Exhibit 3.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
FITLIFE BRANDS, INC.
The
undersigned, the Chief Financial Officer of FitLife Brands, Inc., a
Nevada corporation (the “
Company
”), in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, does
hereby certify that, pursuant to the authority conferred upon the
Board of Directors of the Company by the Articles of Incorporation
of the Company, the following resolution creating a series of
Series A Convertible Preferred Stock, was duly adopted on November
9, 2018:
RESOLVED,
that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company by provisions of the Articles
of Incorporation of the Company, as amended
(the “
Articles of
Incorporation
”), there hereby is created out of the
shares of preferred stock, par value $0.01 per share, of the
Company authorized in Article III of the Articles of Incorporation
(the “
Preferred
Stock
”), a series of Preferred Stock of the Company,
to be named “Series A Convertible Preferred
Stock,” consisting of One Thousand (1,000) shares, which
series shall have the following designations, powers, preferences
and relative and other special rights and the following
qualifications, limitations and restrictions:
TERMS OF SERIES A PREFERRED STOCK
1.
Designation
and Rank
. The designation of
such series of the Preferred Stock shall be the Series A
Convertible Preferred Stock, par value $0.01 per share
(the “
Series A
Preferred
”).
The maximum number of shares of Series A Preferred
shall be One Thousand (1,000) shares. The Series A Preferred shall
rank senior to the Company’s common stock, par value $0.01
per share (the “
Common
Stock
”),
and
to all other classes and series of equity securities of the Company
that by their terms do not rank senior to the Series A
Preferred (“
Junior
Stock
”). Each share of
Series A Preferred shall have a stated value equal to One Thousand
Dollars ($1,000) (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar
recapitalization affecting such shares, or in the event of the
payment of any Capitalized Dividends, as defined in Section 2(a)
below) (the “
Stated
Value
”).
2.
Dividends
.
(a)
Payment
of Dividends
. The
holders of record of shares of Series A Preferred shall be entitled
to receive, out of any assets at the time legally available
therefor, cumulative dividends at the rate of twelve percent (12%)
of the stated Liquidation Preference Amount (as defined in Section
4 hereof) per share per annum commencing on November 13,
2018 (the “
Issuance
Date
”), compounded
monthly and payable quarterly on or before ten (10) business days
after the end of each applicable quarter following the Issuance
Date (each, a “
Dividend Payment
Date
”), and shall, at the
Company’s election, be paid in cash or shall accrue and
increase the Stated Value of such Series A Preferred
(“
Capitalized
Dividends
”);
provided,
however,
that in the event that
the dividends on the Series A Preferred are not paid in cash on or
before the applicable Dividend Payment Date, such dividends shall
constitute Capitalized Dividends and shall automatically accrue and
increase the Stated Value of such Series A Preferred;
provided,
further
, notwithstanding the
foregoing, the Company shall pay all dividends accrued after May
13, 2020 in cash (“
Cash Dividend Payment
Date
”). On or after the
Cash Dividend Payment Date, such dividends shall accrue on each
share of Series A Preferred from day to day whether or not earned
or declared. Such accrued but unpaid dividends on or after the Cash
Dividend Payment Date shall be fully paid on, or declared and set
apart for, such shares of Series A Preferred before any
distribution shall be paid on, or declared and set apart for Junior
Stock.
(b) So
long as any shares of Series A Preferred are issued and
outstanding, the Company shall not declare, pay or set apart for
payment any dividend or make any distribution on any Junior
Stock.
(c) In
the event of a dissolution, liquidation or winding up of the
Company pursuant to Section 4 after the Cash Dividend Payment Date,
all accrued and unpaid dividends on the Series A Preferred shall be
payable on the day immediately preceding the date of payment of the
preferential amount to the holders of Series A Preferred. In
the event of a redemption upon the occurrence of a Change of
Control (as defined in Section 8(b)) after the Cash Dividend
Payment Date, all accrued and unpaid dividends on the Series A
Preferred shall be payable on the day immediately preceding the
date of such redemption.
(d) For
purposes hereof, unless the context otherwise requires,
“distribution” shall mean the transfer of cash or
property without consideration, whether by way of dividend or
otherwise, payable other than in shares of Common Stock or other
equity securities of the Company, or the purchase or redemption of
shares of the Company (other than redemptions set forth in Section
8 below or repurchases of Common Stock held by employees or
consultants of the Company upon termination of their employment or
services pursuant to agreements providing for such repurchase or
upon the cashless exercise of options held by employees or
consultants) for cash or property.
3.
Voting
Rights
.
(a)
General Voting
Rights
. On any matter presented
to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by
written consent of stockholders in lieu of meeting), each holder of
outstanding shares of Series A Preferred shall be entitled to cast
the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series A Preferred held by such
holder are convertible as of the record date for determining
stockholders entitled to vote on such matter, or if no record date
is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as provided by law or
by Section 3(b) or (c) below, holders of Series A Preferred shall
vote together with the holders of Common Stock, and with the
holders of any other series of Preferred Stock the terms of which
so provide, as a single class.
(b)
Election of
Directors
.
(i) So long as any shares of the Series A
Preferred remain outstanding, the holders of a majority of the
outstanding shares of the Series A Preferred shall be entitled to
appoint one member to the Company’s Board of Directors (the
“
Board
”) by written notice to the Company
designating a person to serve as a director (the
“
Series A
Director
”);
provided,
however
, so long as Dayton Judd
remains a director on the Board, he shall be deemed to be the
Series A Director, and holders of the Series A Preferred shall not
have the option to designate any other individual as the Series A
Director.
A Series A Director may
only be removed or replaced by vote or written consent of holders
of a majority of the Series A Preferred.
(ii)
At any meeting held for the purpose of electing the Series A
Director, the presence in person or by proxy of the holders of a
majority of the shares of Series A Preferred then outstanding shall
constitute a quorum of the Series A Preferred for the purpose of
electing directors by holders of the Series A Preferred. A vacancy
in any directorship filled by the holders of Series A Preferred
shall be filled only by vote or written consent in lieu of a
meeting of the holders of a majority of the Series A Preferred or
pending any vote or written consent of the holders of the Series A
Preferred.
(iii)
Commencing February 16, 2019, so long as any shares of the Series A
Preferred remain outstanding, the Company’s Board shall not
consist of more than five (5) members.
(c)
Class Voting
Rights
. The Series A Preferred
shall have the following class voting rights. So long as any shares
of the Series A Preferred remain outstanding, the Company shall
not, without the affirmative vote or consent of the holders of at
least fifty percent (50%) of the shares of the Series A Preferred
issued and outstanding on such date given in person or by proxy,
either in writing or at a meeting, in which the holders of the
Series A Preferred vote separately as a class:
(i) authorize, create,
issue or increase the authorized or issued amount of any class of
debt or equity securities, ranking pari passu or senior to the
Series A Preferred, with respect to the distribution of assets on
liquidation, dissolution or winding up; (ii) amend, alter or repeal
the provisions of the Series A Preferred, whether by merger,
consolidation or otherwise, so as to adversely affect any right,
preference, privilege or voting power of the Series A
Preferred;
provided, however
,
that any creation and issuance of another series of Junior Stock
shall not be deemed to adversely affect such rights, preferences,
privileges or voting powers; (iii) repurchase, redeem or pay
dividends on, shares of Common Stock or any other shares of the
Company’s Junior Stock (other than (1) in connection with any
employee stock option plan or employee stock purchase plan which is
approved by the Board and is existing as of the date hereof, (2) de
minimus repurchases from employees of the Company, and (3) any
contractual redemption obligations existing as of the date hereof
as disclosed in the Company’s public filings with the
Securities and Exchange Commission (“
SEC
”));
(iv) amend the Company’s Articles of Incorporation or bylaws
so as to affect materially and adversely any right, preference,
privilege or voting power of the Series A
Preferred;
provided, however,
that any
creation and issuance of another series of Junior Stock shall not
be deemed to adversely affect such rights, preferences, privileges
or voting powers; (v) subsequent to February 16, 2019, increase the
number of members that make up the Board to more than five (5)
members; (vi) subject to the Company’s fiduciary duties under
Nevada law, take any action that would constitute a Fundamental
Transaction (as defined hereafter); or (vii) incur any indebtedness
for borrowed money or issue any debt securities, or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed
money;
provided,
however
, notwithstanding the
foregoing, nothing contained herein shall prevent or prohibit the
Company or any of its subsidiaries from incurring indebtedness for
borrowed money or otherwise incurring any obligations under the
Company’s Merchant Agreement or other line of credit
agreement with Compass Bank (the “
Facility
”)
and/or any replacement Facility. For purposes of this Section, a
“Fundamental Transaction” shall occur if:
(i) the Company, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of the Company with or into another person, (ii)
the Company, directly or indirectly, effects any sale, lease,
exclusive license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another person whereby such other person acquires
more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other person or
other persons making or party to, or associated or affiliated with
the other persons making or party to, such stock or share purchase
agreement or other business combination).
4.
Liquidation,
Dissolution; Winding-Up
.
(a) In the event of the liquidation,
dissolution or winding up of the affairs of the Company, whether
voluntary or involuntary, the holders of shares of the Series A
Preferred then outstanding shall be entitled to receive, out of the
assets of the Company available for distribution to its
stockholders, an amount equal to the Stated Value plus all accrued
and unpaid dividends (the “
Liquidation Preference
Amount
”) before any
payment shall be made or any assets distributed to the holders of
the Common Stock or any other Junior Stock. If the assets of the
Company are not sufficient to pay in full the Liquidation
Preference Amount payable to the holders of outstanding shares of
the Series A Preferred and any series of preferred stock or any
other class of stock on a parity, as to rights on liquidation,
dissolution or winding up, with the Series A Preferred, then all of
said assets will be distributed among the holders of the Series A
Preferred and the other classes of stock on a parity with the
Series A Preferred, if any, ratably in accordance with the
respective amounts that would be payable on such shares if all
amounts payable thereon were paid in full. The liquidation payment
with respect to each outstanding fractional share of Series A
Preferred shall be equal to a ratably proportionate amount of the
liquidation payment with respect to each outstanding share of
Series A Preferred. All payments for which this Section 4(a)
provides shall be in cash, property (valued at its fair market
value as determined reasonably and in good faith by the Board) or a
combination thereof;
provided, however,
that no cash shall be paid to holders
of Junior Stock unless each holder of the outstanding shares of
Series A Preferred has been paid in cash the full Liquidation
Preference Amount to which such holder is entitled as provided
herein. After payment of the full Liquidation Preference Amount to
which each holder is entitled, such holders of shares of Series A
Preferred will not be entitled to any further participation as such
in any distribution of the assets of the
Company.
(b) Written
notice of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable,
shall, to the extent possible, be given by mail, postage prepaid,
no less than twenty (20) business days prior to the payment date
stated therein, to the holders of record of the Series A Preferred
at their respective addresses as the same shall appear on the books
of the Company.
5.
Conversion
.
The holder of Series A Preferred shall have the following
conversion rights (the “
Conversion
Rights
”):
(a)
Voluntary
Conversion
. At any time on or
after the Issuance Date, the holder of any shares of Series A
Preferred may, at such holder’s option, elect to convert (a
“
Voluntary
Conversion
”) all or any
portion of the shares of Series A Preferred held by such person
into a number of fully paid and nonassessable shares of Common
Stock equal to the quotient of (i) the Liquidation Preference
Amount of the shares of Series A Preferred being converted divided
by (ii) the Conversion Price (as defined in Section 5(d) below)
then in effect as of the date of the delivery by such holder of its
notice of election to convert (the “
Conversion
Shares
”). In the event of
a notice of redemption of any shares of Series A Preferred pursuant
to Section 8 hereof, the Conversion Rights of the shares of Series
A Preferred designated for redemption shall terminate at the close
of business on the last full day preceding the date fixed for
redemption, unless the redemption price is not paid on such
redemption date, in which case the Conversion Rights for such
shares shall continue until such price is paid in full. In the
event of a liquidation, dissolution or winding up of the Company,
the Conversion Rights shall terminate at the close of business on
the last full day preceding the date fixed for the payment of any
such amounts distributable on such event to the holders of Series A
Preferred. In the event of such a redemption or liquidation,
dissolution or winding up, the Company shall provide to each holder
of shares of Series A Preferred notice of such redemption or
liquidation, dissolution or winding up, which notice shall (i) be
sent at least fifteen (15) business days prior to the termination
of the Conversion Rights, and (ii) state the amount per share of
Series A Preferred that will be paid or distributed on such
redemption or liquidation, dissolution or winding up, as the case
may be.
(b)
Mandatory
Conversion
. If, at any time, (i) the Conversion Shares are
registered pursuant to Section 12(b) or (g) under the Securities
Exchange Act of 1934, as amended. (ii) there are sufficient
authorized but unissued shares (which have not otherwise been
reserved or committed for issuance) to permit the issuance of
Conversion Shares. (iii) upon issuance, the Conversion Shares will
be either (A) covered by an effective registration statement under
the Securities Act of 1933, as amended (“
Securities Act
”), which is then
available for the immediate resale of such Conversion Shares by the
recipients thereof, and the Board reasonably believes that such
effectiveness will continue uninterrupted for the foreseeable
future, or (B) freely tradable without restriction pursuant to Rule
144 promulgated under the Securities Act, as determined by counsel
to the Company as set forth in a written opinion letter to such
effect, addressed and acceptable to the Transfer Agent and the
affected holders. and (iv) the VWAP of the Common Stock is at least
$1.25 per share (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) for thirty (30) consecutive
trading days, then the Company shall have the right, subject to the
terms and conditions of this Section 5, to convert all of the
issued and outstanding shares of Series A Preferred into Conversion
Shares.
For
purposes of this Section 5,
"
VWAP
"
means
,
for any
date, the price determined by the first of the following clauses
that
applies: (a) if
the Common Stock then listed or quoted
on a trading market, the daily volume
weighted
average price of the Common Stock for such
date
(or
the nearest preceding date) on the trading market
on
which
the Common Stock is then listed or quoted as
reported by Bloomberg L.P.
(based
on
a
trading day from 9:30
a.m.
(New York time) to 4:02 p.m.
(New
York City
time))
,
(b)
if OTCQB
or OTCQX is not
a
trading market, the
volume weighted average
price of a
share
of
Common
Stock
for such date
(or
the nearest preceding date) on the OTCQB or
OTCQX
as
applicable,
(c)
if
Common
Stock is not then listed or quoted for trading on
the OTCQB or OTCQX
and
if prices
for Common
Stock are then reported on the OTC Pink Open
Market published by OTC
Markets
Group
,
Inc. (or a similar organization
or
agency succeeding
to its
functions
of
reporting prices), the most recent bid price per share of
Common
Stock
so
reported
,
or
(d)
in all other
cases,
the fair market
value
of
the
Common Stock as
determined by
an
independent
appraiser selected in good faith by the holder and reasonably
acceptable to the
Company,
the
fees
and
expenses
of
which
shall be
paid by the Company.
(c)
Mechanics of
Conversion
. Conversions of
Series A Preferred shall be conducted in the following
manner:
(i)
Voluntary
Conversion
. To convert Series A Preferred into Conversion
Shares on any date (the “
Voluntary Conversion Date
”), the
holder thereof shall transmit by facsimile (or otherwise deliver),
for receipt on or prior to 5:00 p.m., New York time on such date, a
copy of a fully executed notice of conversion in the form attached
hereto as Exhibit A (the “
Conversion Notice
”), to the
Company. As soon as practicable following such Voluntary Conversion
Date, unless such shares of Series A Preferred are held in
book-entry form, the holder shall surrender to a common carrier for
delivery to the Company the original certificates representing the
shares of Series A Preferred being converted (or an indemnification
undertaking with respect to such shares in the case of their loss,
theft or destruction) (the “
Preferred Stock Certificates
”)
and the originally executed Conversion Notice.
(ii)
Mandatory
Conversion
. In the event the Company elects to convert
outstanding shares of Series A Preferred into Conversion Shares in
pursuant to Section 5(b) above, the Company shall give written
notice (the “
Mandatory
Conversion Notice
”) to all holders of the Series A
Preferred of its intention to require the conversion of the Series
A Preferred identified therein. The Mandatory Conversion Notice
shall set forth the number of Series A Preferred being converted,
the date on which such conversion shall be effective (the
“
Mandatory Conversion
Date
”), and shall be given to the holders of the
Series A Preferred not less than ten (10) business days prior to
the Mandatory Conversion Date. The Mandatory Conversion Notice
shall be delivered to each holder at the address as it appears on
the stock transfer books of the Company. In order to receive the
Conversion Shares into which the Series A Preferred is convertible
pursuant to Section 5(b), if such shares of Series A Preferred were
not issued in book entry form on the books and records of the
Company, each holder of the Series A Preferred shall surrender to
the Company at the place designated in the Mandatory Conversion
Notice the certificates(s) representing the number of shares of
Series A Preferred specified in the Mandatory Conversion Notice.
Upon the Mandatory Conversion Date, such converted Series A
Preferred shall no longer be deemed to be outstanding, and all
rights of the holder with respect to such shares shall immediately
terminate, except the right to receive the shares of Common Stock
into which the Series C Preferred is convertible pursuant to
Section 5(b).
(iii)
Company’s
Response
. Upon receipt by the
Company of a copy of the fully executed Conversion Notice, the
Company or its designated transfer agent (the
“
Transfer
Agent
”), as applicable,
shall within three (3) business days following the date of receipt
by the Company of a copy of the fully executed Conversion Notice
(the “
Share Delivery
Date
”), issue and deliver
to the Depository Trust Company (“
DTC
”) account on the holder’s behalf via
the Deposit Withdrawal Agent Commission System
(“
DWAC
”) as specified in the Conversion Notice,
registered in the name of the holder or its designee, for the
number of Conversion Shares which the holder shall be entitled.
Notwithstanding the foregoing to the contrary, the Company or the
Transfer Agent shall only be required to issue and deliver the
Conversion Shares to the DTC on a holder’s behalf via DWAC if
(i) such conversion is in connection with a sale, (ii) the shares
of Common Stock may be issued without restrictive legends, and
(iii) the Company and the Transfer Agent are participating in DTC
through the DWAC system. If all of the conditions set forth in
clauses (i), (ii) and (iii) above are not satisfied, the Company
shall deliver physical certificates to the holder or its designee.
If the number of shares of Series A Preferred held by the holder
submitted for conversion is greater than the number of shares of
Series A Preferred being converted, then the Company shall, in the
event such shares are represented by a stock certificate
(“
Preferred Stock
Certificate
”), as soon as
practicable and in no event later than three (3) business days
after receipt of the Preferred Stock Certificate(s) and at the
Company’s expense, issue and deliver to the holder a new
Preferred Stock Certificate representing the number of shares of
Series A Preferred not converted. In the event the shares of Series
A Preferred held by the holder are represented in book entry form
on the books and records of the Company, the shares of Series A
Preferred shall be cancelled on the books and records of the
Company effective on the Share Delivery Date.
(iv)
Dispute
Resolution
. In the case of a
dispute as to the arithmetic calculation of the number of
Conversion Shares to be issued upon conversion, the Company shall
cause its Transfer Agent to promptly issue to the holder the number
of Conversion Shares that is not disputed and shall submit the
arithmetic calculations to the holder via facsimile as soon as
possible, but in no event later than two (2) business days after
receipt of such holder’s Conversion Notice. If such holder
and the Company are unable to agree upon the arithmetic calculation
of the number of Conversion Shares to be issued upon such
conversion within two (2) business days of such disputed arithmetic
calculation being submitted to the holder, then the Company shall
within two (2) business days submit via facsimile the disputed
arithmetic calculation of the number of Conversion Shares to be
issued upon such conversion to the Company’s independent,
outside accountant (the “
Accountant
”). The Company shall cause the Accountant
to perform the calculations and notify the Company and the holder
of the results no later than five (5) business days from the time
it receives the disputed calculations. The Accountant’s
calculation shall be binding upon all parties absent manifest
error. The reasonable expenses of such Accountant in making such
determination shall be paid by the Company, in the event the
holder’s calculation was correct, or by the holder, in the
event the Company’s calculation was correct, or equally by
the Company and the holder in the event that neither the
Company’s or the holder’s calculation was correct. The
period of time in which the Company is required to effect
conversions or redemptions under this Certificate of Designations
shall be tolled with respect to the subject conversion or
redemption pending resolution of any dispute by the Company made in
good faith and in accordance with this Section
5(b)(iii).
(v)
Record
Holder
. The person or persons
entitled to receive the Conversion Shares shall be treated for all
purposes as the record holder or holders of such Conversion Shares
on the Conversion Date.
(vi)
Company’s
Failure to Deliver Conversion Shares
. If, in the case of any Conversion
Notice, such Conversion Shares are not delivered to or as directed
by the applicable holder by the Share Delivery Date, in addition to
any other rights herein, the holder shall be entitled to elect by
written notice to the Company at any time on or before its receipt
of such Conversion Shares, to rescind such Voluntary Conversion, in
which event the Company shall promptly return to the holder any
original Series A Preferred Stock Certificate delivered to the
Company and the holder shall promptly return to the Company the
Conversion Shares issued to such holder pursuant to the rescinded
Conversion Notice.
(vii)
Partial Liquidated
Damages
. If the Company fails
to deliver to a holder such Conversion Shares pursuant to Section
5(b)(ii) on the Share Delivery Date applicable to such conversion,
the Company shall pay to such holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Stated Value of
the Series A Preferred being converted, $10.00 per business day
(increasing to $20.00 per business day on the fifth
(5
th
)
business day after such damages begin to accrue) for each business
day after the Share Delivery Date until such Conversion Shares are
delivered or the holder rescinds such conversion. Nothing herein
shall limit a holder’s right to pursue actual damages for the
Company’s failure to deliver Conversion Shares within the
period specified herein and such holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit a holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
(viii)
Buy-In
Rights
.
In
addition to any other rights available to the holders of Series A
Preferred, if within three (3) business days of the Company’s
receipt of an executed copy of the Conversion Notice (so long as
the applicable Preferred Stock Certificates and original Conversion
Notice are received by the Company on or before such third
(3
rd
)
business day), the Transfer Agent shall fail to issue and deliver
to a holder the number of shares of Common Stock to which such
holder is entitled upon such holder’s conversion of the
Series A Preferred (a “
Conversion
Failure
”), and if after
such date the holder is required by its broker to purchase (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the holder of the shares of
Common Stock issuable upon conversion of Series A Preferred which
the holder anticipated receiving upon such conversion (a
“
Buy-In
”), then the Company shall, within three (3)
business days after such Conversion Failure, (1) pay in cash to the
holder the amount by which (x) the holder’s total purchase
price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon
conversion of Series A Preferred that the Company was required to
deliver to the holder in connection with the conversion at issue
times (B) the price at which the sell order giving rise to such
purchase obligation was executed, and (2) deliver to the holder the
number of shares of Common Stock that would have been issued had
the Company timely complied with its conversion and delivery
obligations hereunder. For example, if the holder purchases
Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of shares of Common
Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay to the
holder $1,000. The holder shall provide the Company written notice
indicating the amounts payable to the holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of
the Series A Preferred as required pursuant to the terms
hereof.
(d)
Conversion
Price
. The term
“Conversion Price” shall mean $0.46, subject to
adjustment under Section 5(e) hereof.
(e)
Adjustments of
Conversion Price
.
(i)
Adjustments for Stock
Splits and Combinations
. If the
Company shall at any time or from time to time after the Issuance
Date, effect a stock split of the outstanding Common Stock, the
Conversion Price shall be proportionately decreased. If the Company
shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the Conversion
Price shall be proportionately increased. Any adjustments under
this Section 5(e)(i) shall be effective at the close of business on
the date the stock split or combination becomes
effective.
(ii)
Adjustments for
Certain Dividends and Distributions
. If the Company shall at any time or from time to
time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in shares of
Common Stock, then, and in each event, the Conversion Price shall
be decreased as of the time of such issuance or, in the event such
record date shall have been fixed, as of the close of business on
such record date, by multiplying the Conversion Price then in
effect by a fraction:
(1) the
numerator of which shall be 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;
and
(2) the denominator of which shall be 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 the number of shares of Common
Stock issuable in payment of such dividend or distribution;
provided,
however,
that no such
adjustment shall be made if the holders of Series A Preferred
simultaneously receive (i) a dividend or other distribution of
shares of Common Stock in a number equal to the number of shares of
Common Stock as they would have received if all outstanding shares
of Series A Preferred had been converted into Common Stock on the
date of such event, or (ii) a dividend or other distribution of
shares of Series A Preferred which are convertible, as of the date
of such event, into such number of shares of Common Stock as is
equal to the number of additional shares of Common Stock being
issued with respect to each share of Common Stock in such dividend
or distribution.
(iii)
Adjustment for Other
Dividends and Distributions
. If
the Company shall at any time or from time to time after the
Issuance Date, make or issue or set 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 event, an
appropriate revision to the applicable Conversion Price shall be
made and provision shall be made (by adjustments of the Conversion
Price or otherwise) so that the holders of Series A Preferred shall
receive upon conversions thereof, in addition to the number of
shares of Common Stock receivable thereon, the number of securities
of the Company which they would have received had their Series A
Preferred been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such
event to and including the Conversion Date, retained such
securities (together with any distributions payable thereon during
such period), giving application to all adjustments called for
during such period under this Section 5(e)(iii) with respect to the
rights of the holders of the Series A Preferred;
provided,
however
, that if such record
date shall have been 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 adjusted pursuant to this paragraph
as of the time of actual payment of such dividends or
distributions.
(iv)
Adjustments for
Reclassification, Exchange or Substitution
. If the Common Stock issuable upon conversion of
the Series A Preferred Stock at any time or from time to time after
the Issuance Date shall be changed to the same or different number
of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than
by way of a stock split or combination of shares or stock dividends
provided for in Sections 5(e)(i), (ii) and (iii), or a
reorganization, merger, consolidation, or sale of assets provided
for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall
be made (by adjustments of the Conversion Price or otherwise) so
that the holder of each share of Series A Preferred shall have the
right thereafter to convert such share of Series A Preferred into
the kind and amount of shares of stock and other securities
receivable upon reclassification, exchange, substitution or other
change, by holders of the number of shares of Conversion Shares
into which such share of Series A Preferred might have been
converted immediately prior to such reclassification, exchange,
substitution or other change, all subject to further adjustment as
provided herein.
(v)
Adjustments for
Reorganization, Merger, Consolidation or Sales of
Assets
. If at any time or from
time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions
provided for in Section 5(e)(i), (ii) and (iii), or a
reclassification, exchange or substitution of shares provided for
in Section 5(e)(iv)), or a merger or consolidation of the Company
with or into another corporation where the holders of outstanding
voting securities prior to such merger or consolidation do not own
over 50% of the outstanding voting securities of the merged or
consolidated entity, immediately after such merger or
consolidation, or the sale of all or substantially all of the
Company’s properties or assets to any other person (an
“
Organic
Change
”), then as a part
of such Organic Change an appropriate revision to the Conversion
Price shall be made if necessary and provision shall be made if
necessary (by adjustments of the Conversion Price or otherwise) so
that the holder of each share of Series A Preferred shall have the
right thereafter to convert such share of Series A Preferred into
the kind and amount of shares of stock and other securities or
property which such holder would have had the right to receive had
such holder converted its shares of Series A Preferred immediately
prior to the consummation of such Organic Change. In any such case,
appropriate adjustment shall be made in the application of the
provisions of this Section 5(e)(v) with respect to the rights of
the holders of the Series A Preferred after the Organic Change to
the end that the provisions of this Section 5(e)(v) (including any
adjustment in the Conversion Price then in effect and the number of
shares of stock or other securities deliverable upon conversion of
the Series A Preferred) shall be applied after that event in as
nearly an equivalent manner as may be
practicable.
(vi)
Record
Date
. In case the Company shall
take record of the holders of its Common Stock or any other
Preferred Stock for the purpose of entitling them to subscribe for
or purchase Common Stock or Convertible Securities, then the date
of the issue or sale of the shares of Common Stock shall be deemed
to be such record date.
(f)
No
Impairment
. The Company shall
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith, assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such
action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred against
impairment. In the event a holder shall elect to convert any
shares of Series A Preferred as provided herein, the Company cannot
refuse conversion based on any claim that such holder or any one
associated or affiliated with such holder has been engaged in any
violation of law, unless (i) an order from the SEC prohibiting such
conversion, or (ii) an injunction from a court, on notice,
restraining and/or adjoining conversion of all or of said shares of
Series A Preferred shall have been issued and the Company posts a
surety bond for the benefit of such holder in an amount equal to
100% of the Liquidation Preference Amount of the Series A Preferred
such holder has elected to convert, which bond shall remain in
effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such holder
in the event it obtains judgment. If the Company is the
prevailing party in any legal action or other legal proceeding
relating to the Conversion Rights of the holders of the Series A
Preferred, then the Company shall be entitled to recover from the
holders of Series A Preferred reasonable attorneys’ fees,
costs and disbursements (in addition to any other relief to which
the Company may be entitled).
(g)
Certificates as to
Adjustments
. Upon occurrence of
each adjustment or readjustment of the Conversion Price or number
of Conversion Shares issuable upon conversion of the Series A
Preferred pursuant to this Section 5, the Company at its expense
shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of such
Series A Preferred a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon
written request of the holder of such affected Series A Preferred,
at any time, furnish or cause to be furnished to such holder a like
certificate setting forth such adjustments and readjustments, the
Conversion Price in effect at the time, and the number of
Conversion Shares and the amount, if any, of other securities or
property which at the time would be received upon the conversion of
a share of such Series A Preferred. Notwithstanding the foregoing,
the Company shall not be obligated to deliver a certificate unless
such certificate would reflect an increase or decrease of at least
one percent of such adjusted amount.
(h)
Issue
Taxes
. The Company shall pay
any and all issue and other taxes, excluding federal, state or
local income taxes, that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of
Series A Preferred pursuant thereto;
provided, however,
that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such
conversion.
(i)
Notices
.
All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by facsimile
or three (3) business days following being mailed by certified or
registered mail, postage prepaid, return-receipt requested,
addressed to the holder of record at its address appearing on the
books of the Company. The Company will give written notice to each
holder of Series A Preferred at least twenty (20) business days
prior to the date on which the Company closes its books or takes a
record (I) with respect to any dividend or distribution upon the
Common Stock, (II) with respect to any pro rata subscription offer
to holders of Common Stock, or (III) for determining rights to vote
with respect to any Fundamental Transaction, Organic Change,
dissolution, liquidation or winding-up and in no event shall such
notice be provided to such holder prior to such information being
made known to the public. The Company will also give written notice
to each holder of Series A Preferred at least twenty (20) business
days prior to the date on which any Fundamental Transaction,
Organic Change, dissolution, liquidation or winding-up will take
place and in no event shall such notice be provided to such holder
prior to such information being made known to the
public.
(j)
Fractional
Shares
. No fractional shares of
Common Stock shall be issued upon conversion of the Series A
Preferred. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Company shall pay cash equal to
the product of such fraction multiplied by the Conversion
Price.
(k)
Reservation of Common
Stock
. The Company shall, so
long as any shares of Series A Preferred are outstanding, reserve
and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Series A
Preferred, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all of the Series
A Preferred then outstanding; provided that the number of shares of
Common Stock so reserved shall at no time be less than 100% of the
number of shares of Conversion Shares for which the shares of
Series A Preferred are at any time convertible. The initial number
of shares of Common Stock reserved for conversions of the Series A
Preferred and each increase in the number of shares so reserved
shall be allocated pro rata among the holders of the Series A
Preferred based on the number of shares of Series A Preferred held
by each holder of record at the time of issuance of the Series A
Preferred or increase in the number of reserved shares, as the case
may be. In the event a holder shall sell or otherwise transfer any
of such holder’s shares of Series A Preferred, each
transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any
shares of Common Stock reserved and which remain allocated to any
person or entity which does not hold any shares of Series A
Preferred shall be allocated to the remaining holders of Series A
Preferred, pro rata based on the number of shares of Series A
Preferred then held by such holder.
(l)
Retirement of Series A
Preferred
. Conversion of Series
A Preferred shall be deemed to have been effected on the applicable
Conversion Date. Upon conversion of only a portion of the number of
shares of Series A Preferred represented by a certificate
surrendered for conversion, the Company shall issue and deliver to
such holder at the expense of the Company, a new certificate
covering the number of shares of Series A Preferred representing
the unconverted portion of the certificate so surrendered as
required by Section 5(b)(ii).
(m)
Regulatory
Compliance
. If any shares of
Common Stock to be reserved for the purpose of conversion of Series
A Preferred require registration or listing with or approval of any
governmental authority, stock exchange or other regulatory body
under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the
Company shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration,
listing or approval, as the case may be.
6.
No
Preemptive Rights
. Except as
provided in Section 5 hereof, no holder of the Series A Preferred
shall be entitled to rights to subscribe for, purchase or receive
any part of any new or additional shares of any class, whether now
or hereinafter authorized, or of bonds or debentures, or other
evidences of indebtedness convertible into or exchangeable for
shares of any class, but all such new or additional shares of any
class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and
disposed of by the Board on such terms and for such consideration
(to the extent permitted by law), and to such person or persons as
the Board in their absolute discretion may deem
advisable.
7.
Inability
to Fully Convert
.
(a)
Holder’s Option
if Company Cannot Fully Convert
. If, upon the Company’s receipt of a
Conversion Notice, the Company cannot issue shares of Common Stock
registered for resale under a registration statement for any reason
(unless such registration statement is not then required to be
effective), including, without limitation, because the Company (x)
does not have a sufficient number of shares of Common Stock
authorized and available, or (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities
from issuing all of the Common Stock which is to be issued to a
holder of Series A Preferred pursuant to a Conversion Notice, then
the Company shall issue as many shares of Common Stock as it is
able to issue in accordance with such holder’s Conversion
Notice and pursuant to Section 5(c)(ii) above and, with respect to
the unconverted Series A Preferred, the holder, solely at such
holder’s option, can elect, within five (5) business days
after receipt of notice from the Company thereof
to:
(i) if
the Company’s inability to fully convert Series A Preferred
is pursuant to Section 7(a)(y) above, require the Company to issue
restricted shares of Common Stock in accordance with such
holder’s Conversion Notice and pursuant to Section 5(c)(ii)
above;
(ii) void
its Conversion Notice and retain or have returned, as the case may
be, the shares of Series A Preferred that were to be converted
pursuant to such holder’s Conversion Notice (provided that a
holder’s voiding its Conversion Notice shall not affect the
Company’s obligations to make any payments which have accrued
prior to the date of such notice); or
(iii) exercise
its Buy-In rights pursuant to and in accordance with the terms and
provisions of Section 5(c)(viii) hereof.
(b)
Mechanics of
Fulfilling Holder’s Election
. The Company shall promptly send via facsimile to
a holder of Series A Preferred, upon receipt of a facsimile copy of
a Conversion Notice from such holder which cannot be fully
satisfied as described in Section 7(a) above, a notice of the
Company’s inability to fully satisfy such holder’s
Conversion Notice (the “
Inability to Fully Convert
Notice
”). Such Inability
to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such holder’s Conversion
Notice, and (ii) the number of Series A Preferred that cannot be
converted. Such holder shall notify the Company of its election
pursuant to Section 7(a) above by delivering written notice via
facsimile to the Company (“
Notice in Response to
Inability to Convert
”).
(c)
Pro-Rata
Conversion
. In the event the
Company receives a Conversion Notice from more than one holder of
Series A Preferred on the same day and the Company can convert
some, but not all, of the Series A Preferred pursuant to this
Section 7, the Company shall convert from each holder of Series A
Preferred electing to have Series A Preferred converted at such
time an amount equal to such holder’s pro-rata amount (based
on the number shares of Series A Preferred held by such holder
relative to the number shares of Series A Preferred outstanding) of
all shares of Series A Preferred being converted at such
time.
8.
Redemption
.
(a)
Redemption Upon Change
of Control
. Simultaneous with
the occurrence of a Change of Control (as defined below), the
Company shall be required to redeem all of the outstanding Series A
Preferred in cash at a price per share of Series A Preferred equal
to 115% of the Liquidation Preference Amount plus all accrued and
unpaid dividends after the Cash Dividend Payment Date (the
“
Change of Control Redemption
Price
”);
provided,
however
, that the Company shall
provide holders of shares of Series A Preferred with notice at
least ten (10) business days prior to such redemption, and such
holders may elect, in their sole discretion, to convert their
shares of Series A Preferred, plus any accrued and unpaid dividends
after the Cash Dividend Payment Date, into Conversion Shares
pursuant to Section 5 prior to the effectiveness of a Change of
Control.
(b)
“Change of
Control”
. A
“Change of Control” shall be deemed to have occurred at
such time as a third party not affiliated with the Company or any
holders of the Series A Preferred shall have acquired, in one or a
series of related transactions, equity securities of the Company
representing more than 50% of the outstanding voting securities of
the Company, and such Change of Control has been approved by the
Board.
(c)
Mechanics of
Redemption Upon Change of Control
. Effective upon the consummation of a Change of
Control, the Company shall redeem all of the holders’ Series
A Preferred then outstanding by delivering written notice thereof
via facsimile and overnight courier (“
Notice of Redemption Upon
Change of Control
”) to
each holder of Series A Preferred, which Notice of Redemption Upon
Change of Control shall indicate (i) the number of shares of Series
A Preferred that the Company is electing to redeem, and (ii) the
Change of Control Redemption Price, as calculated pursuant to
Section 8(a) above. The Change of Control Redemption Price
shall be paid in cash in accordance with Section 8(a) of this
Certificate of Designations. On or prior to the Change of Control,
provided that the holders do not elect to convert their shares of
Series A Preferred into Conversion Shares pursuant to Section 8(a)
above, the holders of Series A Preferred shall surrender to the
Company the certificate or certificates representing such shares,
in the manner and at the place designated in the Notice of
Redemption Upon Change of Control. The Company shall deliver
the Change of Control Redemption Price immediately prior to or
simultaneously with the consummation of the Change of Control;
provided that a holder’s Preferred Stock Certificates shall
have been so delivered to the Company (or an indemnification
undertaking with respect to such Preferred Stock Certificates in
the event of their loss, theft or destruction). From and after
the Change of Control transaction, unless there shall have been a
default in payment of the Change of Control Redemption Price, all
rights of the holders of Series A Preferred as a holder of such
Series A Preferred (except the right to receive the Change of
Control Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to any
redeemed shares of Series A Preferred, and such shares shall not
thereafter be transferred on the books of the Company or be deemed
to be outstanding for any purpose whatsoever. Notwithstanding
the foregoing to the contrary, nothing contained herein shall limit
a holder’s ability to convert its shares of Series A
Preferred following the receipt of the Notice of Redemption Upon
Change of Control and prior to the consummation of the Change of
Control transaction.
(d)
Company’s
Redemption Option
. The
Company may redeem all or a portion of the Series A Preferred
outstanding upon ten (10) business days’ prior written notice
(the “
Company’s Redemption
Notice
”) in cash at a
price per share of Series A Preferred equal to 115% of the
Liquidation Preference Amount plus all accrued and unpaid dividends
after the Cash Dividend Payment Date (the
“
Company’s
Redemption Price
”);
provided,
however
,
that if a
holder has delivered a Conversion Notice to the Company for all or
a portion of the Shares of Series A Preferred, such
shares of Series A Preferred designated to be
redeemed may be converted by such holder. The Company’s
Redemption Notice shall state the date of redemption, which date
shall be ten (10) business days after the Company has delivered the
Company’s Redemption Notice (the “
Company’s Redemption
Date
”), the
Company’s Redemption Price and the number of shares to be
redeemed by the Company. The Company shall deliver the
Company’s Redemption Price to the holder(s) within ten (10)
business days after the Company has delivered the Company’s
Redemption Notice;
provided,
however
, that if the holder(s)
delivers a Conversion Notice before the Company’s Redemption
Date, then the portion of the Company’s Redemption Price
which would be paid to redeem the shares of Series A Preferred
covered by such Conversion Notice shall be returned to the Company
upon delivery of the Common Stock issuable in connection with such
Conversion Notice to the holder(s). On the Redemption Date, the
Company shall pay the Company’s Redemption Price, subject to
any adjustment pursuant to the immediately preceding sentence, to
the holder(s) on a pro rata basis;
provided, however,
that upon receipt by the Company of
the Preferred Stock Certificates to be redeemed pursuant to this
Section 8(d), the Company shall, on the next business day following
the date of receipt by the Company of such Preferred Stock
Certificates, pay the Company’s Redemption Price, subject to
any adjustment pursuant to the immediately preceding sentence, to
the holder(s) on a pro rata basis.
9.
Registration
Rights.
(a)
Piggyback
Registration
.
(i) If at any time within two (2) years
following the Issuance Date that any shares of Series A Preferred
remain outstanding the Company proposes for any reason to register
any shares of Common Stock under the Securities Act, (other than
pursuant to a registration statement on Form S-4 or Form S-8 (or a
similar or successor form)) with respect to an offering of Common
Stock by the Company for its own account or for the account of any
of its stockholders, it shall, unless a holder of Series A
Preferred has provided written notice to the Company that it does
not want to receive such information, at each such time promptly
give written notice to the holders of the Series A Preferred of its
intention to do so (but in no event less than thirty (30) days
before the anticipated filing date) and, to the extent permitted
under the provisions of Rule 415 under the Securities Act, include
in such registration all Conversion Shares issuable upon conversion
of the outstanding shares of Series A Preferred (the
“
Registerable
Securities
”) with respect
to which the Company has received written requests for inclusion
therein within fifteen (15) days after receipt of the
Company’s notice (a “
Piggyback
Registration
”). Such
notice shall offer the holders of the Registrable Securities the
opportunity to register such number of shares of Registrable
Securities as each such holder may request and shall indicate the
intended method of distribution of such Registrable
Securities.
(ii) Notwithstanding
the foregoing, in the event a holder of Series A Preferred elects
to require the Company register shares of Registrable Securities
pursuant to Section 9(a)(i) above, (A) if such registration
involves an underwritten public offering, the holders must sell
their Registrable Securities to, if applicable, the underwriter(s)
at the same price and subject to the same underwriting discounts
and commissions that apply to the other securities sold in such
offering (it being acknowledged that the Company shall be
responsible for other expenses) and subject to the holders entering
into customary underwriting documentation for selling stockholders
in an underwritten public offering, and (B) if, at any time after
giving written notice of its intention to register any Registrable
Securities pursuant to Section 9(a)(i) and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
cause such registration statement to become effective under the
Securities Act, the Company shall deliver written notice to the
holders and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration. Any holder may elect to withdraw such holder’s
request for inclusion of Registrable Securities in any Piggyback
Registration by giving written notice to the Company of such
request to withdraw prior to the effectiveness of the registration
statement or the pricing of an underwritten offering, as
applicable.
(b)
Demand
Registration
.
(i) At any time following the two (2) year
anniversary of the Issuance Date, holders of the issued and
outstanding Series A Preferred (acting together) that own or
control Registrable Securities representing at least fifty percent
(50%) of the then-issued and outstanding Registrable Securities
(collectively, the “
Requesting
Holders
”), may deliver to
the Company a written notice (a “
Demand Registration
Notice
”) informing the
Company that such Requesting Holders require the Company to
register for resale some or all of such Requesting Holders’
Registrable Securities not otherwise then registered for resale (a
“
Demand
Registration
”);
provided,
however,
that the Company
will not be required to effect more than one (1) Demand
Registration in accordance with this Certificate of Designations.
Upon receipt of the Demand Registration Notice, the Company will
use best efforts to file with the SEC as promptly as practicable
after receiving the Demand Registration Notice, but in no event
more than sixty (60) days following receipt of the Demand
Registration Notice, a registration statement covering all
requested Registrable Securities (the “
Demand Registration
Statement
”), and agrees
to use best efforts to cause the Demand Registration Statement to
be declared effective by the SEC as soon as practicable following
the filing thereof, but in no event later than ninety (90) days
after the filing of such Demand Registration Statement. The Company
agrees to use best efforts to keep any Demand Registration
Statement continuously effective (including the preparation and
filing of any amendments and supplements necessary for that
purpose) until such time as all of the Registrable Securities
covered thereby have been sold (“
Minimum Effective
Period
”).
(ii)
Notice to
Holders
. The Company shall give
written notice of the proposed filing of any Demand Registration
Statement to all holders of issued and outstanding shares of Series
A Preferred (other than the Requesting Holders) as soon as
practicable, and each such holder who wishes to participate in such
Demand Registration Statement shall notify the Company in writing
within five (5) business days after the receipt by such holder of
the notice from the Company, and shall specify in such notice the
number of Registrable Securities held by such holder to be included
in the Demand Registration Statement. Upon the written request of
any holder, delivered to the Company no later than five (5)
business days after the Company’s notice is delivered to such
holder, to register, on the same terms and conditions as the
Registrable Securities otherwise being sold pursuant to such Demand
Registration, any of its Registrable Securities, the Company will
use its best efforts to cause such Registrable Securities to be
included in the Demand Registration Statement proposed to be filed
by the Company on the same terms and conditions as any Registrable
Securities included therein.
10.
Lost
or Stolen Certificates
. Upon
receipt by the Company of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing the shares of Series A Preferred, and, in
the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company (in form and substance
satisfactory to the Company) and, 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;
provided,
however
, the Company shall not
be obligated to re-issue Preferred Stock Certificates if the holder
contemporaneously requests the Company to convert such shares of
Series A Preferred into Common Stock.
11.
Governing
Law
. All questions concerning
the construction, validity, enforcement and interpretation of this
Certificate of Designations shall be governed by and construed and
enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws
thereof.
12.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
. The remedies provided
in this Certificate of Designations shall be cumulative and in
addition to all other remedies available under this Certificate of
Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a
holder’s right to pursue actual damages for any failure by
the Company to comply with the terms of this Certificate of
Designations. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall
not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of the Series A Preferred and
that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach, the
holders of the Series A Preferred shall be entitled, in addition to
all other available remedies, to an injunction restraining any
breach or the Series A Preferred stockholders’ reasonable
perception of a threatened breach by the Company of the provisions
of this Certificate of Designations, without the necessity of
showing economic loss and without any bond or other security being
required.
13.
Specific
Shall Not Limit General; Construction
. No specific provision contained in this
Certificate of Designations shall limit or modify any more general
provision contained herein. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and all
initial purchasers of the Series A Preferred and shall not be
construed against any person as the drafter
hereof.
14.
Failure or
Indulgence Not Waiver
. No
failure or delay on the part of a holder of Series A Preferred in
the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or
privilege.
IN WITNESS
WHEREOF,
this Certificate
of Designations is executed on Company this 13th day of
November 2018.
|
|
FITLIFE
BRANDS, INC.
By:
/s/ Michael
Abrams
Name: Michael
Abrams
Title: Chief
Financial Officer
|
EXHIBIT A
FITLIFE BRANDS, INC. CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences
and Rights of the Series A Convertible Preferred Stock of FitLife
Brands, Inc. (the “
Certificate of
Designation
”).
In accordance with and pursuant to the Certificate
of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred, par value $0.01 per share (the
“
Preferred
Shares
”), of FitLife
Brands, Inc., a Nevada corporation
(the “
Company
”),
indicated below into shares of Common Stock, par
value $0.01 per share (the “
Common
Stock
”),
of
the Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date
specified below.
Date
of Conversion:
Number
of Preferred Shares to be converted:
Stock
certificate no(s). of Preferred Shares to be
converted:
Number
of Preferred Shares to be converted:
Please confirm the following information:
Conversion
Price:
Number
of shares of Common Stock to be issued:
Number
of shares of Common Stock beneficially owned or deemed beneficially
owned by the Holder on the Date of Conversion determined in
accordance with Section 16 of the Securities Exchange Act of
1934, as amended:
Please issue the Common Stock into which the Preferred Shares are
being converted and, if applicable, any check drawn on an account
of the Company in the following name and to the following
address:
Issue
to:
Facsimile Number:
Name of bank/broker due to receive the underlying Common
Stock:
Bank/broker's four digit “DTC” participant number
(obtained from the receiving bank/broker):
Authorization:
By:
Title:
Dated:
Exhibit 4.1
Warrant
Certificate No. ______
THE SECURITIES REPRESENTED HEREBY H
AVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS
AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.
HEDGING TRANSACTIONS INVOLVING THESE SECURITIES
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.
Effective
Date: November ___, 2018Expiration Date: November ___,
2023
1
Warrant
No. ________
FITLIFE BRANDS, INC.
WARRANT
TO PURCHASE COMMON STOCK
FitLife Brands, Inc.
,
a Nevada corporation (the
“
Company
”), for
value received on the Effective Date, hereby issues to
__________________________ (the “
Holder
”) this Warrant (the
“
Warrant
”) to
purchase ______________ shares (as from time to time adjusted as
hereinafter provided) (each such share a “
Warrant Share
” and all such shares
being the “
Warrant
Shares
”) of the Company’s Common Stock (as
defined below), at the Exercise Price (as defined below), as
adjusted from time to time as provided herein, on or before the
Expiration Date, all subject to the following terms and
conditions.
As used
in this Warrant, (i) “
Business Day
” means any day other
than Saturday, Sunday or any other day on which commercial banks in
the City of New York, New York, are authorized or required by law
or executive order to close; (ii) “
Common Stock
” means the common
stock of the Company, par value $0.01 per share, including any
securities issued or issuable with respect thereto or into which or
for which such shares may be exchanged for, or converted into,
pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar
event; (iii) “
Exercise
Price
” means $_____
2
per share of Common Stock, subject to
adjustment as provided herein; (iv) “
Trading Day
” means any day on
which the primary national or regional stock exchange on which the
Common Stock is listed, or if not so listed, the OTC Bulletin Board
or the OTC Markets, if quoted thereon,
is open
for the transaction of business; and (v) “
Affiliate
” means any person that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, a person, as such
terms are used and construed in Rule 144 promulgated under the
Securities Act of 1933, as amended (the “
Securities
Act
”).
1.
DURATION
AND EXERCISE OF WARRANTS
(a)
Exercise
Period
. The Holder may exercise
this Warrant in whole or in part on any Business Day on or before
5:00 P.M., Eastern Time, on the Expiration Date, at which time this
Warrant shall become void and of no value.
(b)
Exercise
Procedures
.
(i)
While
this Warrant remains outstanding and exercisable in accordance with
Section 1(a)
,
the Holder may
exercise this Warrant in whole or in part at any time and from time
to time by:
(A)
delivery
to the Company of a duly completed and executed copy of the notice
of exercise attached hereto as
Exhibit A
(the “
Notice of
Exercise
;
(B)
surrender
of this Warrant to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder; and
(C)
payment
of the then-applicable Exercise Price per share multiplied by the
number of Warrant Shares being purchased upon exercise of the
Warrant (such amount, the “
Aggregate Exercise
Price
”) made in the form
of cash, or by wire transfer of immediately available funds,
certified check or bank draft payable in lawful money of the United
States of America.
(ii)
Upon
the exercise of this Warrant in compliance with the provisions of
this Section 1(b), and except as limited pursuant to Section
1(b)(iv), the Company shall promptly issue and cause to be
delivered to the Holder a certificate for the Warrant Shares for
which this Warrant was exercised. Each exercise of this Warrant
shall be effective immediately prior to the close of business on
the date (the “
Date of
Exercise
”) that the
conditions set forth in Section 1(b)(i) or (ii) have been
satisfied, as the case may be.
On or before the third
(3
rd
)
Business Day following the date on which the Company has received
each of the items specified in Section 1(b)(i) or 1(b)(ii), as
applicable (the “
Exercise
Deliverables
”), the Company shall transmit an
acknowledgment of receipt of the Exercise Deliverables to the
Company’s transfer agent (the “
Transfer Agent
”). On or before the
fifth (5
th
) Business Day
following the date on which the Company has received all of the
Exercise Deliverables (the “
Share Delivery Date
”), the Company
shall (X) provided that the Warrant Shares have been registered or
that the Warrant Shares are eligible for sale under Rule 144
without restriction and that the Transfer Agent is participating in
The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder and to
the extent applicable, Holder’s supplying the Company with
required Rule 144 documentation, cause the Transfer Agent to credit
such aggregate number of shares of Common Stock to which the Holder
is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the Warrant Shares
have not been registered and are not eligible for sale under Rule
144 without restriction or if Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program, cause the
Transfer Agent to issue and dispatch by overnight courier to the
address as specified in the Notice of Exercise, a certificate,
registered in the Company’s share register in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder is entitled pursuant to such
exercise.
Upon
delivery of the Exercise Deliverables,
the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective
of the date of delivery of the certificates evidencing such Warrant
Shares.
(iv) If
the Company shall fail for any reason or for no reason to issue or
cause to be issued to the Holder, within five (5) Business Days of
receipt of the Exercise Deliverables, a certificate for the number
of shares of Common Stock to which the Holder is entitled and
register or cause to be registered such shares of Common Stock on
the Company’s share register or to credit or cause to be
credited the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant (in each case as
provided above), and if on or after such fifth (5
th
) Business Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that
the Holder anticipated receiving from the Company (a
“
Buy-In
”), then
the Company shall, within three (3) Business Days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “
Buy-In Price
”), at which point the
Company’s obligation to deliver a certificate for the shares
of Common Stock to which the Holder would have been entitled and
register or cause to be registered such shares of Common Stock on
the Company’s share register, or to credit or cause to be
credited the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder would have
been entitled, shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B)
the fair value of the Common Stock on the date of
exercise.
(v)
Notwithstanding
the foregoing provisions of this Section 1(b), the Holder may not
exercise this Warrant if and to the extent that such exercise would
require the Company to issue a number of shares of Common Stock in
excess of its authorized but unissued shares of Common Stock, less
all amounts of Common Stock that have been reserved for issue upon
the conversion of all outstanding securities convertible into
shares of Common Stock and the exercise of all outstanding options,
warrants and other rights exercisable for shares of Common Stock.
If the Company does not have the requisite number of authorized but
unissued shares of Common Stock to permit the Holder to exercise
this Warrant, then the Company shall use commercially reasonable
efforts to obtain the necessary stockholder consent to increase the
authorized number of shares of Common Stock to permit such Holder
to exercise this Warrant pursuant to Section 1(b)(i) or Section
1(b)(ii).
(vi)
The
delivery by (or on behalf of) the Holder of the Notice of Exercise
and the applicable Exercise Price as provided above shall
constitute the Holder’s certification to the Company that its
representations and warranties contained in the Subscription
Agreement, including without limitation the representation and
warranty that the Holder is an “accredited investor,”
are true and correct as of the exercise date as if remade in their
entirety (or, in the case of any transferee Holder that is not a
party to the Subscription Agreement, such transferee Holder’s
certification to the Company that such representations are true and
correct as to such assignee Holder as of the exercise
date).
(c)
Partial
Exercise
. This Warrant shall be
exercisable, either in its entirety or, from time to time, for part
of the number of Warrant Shares referenced by this Warrant;
provided, that any such partial exercise must be for an integral
number of Warrant Shares. If this Warrant is exercised in part, the
Company shall issue, at its expense, a new Warrant, in
substantially the form of this Warrant, referencing such reduced
number of Warrant Shares that remain subject to this
Warrant.
(d)
Disputes
.
In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and resolve such dispute in accordance
with Section 14.
2.
ISSUANCE
OF WARRANT SHARES
(a)
The
Company covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be (i) duly authorized,
fully paid and non-assessable, and (ii) free from all liens,
charges and security interests, with the exception of claims
arising through the acts or omissions of any Holder and except as
arising from applicable Federal and state securities
laws.
(b)
The
Company shall register this Warrant upon records to be maintained
by the Company for that purpose in the name of the record holder of
such Warrant from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner thereof for
the purpose of any exercise thereof, any distribution to the Holder
thereof and for all other purposes.
(c)
The
Company will not, by amendment of its articles of incorporation,
bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all action necessary or appropriate in order
to protect the rights of the Holder to exercise this Warrant, or
against impairment of such rights.
3.
ADJUSTMENTS
OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES
(a)
General
.
The Exercise Price and the number of shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of certain events described in this
Section 3(a);
provided, however,
that notwithstanding the provisions of
this Section 3, the Company shall not be required to make any
adjustment if and to the extent that such adjustment would require
the Company to issue a number of shares of Common Stock in excess
of its authorized but unissued shares of Common Stock, less all
amounts of Common Stock that have been reserved for issue upon the
conversion of all outstanding securities convertible into shares of
Common Stock and the exercise of all outstanding options, warrants
and other rights exercisable for shares of Common Stock. If the
Company does not have the requisite number of authorized but
unissued shares of Common Stock to make any adjustment, the Company
shall use its commercially reasonable efforts to obtain the
necessary stockholder consent to increase the authorized number of
shares of Common Stock to make such an adjustment pursuant to this
Section 3(a).
(i)
Subdivision
or Combination of Stock
. In
case the Company shall at any time subdivide (whether by way of
stock dividend, stock split or otherwise) its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares shall be
proportionately increased, and conversely, in case the outstanding
shares of Common Stock of the Company shall be combined (whether by
way of stock combination, reverse stock split or otherwise) into a
smaller number of shares, the Exercise Price in effect immediately
prior to such combination shall be proportionately increased and
the number of Warrant Shares shall be proportionately decreased.
The Exercise Price and the Warrant Shares, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive
event or events described in this Section
3(a)(i).
(ii)
Dividends
in Stock, Property, Reclassification
. If at any time, or from time to time, the
holders of Common Stock (or any shares of stock or other securities
at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment
therefor:
(A)
any
shares of stock or other securities that are at any time directly
or indirectly convertible into or exchangeable for Common Stock, or
any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other
distribution, or
(B)
additional
stock or other securities or property (including cash) by way of
spin-off, split-up, reclassification, combination of shares or
similar corporate rearrangement (other than shares of Common Stock
issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3(a)(i) above),
then and in each such case, the Exercise Price and the number of
Warrant Shares to be obtained upon exercise of this Warrant shall
be adjusted proportionately, and the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the
amount of stock and other securities and property (including cash
in the cases referred to above) that such Holder would hold on the
date of such exercise had such Holder been the holder of record of
such Common Stock as of the date on which holders of Common Stock
received or became entitled to receive such shares or all other
additional stock and other securities and property. The Exercise
Price and the Warrant Shares, as so adjusted, shall be readjusted
in the same manner upon the happening of any successive event or
events described in this Section 3(a)(ii)
.
(iii)
Reorganization,
Reclassification, Consolidation, Merger or Sale
. If any recapitalization, reclassification or
reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation or
any other entity, or the sale of all or substantially all of its
assets or other transaction shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock,
securities or other assets or property (an
“
Organic
Change
”), then
, as
a condition of such Organic Change,
lawful and adequate provisions shall be made by
the Company whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented by this
Warrant) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to
the number of shares of such stock immediately theretofore
purchasable and receivable assuming the full exercise of the rights
represented by this Warrant. In the event of any Organic Change,
appropriate provision shall be made by the Company with respect to
the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, in relation to any shares
of stock, securities or assets thereafter deliverable upon the
exercise hereof.
The Company shall not effect any such
Organic Change unless, prior to the consummation
thereof
, the successor corporation or
entity (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets
shall assume by written instrument reasonably satisfactory in form
and substance to the Holder executed and mailed or delivered to the
registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be
entitled to purchase. If there is an Organic Change, then the
Company shall cause to be mailed to the Holder at its last address
as it shall appear on the books and records of the Company, at
least ten (10) calendar days before the effective date of the
Organic Change, a notice stating the date on which such Organic
Change is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares for securities, cash, or
other property delivered upon such Organic Change;
provided,
however
, that the failure to
mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to
be specified in such notice. The Holder is entitled to exercise
this Warrant during the 10-day period commencing on the date of
such notice to the effective date of the event triggering such
notice. In any event, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall be deemed to assume such
obligation to deliver to such Holder such shares of stock,
securities or assets even in the absence of a written instrument
assuming such obligation to the extent such assumption occurs by
operation of law.
(b)
Certificate
as to Adjustments
. Upon the
occurrence of each adjustment or readjustment pursuant to this
Section 3, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to each Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company
shall promptly furnish or cause to be furnished to such Holder a
like certificate setting forth: (i) such adjustments and
readjustments; and (ii) the number of shares and the amount, if
any, of other property which at the time would be received upon the
exercise of the Warrant.
(c)
Certain
Events
. If any event occurs as
to which the other provisions of this Section 3 are not strictly
applicable but the lack of any adjustment would not fairly protect
the purchase rights of the Holder under this Warrant in accordance
with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the purchase rights of
the Holder under this Warrant in accordance with the basic intent
and principles of such provisions, then the Company’s Board
of Directors will, in good faith and subject to applicable law,
make an appropriate adjustment to protect the rights of the
Holder;
provided,
however
, that no such
adjustment pursuant to this Section 3(d) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise
determined pursuant to this Section 3.
4.
TRANSFERS
AND EXCHANGES OF WARRANT AND WARRANT SHARES
(a)
Registration
of Transfers and Exchanges
.
Subject to Section 4(c), upon the Holder’s surrender of this
Warrant, with a duly executed copy of the Form of Assignment
attached as
Exhibit B
, to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder, the Company shall register the
transfer of all or any portion of this Warrant. Upon such
registration of transfer, the Company shall issue a new Warrant, in
substantially the form of this Warrant, evidencing the acquisition
rights transferred to the transferee and a new Warrant, in similar
form, evidencing the remaining acquisition rights not transferred,
to the Holder requesting the transfer.
(b)
Warrant
Exchangeable for Different Denominations
. The Holder may exchange this Warrant for a new
Warrant or Warrants, in substantially the form of this Warrant,
evidencing in the aggregate the right to purchase the number of
Warrant Shares, which may then be purchased hereunder, each of such
new Warrants to be dated the date of such exchange and to represent
the right to purchase such number of Warrant Shares as shall be
designated by the Holder. The Holder shall surrender this Warrant
with duly executed instructions regarding such re-certification of
this Warrant to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder.
(c)
Restrictions
on Transfers
. This Warrant may
not be transferred at any time without (i) registration under the
Securities Act or (ii) an exemption from such registration
and,
if requested by the
Company, a written opinion of legal counsel addressed to the
Company that the proposed transfer of the Warrant may be effected
without registration under the Securities Act, which opinion will
be in form and from counsel reasonably satisfactory to the
Company.
(d)
Permitted
Transfers and Assignments
.
Notwithstanding any provision to the contrary in this Section 4,
the Holder may transfer, with or without consideration, this
Warrant or any of the Warrant Shares (or a portion thereof) to the
Holder’s Affiliates (as such term is defined under Rule 144
of the Securities Act) without obtaining the opinion from counsel
that may be required by Section 4(c)(ii),
provided
,
that the Holder delivers to the Company and its
counsel certification, documentation, and other assurances
reasonably required by the Company’s counsel to enable the
Company’s counsel to render an opinion to the Company’s
Transfer Agent that such transfer does not violate applicable
securities laws.
5.
MUTILATED
OR MISSING WARRANT CERTIFICATE
If this Warrant is mutilated, lost, stolen or
destroyed, upon request by the Holder, the Company will, at its
expense, issue, in exchange for and upon cancellation of the
mutilated Warrant, or in substitution for the lost, stolen or
destroyed Warrant, a new Warrant, in substantially the form of this
Warrant, representing the right to acquire the equivalent number of
Warrant Shares;
provided,
however
, that, as a
prerequisite to the issuance of a substitute Warrant, the Company
may require satisfactory evidence of loss, theft or destruction as
well as an indemnity from the Holder of a lost, stolen or destroyed
Warrant.
The Company will pay all transfer and stock
issuance taxes attributable to the preparation, issuance and
delivery of this Warrant and the Warrant Shares (and replacement
Warrants) including, without limitation, all documentary and stamp
taxes;
provided,
however
, that the Company shall
not be required to pay any tax in respect of the transfer of this
Warrant, or the issuance or delivery of certificates for Warrant
Shares or other securities in respect of the Warrant Shares to any
person or entity other than to the Holder.
No
fractional Warrant Shares shall be issued upon exercise of this
Warrant. Upon the full exercise of this Warrant, the Company, in
lieu of issuing any fractional Warrant Share, shall round up the
number of Warrant Shares issuable to nearest whole
share.
8.
NO
STOCK RIGHTS AND LEGEND
No
holder of this Warrant, as such, shall be entitled to vote or be
deemed the holder of any other securities of the Company that may
at any time be issuable on the exercise hereof, nor shall anything
contained herein be construed to confer upon the holder of this
Warrant, as such, the rights of a stockholder of the Company or the
right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of
meetings or other actions affecting stockholders (except as
provided herein), or to receive dividends or subscription rights or
otherwise (except as provide herein).
Each
certificate for Warrant Shares initially issued upon the exercise
of this Warrant, and each certificate for Warrant Shares issued to
any subsequent transferee of any such certificate, shall be stamped
or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED
HEREBY H
AVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION
FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES
LAWS.
HEDGING TRANSACTIONS INVOLVING THESE SECURITIES
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.
All
notices, consents, waivers, and other communications under this
Warrant must be in writing and will be deemed given to a party (a)
on the date of delivery, if delivered to the appropriate address by
hand or by nationally recognized overnight courier service (costs
prepaid); (b) the date of transmission if sent by facsimile or
e-mail with confirmation of transmission by the transmitting
equipment if such notice or communication is delivered prior to
5:00 P.M., New York City time, on a Trading Day, or the next
Trading Day after the date of transmission, if such notice or
communication is delivered on a day that is not a Trading Day or
later than 5:00 P.M., New York City time, on any Trading Day; (c)
the date received or rejected by the addressee, if sent by
certified mail, return receipt requested, if to the registered
Holder hereof; or (d) seven days after the placement of the notice
into the mails (first class postage prepaid), to the Holder at the
address, facsimile number, or e-mail address furnished by the
registered Holder to the Company in accordance with the
Subscription Agreement by and between the Company and the Holder
or, if the registered Holder is not the original purchaser of this
Warrant, then as provided in the Form of Assignment delivered to
the Company pursuant to Section 4(a) in connection with the
assignment of this Warrant to such Holder, or if to the Company, to
it at:
FitLife
Brands, Inc.
5214 S.
136
th
Street
Omaha,
Nebraska 68137
Attention: Chief
Financial Officer
Facsimile:
Email:
(or to such other address, facsimile number, or e-mail
address as the Holder or the Company as a party may designate by
notice to the other party in accordance with this Section 9) with a
copy to
Disclosure Law
Group
600
West Broadway, Suite 700
San
Diego, CA 92101
Attention: Daniel
W. Rumsey
Facsimile:
619-330-2101
Email:
drumsey@disclosurelawgroup.com
If
a court of competent jurisdiction holds any provision of this
Warrant invalid or unenforceable, the other provisions of this
Warrant will remain in full force and effect. Any provision of this
Warrant held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.
This
Warrant shall be binding upon and inure to the sole and exclusive
benefit of the Company, its successors and assigns, the registered
Holder or Holders from time to time of this Warrant and the Warrant
Shares.
12.
SURVIVAL
OF RIGHTS AND DUTIES
This
Warrant shall terminate and be of no further force and effect on
the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or
the date on which this Warrant has been exercised in
full.
This
Warrant will be governed by and construed under the laws of the
State of Nevada without regard to conflicts of laws principles that
would require the application of any other law.
In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within
five (5)
Business Days of receipt of the Notice
of Exercise giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant
Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the
Company shall, at its sole discretion, within five (5) Business
Days, submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment
bank
add same
to cod
selected by the Company
and approved by the Holder, or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the
Company and the Holder of the results no later than ten (10)
Business Days from the time it receives the disputed determinations
or calculations; provided that, if such disputed determination or
arithmetic calculation being submitted by the Holder is determined
to be incorrect, then the expense of the investment bank or the
accountant shall be the responsibility of the Holder. Such
investment bank’s or accountant’s determination or
calculation,
as the case may be, shall be final, binding and
conclusive upon the parties thereto
.
15.
NOTICES
OF RECORD DATE
Upon
(a) any establishment by the Company of a record date of the
holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or
other distribution, or right or option to acquire securities of the
Company, or any other right, or (b) any capital reorganization,
reclassification, recapitalization, merger or consolidation of the
Company with or into any other corporation or other entity, any
transfer of all or substantially all the assets of the Company, or
any voluntary or involuntary dissolution, liquidation or winding up
of the Company, or the sale, in a single transaction, of a majority
of the Company’s voting stock (whether newly issued, or from
treasury, or previously issued and then outstanding, or any
combination thereof), the Company shall mail to the Holder at least
ten (10) Business Days, or such longer period as may be required by
law, prior to the record date specified therein, a notice
specifying (i) the date established as the record date for the
purpose of such dividend, distribution, option or right and a
description of such dividend, option or right, (ii) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up, or
sale is expected to become effective and (iii) the date, if any,
fixed as to when the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization,
reclassification, transfer, consolation, merger, dissolution,
liquidation or winding up.
16.
RESERVATION
OF SHARES
The
Company shall reserve and keep available out of its authorized but
unissued shares of Common Stock for issuance upon the exercise of
this Warrant, free from pre-emptive rights, such number of shares
of Common Stock for which this Warrant shall from time to time be
exercisable. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued
as provided herein without violation of any applicable law or
regulation. Without limiting the generality of the foregoing, the
Company covenants that it will use commercially reasonable efforts
to take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and
non-assessable Warrant Shares upon the exercise of this Warrant and
use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents, including but not limited
to consents from the Company’s stockholders or Board of
Directors or any public regulatory body, as may be necessary to
enable the Company to perform its obligations under this
Warrant.
The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
18.
AMENDMENT
AND WAIVERS
Any
term of this Warrant may be amended and the observance of any term
of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively),
with the written consent of the Company and the Holders of a
majority of the Warrant Shares issuable upon exercise of the
Warrants.
19.
NO
THIRD PARTY RIGHTS
This
Warrant is not intended, and will not be construed, to create any
rights in any parties other than the Company and the Holder, and no
person or entity may assert any rights as third-party beneficiary
hereunder.
[Signature Page Follows]
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first set forth above.
FITLIFE
BRANDS, INC.
Name: Michael
Abrams
Title: Chief
Financial Officer
EXHIBIT A
NOTICE OF EXERCISE
(To be executed by Holder of Warrant if Holder desires to exercise
Warrant)
To FitLife Brands, Inc.:
The undersigned hereby irrevocably elects to exercise this Warrant
with respect to ___________________ shares of Common Stock (as
defined in the Warrant) as follows
:
Number
of shares of Common Stock exercised X $___ per share =
$_________ (to be paid as provided in Section
1(b)(i) of the Warrant) plus any applicable taxes payable by the
undersigned pursuant to the Warrant.
The undersigned requests that certificates for such shares be
issued in the name of:
_________________________________________
_________________________________________
_________________________________________
(Please print name, address and social security or federal employer
identification number (if applicable))*
If
the shares issuable upon this exercise of the Warrant are not all
of the Warrant Shares which the Holder is entitled to acquire upon
the exercise of the Warrant, the undersigned requests that a new
Warrant evidencing the rights not so exercised be issued in the
name of and delivered to:
_________________________________________
_________________________________________
_________________________________________
(Please print name, address and social security or federal employer
identification number (if applicable))*
*
If
Warrant Shares are to be issued in any name other than that of the
registered Holder of the Warrant, then the Holder must include an
opinion of counsel, reasonably satisfactory to the Company, to the
effect that such issuance complies with all applicable securities
laws.
EXHIBIT B
FORM OF ASSIGNMENT
FOR
VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers to each assignee set forth below all of the
rights of the undersigned under the Warrant (as defined in and
evidenced by the attached Warrant) to acquire the number of Warrant
Shares set opposite the name of such assignee below and in and to
the foregoing Warrant with respect to said acquisition rights and
the shares issuable upon exercise of the Warrant:
|
Name of Assignee (and social security or federal employer
identification number (if applicable))
|
Address
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If
the total of the Warrant Shares are not all of the Warrant Shares
evidenced by the foregoing Warrant, the undersigned requests that a
new Warrant evidencing the right to acquire the Warrant Shares not
so assigned be issued in the name of and delivered to the
undersigned.
