversion Shares”) as is
determined by dividing (i) the Original Issue Price of such shares plus any declared but unpaid
dividend on such shares by (ii) the Conversion Price then in effect.
6
B. Automatic Conversion. At any time, each share of Series 6-A Preferred Stock
outstanding shall be converted into such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing (i) the Original Issue Price of such share plus any declared but
unpaid dividend on such share by (ii) the Conversion Price then in effect immediately upon the date
specified by a written notice (“Automatic Election Notice”) delivered to the Company by the
holders of not less than the majority of the outstanding shares of the Series 6-A Preferred Stock
electing to effect the conversion. The Automatic Election Notice shall be delivered to the Company
not less than ten (10) business days prior to the specified date of the automatic conversion.
Within three (3) business days of receipt of the Automatic Election Notice, the Company shall
provide written notice to all record holders of Series 6-A Preferred Stock of the election of such
automatic conversion. Such notice shall state the date on which the automatic conversion shall
occur and shall call upon the holders of Series 6-A Preferred Stock to deliver to the Company the
certificates representing shares of Series 6-A Preferred Stock so converted (or, in lieu thereof,
materials contemplated by Section VII.J., if applicable). Upon the delivery of such certificates
(or, in lieu thereof, materials contemplated by Section VII.J., if applicable), the Company shall
as soon as practicable, deliver to the transmitting holders (or at their direction) that number of
shares of Common Stock issuable upon conversion of such shares of Series 6-A Preferred Stock being
converted, dated as of the date of such conversion. Such conversion shall be deemed to have been
made (and the shares of Common Stock issued) on the date of such automatic conversion, and the
holders of the Series 6-A Preferred Stock so converted shall be treated for all purposes as the
record holder or holders of such Common Stock as of the date of such conversion specified in the
Automatic Election Notice.
C. Conversion by Company. The Company, at its option, may convert (a “Company
Conversion”) all shares of the Series 6-A Preferred Stock into shares of Common Stock at the
then applicable Conversion Price in the event the Closing Price of the Common Stock exceeds $0.65
per share (as adjusted for stock splits, recapitalizations, stock dividends and the like, the
“Mandatory Redemption Trigger”) for the thirty (30) consecutive trading days prior to the
mailing of the Company Conversion Notice (as defined below), provided, that no Triggering
Event is in effect at the time of the mailing of such notice. Not less than ten (10) business days
prior to the effective date of the Company Conversion, the Company shall provide written notice (a
“Company Conversion Notice”) to all record holders of Series 6-A Preferred Stock of such
Company Conversion. Such Company Conversion Notice shall state the date on which the Company
Conversion shall occur and shall call upon the holders of Series 6-A Preferred Stock to deliver to
the Company the certificates representing shares of Series 6-A Preferred Stock so converted (or, in
lieu thereof, materials contemplated by Section VII.J., if applicable). Upon the delivery of such
certificates (or, in lieu thereof, materials contemplated by Section VII.J., if applicable), the
Company shall as soon as practicable, deliver to the transmitting holders (or at their direction)
that number of shares of Common Stock issuable upon conversion of such shares of Series 6-A
Preferred Stock being converted, dated as of the date of such conversion. Such Company Conversion
shall be deemed to have been made (and the shares of Common Stock
issued) on the date of such Company Conversion, and the holders of the Series 6-A Preferred
Stock so converted shall be treated for all purposes as the record holder or holders of such Common
Stock as of the date of such conversion specified in the Company Conversion Notice.
7
D. Mechanics of Conversion. In order to effect a conversion pursuant to Section
VII.A, a holder of Series 6-A Preferred Stock shall fax (or otherwise deliver) a copy of the fully
executed notice of conversion (in substantially the form attached hereto as Exhibit A, the
“Notice of Conversion”) to the Company or its transfer agent and shall surrender or cause
to be surrendered personally or via a reputable overnight courier to the Company or its transfer
agent the certificates representing the Series 6-A Preferred Stock being converted (the
“Preferred Stock Certificates”) duly endorsed or accompanied by duly executed stock powers
(or, in lieu thereof, materials contemplated by Section VII.J., if applicable). Upon the delivery
of a Notice of Conversion, the Company shall as soon as practicable, deliver to the holder (or at
its direction) (x) that number of shares of Common Stock issuable upon conversion of such shares of
Series 6-A Preferred Stock being converted and (y) a certificate representing the number of shares
of Series 6-A Preferred Stock not being converted, if any. Such conversion shall be deemed to have
been made (and the shares of Common Stock issued) immediately prior to the close of business on the
date of surrender of the Preferred Stock Certificates (or such other later date specified in the
Notice of Conversion), and the person entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder of such shares of Common Stock on
such date.
E. Conversion Price Adjustments. The Conversion Price shall be subject to the
following adjustments:
(1) Adjustment for Stock Splits and Combinations. If the Company at any time or
from time to time after the Closing Date effects a subdivision of the Common Stock of the
Company, by stock split or otherwise, the Conversion Price then in effect immediately before
that subdivision shall be proportionately decreased; and, conversely, if the Company at any
time or from time to time after the Closing Date combines the outstanding shares of Common
Stock, by reverse stock split or otherwise, the Conversion Price then in effect immediately
before that combination shall be proportionately increased. Any adjustment under this
Section VII.E(1) shall become effective at the close of business on the date the subdivision
or combination becomes effective.
(2) Adjustment for Certain Dividends and Distributions. In the event the
Company at any time or from time to time after the Closing Date either makes, or fixes a
record date for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in additional shares of Common Stock, then and in each such
event the Conversion Price then in effect shall be decreased as of the time of such issuance
or, in the event such a record date is fixed, as of the close of business on such record
date, by multiplying the Conversion Price then in effect by a fraction (a) the numerator of
which is the total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance on the close of business on such record date, and (b) the
denominator of which shall be (i) the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such issuance
as of the close of business on such record date plus (ii) the number of shares of Common
Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid or if
such distribution is not
fully made on the date fixed therefor, the Conversion Price shall
be recomputed accordingly as of the close of business on such record date or date fixed
therefor and thereafter the Conversion Price shall be adjusted pursuant to this Section
VII.E(2) as of the time of actual payment of such dividend or distribution. For purposes of
the foregoing formula, “the total number of shares of Common Stock issued and outstanding”
on a particular date shall include shares of Common Stock issuable upon conversion of stock
or securities convertible into Common Stock and the exercise of warrants, options or rights
for the purchase of Common Stock which are outstanding on such date.
8
(3) Adjustments for Other Dividends and Distributions. In the event the Company
at any time or from time to time after the Closing Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company other than shares of Common Stock, then
and in each such event, provision shall be made so that each holder of Series 6-A Preferred
Stock shall receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereon, the amount and kind of securities of the Company which it would
have received had such shares of Series 6-A Preferred Stock been converted into Common Stock
as of the date of such event and had it thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities receivable by it as
aforesaid during such period, subject to all other adjustments called for during such period
hereunder with respect to the rights of such holder.
(4) Adjustment for Recapitalization, Reclassification, or Exchange. If the
Common Stock issuable upon the conversion of the Series 6-A Preferred Stock is changed into
the same or a different number of shares of any class or classes of stock of the Company,
whether by recapitalization, reclassification or other exchange (other than a subdivision or
combination of shares, or a stock dividend or a reorganization, merger, consolidation or
sale of assets, provided for elsewhere in this Section VII.E), then and in any such event
each holder of Series 6-A Preferred Stock shall be entitled to convert its shares of Series
6-A Preferred Stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other exchange by holders of the
number of shares of Common Stock into which the shares of Series 6-A Preferred Stock then
held by such holder could be converted immediately prior to such recapitalization,
reclassification or other exchange, all subject to further adjustment as provided herein.
9
(5) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time
or from time to time there is a capital reorganization of the Common Stock (other than a
subdivision or combination of shares or a stock dividend or a recapitalization,
reclassification or other exchange of shares, provided for elsewhere in this Section VII.E
or a merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company’s assets to any other person), then, as a
part of such capital reorganization, provision shall be made so that each holder of Series
6-A Preferred Stock shall thereafter be entitled to receive upon conversion of the shares of
Series 6-A Preferred Stock then held by such holder the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting from such
capital reorganization, to which a holder of the number of shares of Common Stock
deliverable upon such exercise would have been entitled on such capital reorganization. In
any such case, appropriate adjustment shall be made in the application of the provisions of
this Section VII.E with respect to the rights of each holder of Series 6-A Preferred Stock,
after the capital reorganization to the end that the provisions of this Section VII.E
(including the number of shares deliverable upon conversion of the Series 6-A Preferred
Stock) shall continue to be applicable after that event and shall be as nearly equivalent to
the provisions hereof as may be practicable.
(6) Sale of Shares Below Conversion Price.
(a) If at any time or from time to time after the Closing Date, the Company
issues or sells Additional Shares of Common Stock (as hereinafter defined), or
securities convertible into or exchangeable for Additional Shares of Common Stock,
in connection with a transaction resulting in gross proceeds to the Company of at
least $1,000,000 (a “Subsequent Financing”) for an Effective Price (as
hereinafter defined) less than the then existing Conversion Price (i) on or before
the one-year anniversary of the Closing Date, then the Conversion Price shall be
reduced to an amount equal to such Effective Price effective as of the closing of
such Subsequent Financing or (ii) at any time following the one-year anniversary of
the Closing Date, then the Conversion Price shall be reduced, effective as of the
closing of such Subsequent Financing, to a price determined by multiplying that
Conversion Price by a fraction, the numerator of which shall be (A) the number of
shares of Common Stock outstanding as of the close of business on the day preceding
the closing of the Subsequent Financing (treating for this purpose as outstanding
all shares of Common Stock issuable upon exercise of all rights, options or warrants
or upon conversion of all securities convertible into or exchangeable for Common
Stock (including the Series 1-A Preferred Stock, the Series 2-A Preferred Stock, the
Series 5-A Preferred Stock, and the Series 6-A Preferred Stock) outstanding as of
the close of business on the day preceding the closing of the Subsequent Financing)
plus (B) the number of shares of Common Stock which the aggregate consideration
received (or by the express provisions hereof is deemed to have been received) by
the Company for the total number of Additional Shares of Common Stock (or securities
convertible into or exchangeable for Additional Shares of Common Stock) so issued
would purchase at such Conversion Price (prior to such adjustment) and the
denominator of which shall be (X) the number of shares of Common Stock outstanding
immediately prior to the closing of the Subsequent Financing (treating for this
purpose as outstanding all shares of Common Stock issuable upon exercise of all
rights, options or warrants or upon conversion of all securities convertible
into or exchangeable for Common Stock (including the Series 1-A Preferred Stock, the
Series 2-A Preferred Stock, the Series 5-A Preferred Stock, and the Series 6-A
Preferred Stock) outstanding as of the close of business on the day preceding the
closing of the Subsequent Financing) plus (Y) the number of such Additional Shares
of Common Stock issued or sold in the Subsequent Financing.
10
For the purpose of making any adjustment required under this Section VII.E(6), the
consideration received by the Company for any issue or sale of securities shall (A)
to the extent it consists of cash be computed at the amount of cash received by the
Company, (B) to the extent it consists of property other than cash, be computed at
the fair market value of that property as determined in good faith by the Board, and
(C) if Additional Shares of Common Stock, Convertible Securities (as hereinafter
defined) or rights or options to purchase either Additional Shares of Common Stock
or Convertible Securities are issued or sold together with other stock or securities
or other assets of the Company for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably determined in
good faith by the Board to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(b) For the purpose of the adjustment required under this Section VII.E(6), if
the Company issues or sells any rights or options for the purchase of, or stock or
other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as “Convertible
Securities”) and if the Effective Price of such Additional Shares of Common
Stock is less than the Conversion Price then in effect, then in each case the
Company shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of Common
Stock issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total amount of
the consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or options,
the minimum amounts of consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible Securities)
upon the conversion thereof. No further adjustment of the Conversion Price, adjusted
upon the issuance of such rights, options or Convertible Securities, shall be made
as a result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised, the
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would have
been in effect had an adjustment been made
on the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the exercise
of such rights or options or rights of conversion of such Convertible Securities,
and such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all such
rights or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Company (other than by cancellation
of liabilities or obligations evidenced by such Convertible Securities) on the
conversion of such Convertible Securities.
11
(c) “Additional Shares of Common Stock” shall mean all shares of Common
Stock issued (or deemed issued hereunder) by the Company after the Closing Date,
whether or not subsequently reacquired or retired by the Company, other than: (A)
shares of Common Stock issued upon conversion or exchange of the Series 6-A
Preferred Stock or any other options or warrants or convertible securities
outstanding or issuable on the Closing Date including, without limitation, the
Warrants; (B) shares of Common Stock issued upon conversion or exchange of the
Series 2-A Preferred Stock pursuant to Section 7 of the Certificate of Designation
creating the Series 2-A Preferred Stock; (C) shares of Common Stock issued upon
conversion or exchange of the Series 1-A Preferred Stock pursuant to Article 4,
Section C.5 of the Certificate of Incorporation; (D) , shares of Common Stock issued
upon conversion or exchange of the Series 5-A Preferred Stock pursuant to Section 7
of the Certificate of Designation creating the Series 5-A Preferred Stock; (E)
shares of Common Stock issuable or issued to the directors, officers and employees
of or consultants to the Company pursuant to a plan approved by the Board of
Directors of the Company; (F) shares of Common Stock issuable or issued as part of
an acquisition by the Company of all of or certain assets (including technology
rights) or shares of another company or entity whether through a purchase, merger,
exchange, reorganization or the like; and (G) shares of Common Stock issuable or
issued pursuant to equipment financing or leasing arrangements. The “Effective
Price” of Additional Shares of Common Stock shall mean the quotient determined
by dividing the total number of Additional Shares of Common Stock issued or sold, or
deemed to have been issued or sold by the Company under this Section VII.E(6), into
the aggregate consideration received, or deemed to have been received by the Company
for such issue under this Section VII.E(6), for such Additional Shares of Common
Stock.
(7) Upon the occurrence of each adjustment or readjustment of the Conversion Price, the
Company at its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof, and shall prepare and furnish to the holders of Series 6-A Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
12
F. Reservation of Stock Issuable Upon Conversion. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the Series 6-A Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series 6-A Preferred Stock and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series 6-A Preferred Stock, the Company will take
such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose, including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation.
G. Fractional Shares. No fractional share shall be issued upon the conversion of any
share or shares of Series 6-A Preferred Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Series 6-A Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion would result in the
issuance of any fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash
equal to the fair market value of such fraction on the date of conversion (determined as provided
in Section IV.B).
H. Notices. Any notice required by the provisions of this Section VII to be given to
the holders of shares of Series 6-A Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, return receipt requested, and addressed to each holder of
record at its address appearing on the books of the Company.
I. Valid Issue. The Company will ensure that all Conversion Shares issued pursuant to
this Section VII, if any, will be duly and validly issued, fully-paid and non-assessable, and free
and clear of all encumbrances, liens, mortgages and any other rights of third parties whatsoever.
J. Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence of the
loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) (x) in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company, or (y) in
the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the
Company shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date.
However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock
Certificate(s) if a holder of Series 6-A Preferred Stock contemporaneously requests the Company to
convert such Preferred Stock.
13
VIII. AMENDMENT
Any term relating to the Series 6-A Preferred Stock may be amended and the observance of any
term relating to the Series 6-A Preferred Stock may be waived (either generally or in a particular
instance) only with the vote or written consent of holders of a majority of the
outstanding shares of the Series 6-A Preferred Stock. Any amendment so effected shall be
binding upon the Company and any holder of the Series 6-A Preferred Stock.
IX. PROTECTIVE PROVISIONS
So long as at least 25% of the authorized shares of Series 6-A Preferred Stock remain
outstanding, the Company shall not, without the vote or written consent by the holders of a
majority of the outstanding shares of Series 6-A Preferred Stock, voting together as a single
class:
A. Amend, alter or repeal the provisions of the Series 6-A Preferred Stock in this Certificate
of Designation, whether by merger, consolidation or otherwise, so as to adversely affect any right,
preference, privilege or voting power of the Series 6-A Preferred Stock;
B. Repurchase, redeem or pay dividends or effect any other distribution on, shares of the
Company’s capital stock ranking junior to the Series 6-A Preferred Stock, other than dividends
payable in capital stock of the Company; or
C. Amend the Certificate of Incorporation (including by way of a Certificate of Designation)
or bylaws of the Company to change materially and adversely the rights, preferences, privileges or
limitations of the Series 6-A Preferred Stock;
provided, that the foregoing shall in no way limit the Company’s ability to authorize,
create or issue any class of capital stock ranking senior (in terms of dividends, liquidation
preference or redemption) to, or pari passu with, the Series 6-A Preferred Stock.
X. NO REISSUANCE OF SERIES 6-A PREFERRED STOCK
No share or shares of Series 6-A Preferred Stock acquired by the Company by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be
returned to the status of undesignated shares of Preferred Stock.
* * *
14
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation this
_____
day
of February, 2009.
| TRI-ISTHMUS GROUP, INC. |
||||
| By: | ||||
| Name: | ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ | |||
| Title: | Chief Executive Officer | |||
[Signature Page to Certificate of Designation of Rights and Preferences of Series 6-A
Convertible Preferred Stock of Tri-Isthmus Group, Inc.]
Convertible Preferred Stock of Tri-Isthmus Group, Inc.]
EXHIBIT A
NOTICE OF CONVERSION
ATTN:
|
CHIEF EXECUTIVE OFFICER | |
| CHIEF FINANCIAL OFFICER |
The undersigned hereby irrevocably elects to convert (the “Conversion”) the number of
shares of the Series 6-A Convertible Preferred Stock (the “Series 6-A Preferred Stock”) set
forth below (the “Amount of Preferred Stock”), plus all declared and unpaid dividends
thereof, into shares of common stock (“Common Stock”) of Tri-Isthmus Group, Inc. (the
“Company”) according to the conditions of the Certificate of Designation, as of the date
written below.
In the event of partial exercise, please reissue an appropriate certificate for the principal
balance which shall not have been converted.
| Date of Conversion: | ||
| Applicable Conversion Price: | ||
| Amount of Preferred stock: | ||
| Number of Shares of Common Stock to be Issued upon conversion: |
| Signature: | ||||
| Name: | ||||
| Address: | ||||
| Fax Number (for confirmation): |
cc: [Transfer Agent]
Acknowledged And Agreed:
TRI-ISTHMUS GROUP, INC.
By: |
||||||||||
| Name: | ||||||||||
| Title: | Date: | |||||||||