ASCENDIA BRANDS, INC.
100 American Metro Boulevard
Suite 108
Hamilton, New Jersey 08619
INFORMATION STATEMENT
We are required to deliver this Information Statement to holders of our common stock, par value $.001 per share (the “Common Stock”), Series A Junior Participating Preferred Stock, par value $.001 per share (the “Series A Preferred Stock”), Series B Convertible Preferred Stock, par value $.001 per share (the “Series B Preferred Stock”), and Series B-1 Convertible Preferred Stock, par value $.001 per share (the “Series B-1 Preferred Stock”, and collectively with the Common Stock, the Series A Preferred Stock and the Series B Preferred Stock, the “Capital Stock”), in order to inform them that, in connection with the approval by our board of directors of the matters described below, the holders of more than a majority of the voting power of our outstanding Capital Stock subsequently approved these matters by written consent on December 30,
2006 (the “Written Consent”).
December 29, 2006 has been fixed as the record date for the determination of stockholders who are entitled to receive this
Information Statement. On December 29, 2006, there were 11,744,056 shares of our Common Stock outstanding, 2,347.7745 shares of our
Series A Preferred Stock outstanding, 300 shares of our Series B Preferred Stock outstanding and 30 shares of our Series B-1
Preferred Stock outstanding. As of the record date, each share of Common Stock entitles its holder to one vote, each share of Series
A Preferred Stock entitles its holder to 10,118.9046 votes, and, to the extent permitted to vote, each share of Series B Preferred
Stock and each share of Series B-1 Preferred Stock entitles its holders to 6,666.66 votes, in each case, on matters submitted to a
vote of holders of the Common Stock; provided, however, that any holder of the Series B Preferred Stock or Series B-1
Preferred Stock shall not have the right to exercise voting rights with respect to shares of Series B Preferred Stock or Series B-1
Preferred Stock, respectively, to the extent that giving effect to such voting rights would result in such holder’s and its
affiliates being deemed to beneficially own more than 9.99% of the aggregate number of shares of our Common Stock outstanding after
giving effect to such exercise and accordingly, as of the record date, the outstanding shares of Series B Preferred Stock and Series
B-1 Preferred Stock entitle its holder to an aggregate of 56,382 votes.
THIS INFORMATION STATEMENT IS
FIRST BEING SENT OR GIVEN TO THE HOLDERS OF OUR COMMON STOCK, SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK AND SERIES B-1
PREFERRED STOCK ON OR ABOUT JULY __, 2007.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
ISSUANCE OF SECURITIES
Exchange of Common Stock For Preferred Stock.
On December 27, 2006, the Company entered into an Amendment and Exchange Agreement (as amended by Amendment No. 1 on December 29, 2006) (the “Common Exchange Agreement”) with Prencen Lending LLC (“Prencen Lending”) and Prencen, LLC (“Prencen”) pursuant to which Prencen (i) exchanged 2,000,000 shares of our Common Stock for 300 shares of our Series B Preferred Stock and (ii) exchanged 200,000 shares of our Common Stock for 30 shares of our Series B-1 Preferred Stock. The exchanges were made in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. The consideration received by the Company in connection with the issuance of the
3
Series B Preferred Stock and Series B-1 Preferred Stock consisted of the waiver of certain registration delay payments required to
be made by the Company under the prior registration rights agreement among the Company, Prencen and Prencen Lending. To the extent
permitted to vote, each share of Series B Preferred Stock and Series B-1 Preferred Stock entitles the holder thereof to 6,666.66
votes per share on all matters to be voted on by the shareholders of the Company. Each share of Series B Preferred Stock and Series
B-1 Preferred Stock is convertible only in connection with a Fundamental Transaction (as defined in the Certificate of Designations
for each of the Series B Preferred Stock and Series B-1 Preferred Stock) into 6,666.66 shares of our Common Stock, subject to
standard anti-dilution provisions,provided, however, that the holders of the Series B
Preferred Stock and Series B-1 Preferred Stock may not convert any Series B Preferred Stock or Series B-1 Preferred Stock if and to
the extent that, following such a conversion, such holder and any of its affiliates would collectively beneficially own more than
9.99 percent of the aggregate number of shares of our Common Stock outstanding following such conversion.
Amendment of Senior Secured Convertible Notes.
On December 30, 2006 the Company entered into an agreement (the “Note Amendment Agreement”) with Prencen Lending and Prencen, amending certain terms and conditions of the senior secured convertible notes (the “Notes”) in the principal amount of $91 million sold by the Company to Prencen Lending on August 2, 2006 pursuant to a Second Amended and Restated Securities Purchase Agreement, dated June 30, 2006, as amended (the “Securities Purchase Agreement”).
As amended, the Notes (the “Amended Notes”) have a term of 10 years from the date of the Note Amendment Agreement (subject
to certain put and call rights described below), extended from August 2, 2016 under the original Notes. The Amended Notes bear
interest at the same rate (9 percent per annum) as the original Notes, provided that
the interest rate on the Amended Note is subject to increase to up to 13 percent per annum upon the nonoccurrence of certain
specified events. Such events include the failure to obtain by June 30, 2007, at a meeting of the Company’s stockholders, if
required, approval of an amendment to the Company’s certificate of incorporation to increase the authorized Common Stock to a
number of shares that is no less than such number that would permit the Company to reserve for issuance, as of December 30, 2006,
130 percent of the maximum number of Conversion Shares (as defined below), shares of Common Stock into which the Series B Preferred
Stock and the Series B-1 Preferred Stock may be converted and shares of Common Stock that may be issued upon exercise of certain
warrants held by Prencen and Prencen Lending. Upon the occurrence and during the continuance of an event of default under the
Amended Notes or actions that would constitute an event of default under the Amended Notes following repayment of the senior secured
indebtedness, the interest rate on the Amended Notes would increase to 15 percent. Events of default include, without limitation,
failure of the registration statement required by the Registration Rights Agreement (as defined below) to be declared effective by
the SEC on or prior to 60 days after the applicable effectiveness deadline, the suspension from trading of the Common Stock for a
period of five consecutive trading days, the Company’s failure to deliver shares of Common Stock within 10 business days after
any conversion of the Amended Notes, the Company’s failure to pay any amount of principal, interest or other amounts when and
as due (or within three business days of the date due under certain circumstances), certain events occur with respect to the Company
or its material subsidiaries under bankruptcy laws, a final judgment for the payment of money in excess of $100,000 is rendered
against the Company or any of its material subsidiaries under certain circumstances and material damage to the collateral that
secures the indebtedness under the Amended Notes. In addition, as a consequence of the completion by the Company of its February 9,
2007 purchase of certain assets, including the Calgon® and the healing garden® brands, from Coty Inc. and certain of its affiliates (the “Coty
Transaction”), the Company is required to defer and capitalize interest on the outstanding balance of the Amended Notes
indefinitely.
4
Any portion of the balance due under the Amended Notes is convertible at any time, at the option of the holders(s), into our Common
Stock (the “Conversion Shares”) at a price of $0.42 per share (subject to certain anti-dilution adjustments), provided
that the holders may not convert any amounts due under the Amended Notes if and to the extent that, following such a conversion, the
holder and any affiliate would collectively beneficially own more than 9.99 percent of the aggregate number of shares of our Common
Stock outstanding following such conversion. Prior to the amendment of the Notes, the conversion price was $1.75 per share (subject
to certain anti-dilution adjustments). The Company may require the exchange of up to $40 million in principal amount of the Amended
Notes, at a premium of 15 percent, payable in cash, if necessary to maintain the Company’s stockholders’ equity at the
level required pursuant to the continued listing standards of the American Stock Exchange (the “AMEX”), on which our
Common Stock is listed.
At any time after the eighth anniversary of the Note Amendment Agreement, the Company or any holder may redeem all or any portion of
the balance outstanding under the Amended Notes at a premium of 7 percent. The Amended Notes are redeemable by the holder(s) at any
time upon the occurrence of an event of default or a change in control of the Company (as defined in the Amended Notes), at premiums
of no less than 25 and 20 percent, respectively. In addition, upon the consummation of an Acquisition, the Company may redeem up to
$10 million in principal amount of the Amended Notes at a premium of 15 percent, and up to an additional $10 million in principal
amount of the Amended Notes at a premium to be mutually agreed between the parties.
The Amended Notes rank as senior secured indebtedness of the Company, are secured by liens on all of the Company’s and its subsidiaries’ assets (other than Cenuco, Inc.) and are guaranteed by all of the Company’s subsidiaries (other than Cenuco, Inc.). The Amended Notes were subject to a first priority lien on the Company’s U.S. inventory and accounts receivable to secure a revolving credit facility of $13 million that was terminated on February 9, 2007 in conjunction with the closing of the Coty Transaction.
In connection with the amendment to the Notes, Prencen Lending agreed to waive certain defaults arising under the Notes relating to
the payment of accrued interest due December 31, 2006, waive compliance with certain financial covenants through the end of the
Company’s current fiscal year, and to defer until June 30, 2007 the requirement to file a registration statement with respect
to the Conversion Shares. In addition, the parties agreed to defer until February 28, 2007 the date for determining the number of
shares of our Common Stock that may be issued upon the exercise of the Series B Warrants held by Prencen Lending, and the exercise
price of such Series B Warrants.
Registration Rights Agreement
In addition, on December 27, 2006, the Company entered into a Second Amended and Restated Registration Rights Agreement in favor of
Prencen and Prencen Lending (which was subsequently further amended by the Common Exchange Agreement and further amended by the Note
Amendment Agreement referred to above) (the “Registration Rights Agreement”) to provide registration rights with respect
to the Conversion Shares, the Series B Preferred Stock, the Series B-1 Preferred Stock and our Common Stock into which the Series B
Preferred Stock and Series B-1 Preferred Stock may be converted. Under the Registration Rights Agreement, the Company is required to
file a registration statement with respect to the registrable securities by June 30, 2007 (which date has been changed to September
30, 2007) and to use its best efforts to have such registration statement declared effective not later than 60 days thereafter (or
90 days after the filing deadline if the registration statement is subject to a review by the United States Securities and Exchange
Commission (“SEC”)). Holders of shares of our Common Stock that are issued in connection with conversion of either the
Amended Notes or shares of the Series B Preferred Stock or the Series B-1 Preferred Stock shall have the right to sell such shares
of Common Stock under the registration statement so long as it remains effective.
5
Reasons for Exchanges and Amendment
The exchanges and the amendment of the Notes were required by Prencen and Prencen Lending as a condition to their consent to the
Company’s purchase of certain assets in the Coty Transaction, and the financings related thereto, the waiver of certain
defaults and events of default under the Notes and the waiver by Prencen Lending and Prencen of their rights to receive registration
delay payments pursuant to the prior registration rights agreement. Absent the amendment of the Notes pursuant to the Note Amendment
Agreement, on December 31, 2006, the Company would have been required to make an interest payment on the Notes in the amount of
$4,372,077. In addition, pursuant to the original registration rights agreement, the Company was required to file a registration
statement with respect to all shares registrable thereunder by no later than October 2, 2006 and to cause such registration
statement to be effective by no later than the earlier of 120 days after the filing date or 180 days after the issuance of the
original Notes. As of the date of each of the Registration Rights Agreement and the Amendment Agreement, the required registration
statement was neither filed nor effective. By December 30, 2006, the Company owed registration delay payments in the amount of $5.46
million.
Effect of Exchange and Amendment on Stockholders
The Company does not anticipate that the exchange effected by the Common Exchange Agreement will have any material impact or effect on the rights of the Company’s existing security holders. The amendments effected by the Note Amendment Agreement and the Amended Note may result in significantly greater dilution of the ownership of the Company’s existing holders of our Common Stock in the event that Prencen Lending converts any portion of the Amended Notes. For example, as of the record date, on a fully diluted basis and without regard to the limitations on conversion of the Amended Notes described above, the number of conversion shares represented approximately 76 percent of the outstanding shares (on a fully diluted basis) before such amendments and approximately 93 percent of the outstanding shares (on a fully diluted basis) immediately following such amendment.
The above description does not purport to be a complete statement of the parties’ rights and obligations under the Common
Exchange Agreement, the Registration Rights Agreement, the Note Amendment Agreement and the Amended Notes and is qualified in its
entirety by reference to (i) the Certificate of Designations for the Series B Preferred Stock, (ii) the Certificate of Designations
for the Series B-1 Preferred Stock, (iii) the Common Exchange Agreement, (iv) the Registration Rights Agreement, (v) the Note
Amendment Agreement and (vi) the Amended Notes, copies of which are attached to the Company’s Current Report on Form 8-K filed
on January 3, 2007 as Exhibits 3.1, 3.2, 4.4, 4.5, 4.3, 4.1 and 4.2, respectively, and which are attached hereto as Exhibits B
through G, respectively.
Except for their status as the contractual documents between the parties with respect to the transactions described therein, none of the above-referenced agreements is intended to provide factual information about the parties and the representations and warranties contained in such documents are made only for purposes of the respective agreements and as of specific dates, are intended solely for the benefit of the parties to the respective agreements, and may be subject to limitations agreed by the parties, including being qualified by disclosures between the parties.
6
These representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the respective agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Accordingly, they should not be relied on by investors as statements of factual information.
Our Common Stock is listed on the AMEX and we are subject to the rules and requirements set forth in the AMEX Company Guide. Under Section 713(a) of the AMEX Company Guide, we were required to obtain prior stockholder approval of the issuance of securities in any private transaction involving (i) the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) for less than the greater of book or market value of our Common Stock which together with sales by our officers, directors or principal shareholders equals 20% or more of our Common Stock outstanding before such issuance or (ii) the issuance of shares of our Common Stock (or securities convertible into or exercisable for Common Stock) equal to 20% or more of our Common Stock outstanding before the issuance for less than the greater of book or market value of our Common Stock. We sometimes
refer to this rule as the “20% Rule”. The securities to be issued in the Transaction may be issued at a discount to the market price of our Common Stock. The Conversion Shares and our Common Stock into which the Series B Preferred Stock and Series B-1 Preferred Stock may be converted would constitute more than 20% of the number of shares of our Common Stock outstanding. In addition, we obtained prior stockholder approval for the securities to be issued in the Transaction in the event that any other rule or requirement of the AMEX Company Guide would require such approval. We have obtained stockholder approval by written consent and the Written Consent will become effective on the twentieth (20th) day following the date on which this Information Statement is first sent or given to our stockholders, or as soon thereafter as is reasonably practicable. A copy of the form of Written Consent executed in connection with the stockholder approval is attached hereto as Exhibit
A.
The Written Consent was signed by persons who, as of the execution date, collectively owned 86.7% of the Company’s Series A
Preferred Stock, namely Dana Holdings, LLC, MarNan, LLC, Franco S. Pettinato, Edward J. Doyle and Paul Taylor. Edward J. Doyle is a
director of the Company, and Franco S. Pettinato is one of its executive officers. Dana Holdings, LLC is an affiliate of Joseph A.
Falsetti, a director and executive officer of the Company. As of the date upon which the Written Consent was signed, each share of
Series A Preferred Stock was entitled to 10,118.9046 votes, and, to the extent permitted to vote, each share of Series B Preferred
Stock and each share of Series B-1 Preferred Stock was entitled to 6,666.66 votes, in each case, on most matters (including the
approval of the Transaction), with the consequence that the persons signing the Written Consent collectively accounted for more than
50% of the aggregate votes entitled to be cast. (For further information, please refer to the Table of Beneficial Ownership,
infra.) No payment was made to any person in consideration of their executing the Written Consent.
Prencen and Prencen Lending have acknowledged and agreed that the Conversion Shares and our Common Stock into which the Series B
Preferred Stock and Series B-1 Preferred Stock may be converted will not be issued in an amount in excess of the number of shares
that may be permitted under the AMEX rules, until such issuances have been approved by the Company’s stockholders and the
listing of the Conversion Shares and our Common Stock into which the Series B Preferred Stock and Series B-1 Preferred Stock may be
converted on the AMEX has been authorized by the AMEX.
7
Issuance of the Conversion Shares and our Common Stock into which the Series B Preferred Stock and Series B-1 Preferred Stock may be converted will result in dilution to our existing stockholders, but will not otherwise materially affect our existing common stockholders’ rights as stockholders.
NO APPRAISAL OR DISSENTERS’ RIGHTS
Under the Delaware General Corporation Law, our stockholders are not entitled to any dissenters’ rights or appraisal of their shares of Common Stock in connection with the approval of the actions described in this Information Statement.
NO ACTION IS REQUIRED
No other votes are necessary or required. This Information Statement is first being mailed or given to stockholders on or about
July __, 2007. In accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Written
Consent and the approval of the matters described in the Written Consent and this Information Statement will become effective twenty
(20) calendar days following the mailing of this Information Statement, or as soon thereafter as is reasonably
practicable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the record date, December 29, 2006, the Company’s directors, executive officers and principal stockholders beneficially
own, directly or indirectly, in the aggregate, approximately 21.5% of its outstanding Common Stock, 99.6% of its Series A Preferred
Stock, 100% of the Series B Preferred Stock and 100% of the Series B-1 Preferred Stock. Each share of Common Stock entitles its
holder to one vote, each share of Series A Preferred Stock entitles its holder to 10,118.9046 votes, and, to the extent permitted to
vote, each share of Series B Preferred Stock and each share of Series B-1 Preferred Stock entitles its holders to 6,666.66 votes, in
each case, on most matters submitted to a vote of holders of the Common Stock. These stockholders have significant influence over
the Company’s business affairs, with the ability to control matters requiring approval by the Company’s stockholders,
including the Written Consent set forth in this Information Statement.
The following table sets forth certain information as of December 29, 2006, with respect to the beneficial ownership of shares of our Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock by (i) each person known by us to beneficially own more than five percent (5%) of the outstanding shares of our Common Stock, Series A Preferred Stock, Series B Preferred Stock or Series B-1 Preferred Stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all of our executive officers and directors as a group.
As of December 29, 2006, there were 11,744,056 shares of our Common Stock outstanding, 2,347.7745 shares of our Series A Preferred
Stock outstanding, 300 shares of our Series B Preferred Stock outstanding and 30 shares of our Series B-1 Preferred Stock
outstanding. Beneficial ownership has been calculated and presented in accordance with Rule 13d-3 of the Exchange Act and, as such,
the numbers below are not presented on a fully diluted basis.
8
Unless otherwise indicated below, (i) each stockholder has sole voting and investment power with respect to the shares shown; and (ii) the address for the stockholder is c/o Ascendia Brands, Inc., 100 American Metro Boulevard, Suite 108, Hamilton, New Jersey 08619.
|
Name and Address of Beneficial Owner |
Shares of
Series A
Pref. Stock
(1) |
Percentage
of Series A
Pref. Stock |
Shares of
Series B
and B-1
Pref. Stock |
Percentage
of Series B
and B-1
Pref. Stock |
Shares of
Common
Stock |
Percentage
of
Common
Stock |
Percentage
of
Voting
Power(2) |
|
Dana Holdings, LLC(3) |
889.8162 |
37.90% |
-0- |
-0- |
-0- |
-0- |
25.32% |
|
MarNan, LLC(4) |
778.5889 |
33.16% |
-0- |
-0- |
-0- |
-0- |
22.16% |
|
Prencen LLC
623 Fifth Avenue
32nd Floor
New York, NY 10022 |
-0- |
-0- |
330 |
100.0% |
1,174,911(5) |
9.99% |
3.32% |
|
Frederic H. Mack
2115 Linwood Avenue
Suite 110
Fort Lee, NJ 07024(6) |
53.9525 |
2.30% |
-0- |
-0- |
1,155,000 |
9.83% |
4.78% |
|
Robert Enck |
127.6837 |
5.44% |
-0- |
-0- |
-0- |
-0- |
3.63% |
|
Paul C. Taylor
c/o Taylor, Colicchio &
Silverman, LLP
502 Carnegie Center
Suite 103
Princeton, NJ 08540 |
111.2272 |
4.74% |
-0- |
-0- |
-0- |
-0- |
3.16% |
|
Edward J. Doyle
316 Perry Cabin Drive
St. Michael’s, MD 21663 |
127.6837 |
5.44% |
-0- |
-0- |
-0- |
-0- |
3.63% |
|
Robert Picow |
-0- |
-0- |
-0- |
-0- |
196,049(7) |
1.67% |
* |
|
Kenneth D. Taylor
1775 York Avenue
Apt. 29 H
New York, NY 10128 |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
|
Francis Ziegler
100 Roebling Road
Bernardsville, NJ 07924 |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
|
Joseph A. Falsetti |
-0- |
-0- |
-0- |
-0- |
-0-(3) |
-0- |
-0- |
|
John D. Wille |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
|
William B. Acheson |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
|
Franco S. Pettinato |
127.6837 |
5.44% |
-0- |
-0- |
-0- |
-0- |
3.63% |
|
Elizabeth Houlihan |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
-0- |
|
All executive officers
and directors as a
group (9 persons) |
255.3674 |
10.88% |
-0- |
-0- |
196,049(7) |
1.67% |
7.82% |
9
|
* |
Less than one percent |
|
|
(1) |
The percentages computed in the table are based on 2,347.7746 shares of Series A Preferred Stock outstanding as of December 29, 2006. |
|
(2) |
This column reflects the relative voting power of the shares of the Company’s Capital Stock listed in
the table with respect to matters voted upon by the holders of the Company’s Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock as a single class. Each share
of Series A Preferred Stock is entitled to 10,118.9046 votes on most matters. To the extent permitted to
vote, each share of Series B Preferred Stock and Series B-1 Preferred Stock is entitled to 6,666.66
votes on most matters. Accordingly, all voting percentage calculations in this table are based on the
assumption that the Series B Preferred Stock and Series B-1 Preferred Stock entitle its holder to an
aggregate of 56,382 votes. For purposes of this table, holders of the Amended Notes are deemed to be
able to vote the shares of Common Stock that they beneficially own through their ownership of the
Amended Notes, even though ownership of the Amended Notes does not entitle the holders of the Amended
Notes to vote on matters submitted to the holders of the shares of Common Stock. |
|
(3) |
Joseph A. Falsetti, the President and Chief Executive Officer of the Company as of the record date, owns a 50% percentage interest in, and is the sole manager and sole executive officer of, Dana Holdings, LLC. Mr. Falsetti disclaims beneficial ownership of the shares of Common Stock that are beneficially owned by Dana Holdings, LLC. |
|
(4) |
Mark I. Massad is the sole manager and sole executive officer of MarNan, LLC. Mr. Massad disclaims beneficial ownership of the shares of Common Stock that are beneficially owned by MarNan, LLC. |
|
(5) |
In connection with the Transaction, Prencen Lending acquired the Amended Notes, and Prencen acquired 300 shares of Series B
Preferred Stock and 30 shares of Series B-1 Preferred Stock, in each case, that are convertible into or exercisable for shares of
the Common Stock of the Company, provided that such securities and the warrants previously acquired by Prencen may not be converted
into nor exercised for shares of Common Stock to the extent that after giving effect to such conversion or exercise the holder would
beneficially own in excess of 9.99% of the shares outstanding immediately after giving effect to the exercise or conversion. The
beneficial ownership set forth in the above table assumes the conversion of such securities corresponding to 56,382 shares of Common
Stock, together with the 1,122,482 shares of Common Stock directly owned, equal to 9.99% of the total outstanding shares of Common
Stock after such conversion. If the blocker were not in place, the Amended Notes held by Prencen Lending would be initially
convertible into 216,666,666 shares of Common Stock, the Series B Preferred Stock held by Prencen would be initially convertible
into 2,000,000 shares of Common Stock, the Series B-1 Preferred Stock held by Prencen would be initially convertible into 200,000
shares of Common Stock and the warrants held by Prencen would be exercisable for up to 6,053,358 shares of Common Stock. Prentice
Capital Management, L.P. has investment and voting power with respect to the securities held by Prencen and Prencen Lending.
Mr. Michael Zimmerman controls Prentice Capital Management, L.P. Each of Prentice Capital Management, L.P. and
Mr. Zimmerman disclaims beneficial ownership of any of these securities. |
|
(6) |
Excludes 115,000 shares of Common Stock and 4.9456 shares of Series A Preferred Stock owned by the Irrevocable Trust FBO Hailey Mack (the “HM Trust”), and 115,000 shares of Common Stock and 4.9456 shares of Series A Preferred Stock owned by the Irrevocable Trust FBO Jason Mack (the “JM Trust”). As sole trustee, Tami J. Mack, the wife of Mr. Mack, has sole voting power with respect to the shares owned by the HM Trust and JM Trust. Mr. Mack disclaims beneficial ownership of the shares of Series A Preferred Stock and Common Stock held by the HM Trust and the JM Trust. |
|
(7) |
Includes options to purchase 8,334 shares of Common Stock. |
|
|
|
|
10
BROKERS, CUSTODIANS, ETC.
We have asked brokers and other custodians, nominees and fiduciaries to forward this Information Statement to the beneficial owners of our Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock held of record by such persons and will reimburse such persons for out-of-pocket expenses incurred in forwarding such material.
All information concerning the Company contained in this Information Statement has been furnished by the Company. No person is
authorized to make any representation with respect to the matters described in this Information Statement other than those contained
in this Information Statement and if given or made must not be relied upon as having been authorized by the Company or any other
person. Therefore, if anyone gives you such information, you should not rely on it. This Information Statement is dated July __,
2007. You should not assume that the information contained in this document is accurate as of any other date unless the information
specifically indicates that another date applies.
SELECTED HISTORICAL CONSOLIDATED AND/OR COMBINED FINANCIAL DATA OF ASCENDIA BRANDS, INC.
The following selected combined and/or consolidated financial information of Ascendia Brands, Inc. and its subsidiaries for the
years ended February 28, 2007, 2006 and 2005 has been derived from the audited historical financial statements included in the
Annual Report on Form 10-K for the Fiscal Year ended February 28, 2007 that was filed by the Company with the SEC on July 16 25.
2007, a copy of which has been delivered with this Information Statement. The following selected combined and/or consolidated
financial information of the period from April 25, 2003 (inception) to February 29, 2004 has been derived from the audited
historical financial statements included in Amendment No. 1 to the Annual Report on Form 10-K/A for the Fiscal Year ended February
28, 2006 that was filed by the Company with the SEC on June 25. 2007. The following selected consolidated financial information for
the period ended May 26, 2007 has been derived from the unaudited financial statements included in the Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended May 26, 2007 that was filed by the Company with the SEC on July 24, 2007, a copy of which has been
delivered with this Information Statement.
|
|
|
For the period |
|
|
|
(Restated) |
|
|
|
13 Weeks Ended |
|
|
|
|
from 4/25/2003 |
|
Year ended |
|
Year ended |
|
Year ended |
|
(Restated) |
|
|
|
|
(inception) to |
|
2/28/2005 |
|
2/28/2006 |
|
2/28/2007 |
|
5/27/2006 |
|
5/26/2007 |
|
|
($000’s) except per share amounts |
|
2/29/2004 (1) |
|
(1) (3) |
|
(1) (2) (3) |
|
(1) (3) (4) (5) |
|
(1) |
|
(4) (5) |
|
|
Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
55,046 |
|
$ |
69,861 |
|
$ |
79,518 |
|
$ |
99,642 |
|
$ |
24,847 |
|
$ |
41,951 |
|
|
Gross profit |
|
|
6,803 |
|
|
7,491 |
|
|
5,260 |
|
|
15,165 |
|
|
4,654 |
|
|
12,386 |
|
|
Income (loss) from operations |
|
|
(1,195 |
) |
|
(2,756 |
) |
|
(8,843 |
) |
|
(10,688 |
) |
|
623 |
|
|
167 |
|
|
Net loss from continuing operations |
|
|
(1,719 |
) |
|
(3,989 |
) |
|
(11,373 |
) |
|
(80,273 |
) |
|
(2,888 |
) |
|
(6,233 |
) |
|
Net loss from discontinued operations |
|
|
- |
|
|
- |
|
|
(37,540 |
) |
|
(23,330 |
) |
|
(656 |
) |
|
(286 |
) |
|
Net loss |
|
|
(1,719 |
) |
|
(3,989 |
) |
|
(48,913 |
) |
|
(103,603 |
) |
|
(3,544 |
) |
|
(6,519 |
) |
|
Loss from continuing operations per common share |
|
|
N/A |
|
|
N/A |
|
|
(0.74 |
) |
|
(5.75 |
) |
|
(0.22 |
) |
|
(0.15 |
) |
|
Loss from discontinued operations per common share |
|
|
N/A |
|
|
N/A |
|
|
(2.72 |
) |
|
(1.65 |
) |
|
(0.05 |
) |
|
(0.01 |
) |
|
Net loss per common share |
|
|
N/A |
|
|
N/A |
|
|
(3.46 |
) |
|
(7.40 |
) |
|
(0.27 |
) |
|
(0.16 |
) |
|
Balance Sheet Data (as of the period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
24,461 |
|
$ |
24,036 |
|
$ |
102,946 |
|
$ |
216,895 |
|
$ |
101,904 |
|
$ |
212,265 |
|
|
Current portion of long-term debt |
|
|
8,203 |
|
|
8,930 |
|
|
32 |
|
|
2000 |
|
|
21 |
|
|
2,000 |
|
|
Long-term debt, less current portion |
|
|
7,608 |
|
|
6,875 |
|
|
80,000 |
|
|
271,317 |
|
|
81,713 |
|
|
274,732 |
|
|
Other long-term obligations |
|
|
673 |
|
|
673 |
|
|
967 |
|
|
668 |
|
|
874 |
|
|
691 |
|
|
Stockholders’ equity (deficit)/members’ (loss) |
|
|
(1,815 |
) |
|
(5,830 |
) |
|
8,869 |
|
|
(77,138 |
) |
|
5,419 |
|
|
(83,415 |
) |
|
Cash dividends declared per common share |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
11
(1) On May 20, 2005, Hermes
Holding Company, Inc., a wholly owned subsidiary of Cenuco, Inc., merged with Hermes Acquisition Company I, LLC (“HACI”)
(the “Merger”). As a consequence of the Merger, HACI, together with its wholly owned subsidiaries, became wholly owned
subsidiaries of Cenuco, Inc. For financial statement purposes, the Merger was treated as a recapitalization of HACI followed by the
reverse acquisition of Cenuco, Inc. by HACI. Accordingly the financial position and results of operations of HACI and its
predecessor entities are presented above for periods prior to the Merger and the financial position and results of operations of
Cenuco have been included thereafter. The Company’s name was subsequently changed to Ascendia Brands, Inc. on May 9, 2006.
(2) On November 16, 2005, the
Company acquired certain brands and brand related assets from Playtex, Inc. for approximately $58.0 million. Sales and expenses of
the acquired Playtex products and amortization of related acquired intangible assets are reflected above from that date
forward.
(3) In February 2007, the Company
committed to the sale of its wireless subsidiary and as a result this operation has been presented as a discontinued operation.
Subsequent to year end, the Company made a determination that a sale was no longer likely and decided to liquidate the wireless
operation. The total loss from discontinued operations was $23.3 million and $37.5 million, respectively, for the years ended
February 28, 2007 and 2006. There was no loss from discontinued operations for the year ended February 28, 2005 or for the period
from April 25, 2003 (inception) to February 29, 2004. For the year ended February 28, 2007, the loss from discontinued operations
consisted of the write-off of goodwill of $14.6 million, the write-off of the carrying value of net assets of $5.4 million
(primarily software technology) and the loss from operations of $3.3 million. For the year ended February 28, 2006, loss from
discontinued operations consisted of the write-off of goodwill of $35.1 million and the loss from operations of $2.4
million.
(4) In August 2006, the Company
completed the issuance of secured notes with a beneficial conversion option and other embedded derivatives As a result of this
financing arrangement, a compound derivative was identified and bifurcated and the related liability recorded as required under FASB
No. 133 and EITF 00-19. This resulted in a $6.8 million loss being recorded in interest and other expense on August 2, 2006. The
value of the compound derivative liability was adjusted as of August 26, 2006, resulting in a reduction of interest and other
expense for the period between August 2 and August 26, 2006 of $11.2 million.
(5) On February 9, 2007, the
Company acquired the Calgon and the healing garden brands and brand related assets from Coty Inc. and certain of its affiliates.
Sales and expenses of the acquired Coty products and amortization of related intangible assets are reflected from that date
forward.
INCORPORATION BY REFERENCE
The SEC allows us to provide certain financial information and other important information to you by “incorporating by reference” the information we file with the SEC, which means that we can disclose the information to you by referring in this Information Statement to the documents we file with the SEC. Under the SEC’s regulations, any statement contained in a document incorporated by reference in this Information Statement is automatically updated and superseded by any information contained in this Information Statement, or in any subsequently filed document of the types described below.
We incorporate into this Information Statement by reference the following documents filed by us with the SEC:
|
SEC Filing |
Period Covered or Date of Filing |
|
Annual Report on Form 10-K filed July 16, 2007 |
Fiscal Year ended February 28, 2007 |
|
Quarterly Report on Form 10-Q filed July 24, 2007 |
Fiscal Quarter ended May 26, 2007 |
12
We are delivering with this Information Statement a copy of our Annual Report on Form 10-K for the fiscal year ended February 28,
2007, filed with the SEC on July 16, 2007, and the Quarterly Report on Form 10-Q for the thirteen weeks ended May 26, 2007, filed
with the SEC on July 24, 2007. Upon request, we will provide copies of the exhibits to the Annual Report on Form 10-K at no
additional cost. All requests for copies should be directed to our Corporate Secretary, Ascendia Brands, Inc., 100 American Metro
Boulevard, Suite 108, Hamilton, New Jersey 08619.
You should rely only on the information incorporated by reference or provided in this Information Statement. We have not authorized anyone else to provide you with different information. You should not assume that the information in this Information Statement is accurate as of any date other than the date on the front of such documents.
By order of the Board of Directors
Joseph A. Falsetti
Chairman of the Board of Directors
July __, 2007
13
EXHIBIT A
WRITTEN
CONSENT
OF CERTAIN STOCKHOLDERS
OF
ASCENDIA BRANDS, INC.
The undersigned, being the holders of a
majority of the outstanding shares of capital stock of Ascendia Brands, Inc., a
Delaware corporation (the “Corporation”), acting by written consent without a
meeting pursuant to Section 228 of the General Corporation Law of the State
of Delaware, hereby consent to the adoption of the following resolutions:
WHEREAS, the Board of Directors of the
Corporation has approved and authorized the Corporation to enter into each of
the following documents (collectively, the “Transaction Documents”):
(i) the Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of the Corporation (the “Series B
Certificate of Designations”) and the Certificate of Designations, Preferences
and Rights of Series B-1 Convertible Preferred Stock of the Corporation
(the “Series B-1 Certificate of Designations”); (ii) the Amendment and
Exchange Agreement, dated as of December 27, 2006, as amended by Amendment
No. 1 thereto (the “Exchange Agreement”), by and among the Corporation,
Prencen LLC (“Prencen”) and Prencen Lending LLC (“Prencen Lending” and together
with Prencen, the “Investors”); (iii) the Second Amended and Restated
Registration Rights Agreement, dated as of December 27, 2006 by and among
the Corporation and the Investors (the “Registration Rights Agreement”);
(iv) the form of Amendment Agreement by and among the Corporation and the
Investors (the “Amendment Agreement”); (v) the form of Amended Note to be
delivered by the Corporation to Prencen Lending pursuant to the terms of the
Amendment Agreement; (vi) the form of First Amendment and Reaffirmation of
the Amended and Restated Security Agreement by and among the Corporation,
certain of its subsidiaries and Prencen Lending as collateral agent for the
lenders; (vii) the form of First Amendment and Reaffirmation of the Amended
and Restated Pledge and Security Agreement by and among the Corporation, certain
of its subsidiaries and Prencen Lending as collateral agent for the lenders;
(viii) the form of Irrevocable Transfer Agent Instructions to be delivered
by the Corporation to the Corporation’s transfer agent pursuant to the Exchange
Agreement and the Amendment Agreement; and (ix) the form of Voting
Agreement by and among the Corporation and certain of the stockholders of the
Corporation, and to consummate the transactions contemplated thereby; and
WHEREAS, a copy of each of the
Transaction Documents has been provided to each of the undersigned stockholders;
and
WHEREAS, pursuant to the Exchange
Agreement, Prencen exchanged (the “Exchange”) certain shares of the
Corporation’s common stock, par value $0.001 per share (the “Common Stock”), for
shares of the Corporation’s Series B Convertible Preferred Stock, par value
$0.001 per share (the “Series B Preferred Shares”), and shares of the
Corporation’s Series B-1 Convertible Preferred Stock, par value $0.001 per
share (together with the Series B Preferred Shares, the “Preferred
Shares”), which shall be convertible into shares of the Common Stock (the
“Preferred Conversion Shares”); and
WHEREAS, pursuant to the Amendment
Agreement, the Corporation has agreed to amend and restate its series of senior
secured convertible notes of the Corporation issued to Prencen Lending as of
August 2, 2006, in substantially the form attached as Exhibit A to the
Amendment Agreement (the “Amended Note), which shall be convertible into shares
of the Common Stock (the “Amended Conversion Shares”), and to issue the Amended
Note to Prencen Lending; and
WHEREAS, Section 713(a) of the AMEX
Company Guide requires that the Corporation secure stockholder approval of the
issuance of securities in any private transaction involving (i) the sale,
issuance, or potential issuance by the Corporation of Common Stock (or
securities convertible into or exercisable for Common Stock) for less than the
greater of book or market value of the Common Stock which together with sales by
officers, directors or principal shareholders of the Corporation equals 20% or
more of the presently outstanding Common Stock or (ii) the sale, issuance,
or potential issuance by the Corporation of Common Stock (or securities
convertible into or exercisable for Common Stock) equal to 20% or more of the
presently outstanding Common Stock for less than the greater of book or market
value of the Common Stock; and
WHEREAS, in the event that any other
provision of the AMEX Company Guide requires the Corporation to secure
stockholder approval for the issuance of its securities in connection with the
Transaction Documents and the transactions contemplated thereby for any other
reason, then this Consent shall apply to any such other provision of the AMEX
Company Guide; and
WHEREAS, the Board of Directors of the
Corporation recommends that the undersigned approve, ratify and confirm the
Series B Certificate of Designations, the Series B-1 Certificate of
Designations, the Exchange Agreement, the Registration Rights Agreement and the
consummation of the transactions contemplated by the Exchange Agreement and the
Registration Rights Agreement, including the terms and issuance of the Preferred
Shares, and approve the other Transaction Documents and the transactions
contemplated thereby, including the terms and issuance of the Amended Note;
NOW, THEREFORE, BE IT:
RESOLVED, that the approval of the
Series B Certificate of Designations, the Series B-1 Certificate of
Designations, the Exchange Agreement and the Registration Rights Agreement by
the Board of Directors of the Corporation, the execution and delivery of the
Series B Certificate of Designations, the Series B-1 Certificate of
Designations, the Exchange Agreement and the Registration Rights Agreement by
the authorized officers of the Corporation and the consummation of the
transactions contemplated thereby, including the Exchange, the terms and the
issuance of the Preferred Shares in accordance with the Certificate of
Incorporation of the Corporation and the issuance of the Preferred Conversion
Shares upon conversion of the Preferred Shares in accordance with the
Series B Certificate of Designations or the Series B-1 Certificate of
Designations, as the case may be, be, and the same hereby are, approved,
ratified and confirmed in all respects; and be it further
- 2 -
RESOLVED, that the form, terms and
provisions of the other Transaction Documents, substantially on the terms
presented to the undersigned stockholders, and all of the transactions
contemplated thereby, including the terms and issuance of the Amended Note and
the issuance of the Amended Conversion Shares (subject to the provisions of the
Certificate of Incorporation of the Corporation, applicable law and the rules
and regulations of the American Stock Exchange), be, and they hereby are,
authorized, approved and adopted, and that the authorized officers of the
Corporation be, and each of them hereby is, authorized, in the name and on
behalf of the Corporation, to execute and deliver the Transaction Documents and
any related documents, instruments or agreements, with such changes therein as
such officer or officers executing the same may approve, the execution and
delivery thereof to be conclusive evidence that the same shall have been
approved hereby; and be it further
RESOLVED, that this Consent shall
constitute the requisite stockholder approval of the transactions contemplated
by the Transaction Documents pursuant to Section 713(a) of the AMEX Company
Guide and, to the extent applicable, any other provision of the AMEX Company
Guide; and be it further
RESOLVED, that the Investors are the
express third party beneficiaries of this Consent and this Consent shall not be
amended or modified without their written consent; and be it further
RESOLVED, that the authorized officers
of the Corporation be, and each of them hereby is, authorized, empowered and
directed, in the name and on behalf of the Corporation, to take or cause to be
taken all such further actions and to execute and deliver or cause to be
executed and delivered all such further agreements, documents, instruments,
notes, reports, certificates and undertakings, and to incur and pay all such
fees and expenses as in their judgment shall be necessary or advisable to carry
into effect the purpose and intent of any and all of the foregoing resolutions,
and all such acts of such officers taken pursuant to the authority granted
herein, or having occurred prior to the date hereof in order to effect such
transactions, are hereby approved, adopted, ratified and confirmed in all
respects; and be it further
RESOLVED, that for purposes of each of
the foregoing resolutions, the authorized officers of the Corporation shall be
the President and Chief Executive Officer, the Chief Financial Officer, any Vice
President, the Treasurer and the Secretary.
This Consent may be executed in one or
more counterparts, all of which taken together shall constitute one and the same
instrument. Telecopied signatures on this Consent shall be valid and effective
for all purposes.
[Remainder of this
page intentionally left blank]
- 3 -
IN WITNESS WHEREOF, the undersigned
have duly executed this Written Consent as of the 30th day of December, 2006.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Bettinger |
|
|
|
|
|
|
|
|
|
|
| |
|
DANA HOLDINGS, LLC |
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Joseph A. Falsetti |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name: Joseph A. Falsetti |
|
|
|
|
|
|
|
Title: Manager |
|
|
|
|
|
|
|
|
|
|
| |
|
MARNAN, LLC |
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Mark I. Massad |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name: Mark I. Massad |
|
|
|
|
|
|
|
Title: Managing Member |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Franco S. Pettinato |
|
|
|
|
|
|
|
|
|
|
|
Franco S. Pettinato |
|
|
|
|
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|
|
|
/s/ Edward J. Doyle |
|
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|
Edward J. Doyle |
|
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Robert Enck |
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/s/ Paul Taylor |
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Paul Taylor |
|
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Brian Geiger |
|
|
Exhibit B
CERTIFICATE OF
DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED
STOCK
OF
ASCENDIA BRANDS, INC.
Ascendia Brands, Inc. (the
“Company”), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “DGCL”), does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company (the “Board”) by the Amended and Restated Certificate of
Incorporation of the Company, and pursuant to Sections 151 and 141 of the
DGCL, the Board of Directors of the Company adopted resolutions
(i) designating a series of the Company’s previously authorized preferred
stock, par value $.001 per share, and (ii) providing for the designations,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, of Three Hundred
(300) shares of Series B Convertible Preferred Stock of the Company,
as follows:
RESOLVED, that the Company is
authorized to issue 300 shares of Series B Convertible Preferred Stock (the
“Preferred Shares”), par value $.001 per share, which shall have the
following powers, designations, preferences and other special rights:
(1) Dividends. Other than
as specifically set forth herein, the holders of Preferred Shares (each, a
“Holder” and collectively, the “Holders”) shall not be entitled to
receive any dividends.
(2) Conversion of Preferred
Shares. Preferred Shares shall be convertible into shares of Common Stock,
par value $.001 per share (the “Common Stock”), of the Company on the
terms and conditions set forth in this Section 2.
(a) Certain Defined Terms. For
purposes of this Certificate of Designations, the following terms shall have the
following meanings:
(i) “AMEX” means the American
Stock Exchange.
(ii) “Bloomberg” means Bloomberg
Financial Markets.
(iii) “Business Day” means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.
(iv) “Closing Sale Price” means,
for any security as of any date, the last closing trade price for such security
on the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price then the last trade price of such security prior to
4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal
Market is not the principal securities exchange or trading market for such
security the last trade price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last trade price of such
security in the over-the-
counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Required Holders. If the Company and
the Required Holders are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to
Section 2(d)(iii). All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
(v) “Conversion Price” means
$1.50, subject to adjustment as provided herein.
(vi) “Convertible Securities”
means any stock or securities (other than Options) of the Company directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.
(vii) “Eligible Market” means
the NYSE, The NASDAQ Global Market, The NASDAQ Global Select Market or The
NASDAQ Capital Market.
(viii) “Exchange Act” means The
Securities Exchange Act of 1934, as amended.
(ix) “Exchange Agreement” means
the Amendment and Exchange Agreement by and among the Company, Precen LLC and
Prencen Lending LLC, as such agreement may be amended from time to time, which
is anticipated to be dated on or after December 26, 2006.
(x) “Fundamental Transaction”
means that the Company shall (or in the case of clause (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act)), directly or indirectly, in one or more related transactions,
(i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person or
Persons to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Person or Persons making or party
to, such purchase, tender or exchange offer), or (iv)
- 2 -
consummate a stock 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 the 50% of either the outstanding shares of Voting Stock (not
including any shares of Voting 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 purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Common Stock, or
(vi) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.
(xi) “Initial Issuance Date”
means the first day that any Preferred Shares are issued, which date is
anticipated to be on or after December 26, 2006.
(xii) “Liquidation Event” means
the voluntary or involuntary liquidation, dissolution or winding up of the
Company or such Subsidiaries the assets of which constitute all or substantially
all the assets of the business of the Company and its Subsidiaries taken as a
whole, in a single transaction or series of transactions.
(xiii) “NYSE” means The New York
Stock Exchange, Inc.
(xiv) “Options” means any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(xv) “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(xvi) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xvii) “Principal Market” means
AMEX, or if the Common Stock is not traded on the Principal Market, an Eligible
Market.
(xviii) “Required Holders” means
the Holders of Preferred Shares representing at least a majority of the
aggregate Preferred Shares then outstanding.
(xix) “SEC” means the Securities
and Exchange Commission.
- 3 -
(xx) “Series A Preferred
Stock” shall mean the Series A Junior Participating Preferred Stock of
the Company, par value $0.001 per share.
(xxi) “Stated Value” means
$10,000.
(xxii) “Subsidiary” means any
joint venture or any entity in which the Company, directly or indirectly, owns
in excess of fifty percent (50%) of the capital stock or holds in excess of
fifty percent (50%) of an equity or similar interest.
(xxiii) “Successor Entity” means
the Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.
(xxiv) “Trading Day” means any
day on which the Common Stock is traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the shares of
Common Stock are then traded; provided that “Trading Day” shall not include any
day on which the shares of Common Stock are scheduled to trade on such exchange
or market for less than 4.5 hours or any day that the shares of Common Stock are
suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York Time).
(xxv) “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
(xxvi) “Weighted Average Price”
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market during the period beginning at
9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New York
City Time, as reported by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York
City Time, and ending at 4:00:00 p.m., New York City Time, as
- 4 -
reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Required
Holders. If the Company and the Required Holders are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(d)(iii)below with the term “Weighted Average Price”
being substituted for the term “Closing Sale Price.” All such determinations
shall be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
(b) Holder’s Conversion Right.
Subject to Section 6 hereof, at any time or times on or after the Initial
Issuance Date, any Holder shall be entitled to convert any whole number of
Preferred Shares into fully paid and nonassessable shares of Common Stock in
accordance with Section 2(d) at the Conversion Rate (as defined below).
(c) Conversion. The number of
shares of Common Stock issuable upon conversion of each Preferred Share pursuant
to Section 2(b) shall be determined according to the following formula (the
“Conversion Rate”):
Stated
Value
Conversion Price
(d) Mechanics of Conversion. The
conversion of Preferred Shares shall be conducted in the following manner:
(i) Holder’s Delivery
Requirements. To convert Preferred Shares into shares of Common Stock on any
date (the “Conversion Date”), the Holder shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m.,
New York City Time, on such date, a copy of a properly completed notice of
conversion executed by the registered Holder of the Preferred Shares subject to
such conversion in the form attached hereto as Exhibit I (the
“Conversion Notice”) to the Company and the Company’s designated transfer
agent (the “Transfer Agent”) and (B) if required by
Section 2(d)(viii), deliver to the Company as soon as practicable following
such date the original certificates representing the Preferred Shares being
converted (or comply with the procedures set forth in Section 11) (the
“Preferred Stock Certificates”).
(ii) Company’s Response. Upon
receipt by the Company of a copy of a Conversion Notice, and if so required by
Section 2(d)(viii), the
- 5 -
Preferred Stock Certificates, the Company shall (I) as soon as
practicable, but in any event within one (1) Trading Day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such Holder
and the Transfer Agent, which confirmation shall constitute an instruction to
the Transfer Agent to process such Conversion Notice in accordance with the
terms hereof and (II) on or before the third (3rd) Trading Day following
the date of receipt by the Company of such Conversion Notice, (A) provided
the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer Program, credit such aggregate number of shares of Common Stock to
which the Holder shall be entitled to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or
(B) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver to the address as specified in
the Conversion Notice, a certificate, registered in the name of the Holder or
its designee, for the number of shares of Common Stock to which the Holder shall
be entitled. If the number of Preferred Shares represented by the Preferred
Stock Certificate(s) submitted for conversion, as may be required pursuant to
Section 2(d)(viii), is greater than the number of Preferred Shares being
converted, then the Company shall, as soon as practicable and in no event later
than three (3) Business Days after receipt of the Preferred Stock
Certificate(s) and at its own expense, issue and deliver to the Holder a new
Preferred Stock Certificate representing the number of Preferred Shares not
converted.
(iii) Dispute Resolution. In the
case of a dispute as to the determination of the Closing Sale Price or the
arithmetic calculation of the Conversion Rate, the Company shall instruct the
Transfer Agent to issue to the Holder the number of shares of Common Stock that
is not disputed and shall transmit an explanation of the disputed determinations
or arithmetic calculations to the Holder via facsimile within (a) one
(1) Business Day in the case of a dispute as to the arithmetic calculation
of the Conversion Rate and (b) three (3) Business Days in the case of
a dispute as to the determination of the Closing Sale Price of receipt of such
Holder’s Conversion Notice or other date of determination. If such Holder and
the Company are unable to agree upon the determination of the Closing Sale Price
or the arithmetic calculation of the Conversion Rate within two
(2) Business Days of such disputed determination or arithmetic calculation
being transmitted to the Holder, then the Company shall within three
(3) Business Days with respect to the determination of the Closing Sale
Price and within one (1) Business Day with respect to the arithmetic
calculation of the Conversion Rate, in each case after the end of such two
(2) Business Day period, submit via facsimile (A) the disputed
determination of the Closing Sale Price to an independent, reputable investment
bank selected by the Company and approved by the Required Holders or
(B) the disputed arithmetic calculation of the Conversion Rate to the
Company’s independent, outside accountant. The Company shall
- 6 -
cause,
at the Company’s expense, the investment bank or the accountant, as the case may
be, to perform the determinations or calculations and notify the Company and the
Holders of the results no later than five (5) Business Days with respect to
the determination of the Closing Sale Price and no later than two
(2) Business Days with respect to the calculation of the Conversion Rate,
in each case from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
(iv) Record Holder. The Person
or Persons entitled to receive the shares of Common Stock issuable upon a
conversion of Preferred Shares shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion Date.
(v) Company’s Failure to Timely
Convert. If within three (3) Trading Days after the Company’s receipt
of the facsimile copy of a Conversion Notice, and if required by
Section 2(d)(viii), the Preferred Stock Certificates, the Company shall
fail to issue and deliver a certificate to a Holder or credit such Holder’s
balance account with DTC for the number of shares of Common Stock to which there
is no dispute, such Holder is entitled upon such Holder’s conversion of
Preferred Shares, and if on or after such third (3rd) Trading 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 the shares of Common
Stock issuable upon such conversion that the Holder anticipated receiving from
the Company, 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 such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such 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 Closing Sale Price on the
Conversion Date.
(vi) Pro Rata Conversion. In the
event the Company receives a Conversion Notice from more than one Holder for the
same Conversion Date and the Company can convert some, but not all, of such
Preferred Shares, the Company shall convert from each Holder electing to have
Preferred Shares converted at such time a pro rata amount of such Holder’s
Preferred Shares submitted for conversion based on the number of Preferred
Shares submitted for conversion on such date by such Holder relative to the
number of Preferred Shares submitted for conversion on such date.
- 7 -
(vii) No Redemption. The
Preferred Shares may not be redeemed at the option of the Company at any time,
in whole or in part, without the prior written consent of, and on terms and
conditions satisfactory to, the Required Holders.
(viii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of
Preferred Shares in accordance with the terms hereof, the Holder thereof shall
not be required to physically surrender the certificate representing the
Preferred Shares to the Company unless (A) the full or remaining number of
Preferred Shares represented by the certificate are being converted or
(B) a Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of
Preferred Shares upon physical surrender of any Preferred Shares. The Holder and
the Company shall maintain records showing the number of Preferred Shares so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of the certificate representing the Preferred Shares upon
each such conversion. In the event of any dispute or discrepancy, such records
of the Company establishing the number of Preferred Shares to which the record
holder is entitled shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if Preferred Shares represented
by a certificate are converted as aforesaid, the Holder may not transfer the
certificate representing the Preferred Shares unless the Holder first physically
surrenders the certificate representing the Preferred Shares to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new certificate of like tenor, registered as the Holder may request,
representing in the aggregate the remaining number of Preferred Shares
represented by such certificate. The Holder and any assignee, by acceptance of a
certificate, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any Preferred Shares, the number of Preferred
Shares represented by such certificate may be less than the number of Preferred
Shares stated on the face thereof. Each certificate for Preferred Shares shall
bear the following legend:
ANY
TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE
COMPANY’S CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 2(d)(viii) THEREOF. THE
NUMBER OF PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE
NUMBER OF PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO
- 8 -
SECTION 2(d)(viii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE.
(e) Taxes. The Company shall pay
any and all documentary, stamp, transfer (but only in respect of the registered
holder thereof) and other similar taxes that may be payable with respect to the
issuance and delivery of Common Stock upon the conversion of Preferred Shares.
(f) Adjustment of Conversion Price
upon Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.
(g) Notices.
(i) As promptly as practicable after
any adjustment of the Conversion Price pursuant to Section 2(f), the
Company will give written notice thereof to each Holder, setting forth in
reasonable detail, and certifying, the calculation of such adjustment. In the
case of a dispute as to the determination of such adjustment, then such dispute
shall be resolved in accordance with the procedures set forth in
Section 2(d)(iii).
(ii) The Company will give written
notice to each Holder at least ten (10) Business Days prior to the date on
which the Company closes its books or takes a record for determining rights to
vote with respect to any Fundamental Transaction or Liquidation Event, provided
that such information shall have been made known to the public prior to or in
conjunction with such notice being provided to such Holder.
(iii) The Company will also give
written notice to each Holder at least ten (10) Business Days prior to the
date on which any Fundamental Transaction or Liquidation Event will take place,
provided that such information shall have been made known to the public prior to
or in conjunction with such notice being provided to such Holder.
(3) Purchase Rights. If at
any time the Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property pro-rata to
the record holders of any class of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Preferred
- 9 -
Shares (without taking
into account any limitations or restrictions on the convertibility of the
Preferred Shares) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
(4) Reservation of Shares.
(a) The Company shall, so long as any
of the Preferred Shares are outstanding, take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares 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 Common Stock for which the Preferred Shares are at
any time convertible (without regard to any limitations on conversions (the
“Required Reserve Amount”). The initial number of shares of Common Stock
reserved for conversions of the Preferred Shares and each increase in the number
of shares so reserved shall be allocated pro rata among the Holders based on the
number of Preferred Shares held by each Holder at the time of issuance of the
Preferred Shares or increase in the number of reserved shares, as the case may
be (the “Authorized Share Allocation”). In the event a Holder shall sell
or otherwise transfer any of such Holder’s Preferred Shares, each transferee
shall be allocated a pro rata portion of such Holder’s Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to any Person
which ceases to hold any Preferred Shares (other than pursuant to a transfer of
Preferred Shares in accordance with the immediately preceding sentence) shall be
allocated to the remaining Holders of Preferred Shares, pro rata based on the
number of Preferred Shares then held by such Holders.
(b) Insufficient Authorized
Shares. If at any time while any of the Preferred Shares remain outstanding
the Company does not have a sufficient number of authorized and unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
conversion of the Preferred Shares at least a number of shares of Common Stock
equal to the Required Reserve Amount (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Preferred Shares then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its reasonable best efforts to
solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
- 10 -
(5) Voting Rights. Subject
to Sections 6 and 8, each Holder shall be entitled to the whole number of
votes equal to the number of shares of Common Stock into which such Holder’s
Preferred Shares would be convertible on the record date for the vote or consent
of stockholders, and shall otherwise have voting rights and powers equal to the
voting rights and powers of the Common Stock. Each Holder shall be entitled to
receive the same prior notice of any stockholders’ meeting as is provided to the
holders of Common Stock in accordance with the bylaws of the Company, as well as
prior notice of all stockholder actions to be taken by legally available means
in lieu of a meeting, and shall vote with holders of the Common Stock as if they
were a single class of securities upon any matter submitted to a vote of
stockholders, except those matters required by law or by the terms hereof to be
submitted to a class vote of the Holders of Preferred Shares, in which case the
Holders of Preferred Shares only shall vote as a separate class.
(6) Limitation on Beneficial
Ownership. Other than in connection with a Fundamental Transaction, the
Company shall not effect any conversion of Preferred Shares, and no Holder shall
have the right to convert any Preferred Shares, to the extent that after giving
effect to such conversion, a Holder (together with such Holder’s affiliates)
would beneficially own in excess of 9.99% (“Maximum Percentage”) of the
number of shares of Common Stock outstanding immediately after giving effect to
such conversion. The Company shall not give effect to any voting rights of the
Preferred Shares, and any Holder shall not have the right to exercise voting
rights with respect to any Preferred Shares pursuant hereto, to the extent that
giving effect to such voting rights would result in such Holder (together with
its affiliates) being deemed to beneficially own in excess of the Maximum
Percentage of the number of shares of Common Stock outstanding immediately after
giving effect to such exercise, assuming such exercise as being equivalent to
conversion. For purposes of the foregoing sentences, the number of shares of
Common Stock beneficially owned by a Holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares with respect to which the determination of such sentences is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted Preferred Shares
beneficially owned by such Holder or any of its affiliates and (B) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company (including, without limitation, any notes or warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained in
this Section beneficially owned by such Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 6,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act. For purposes of this Section 6, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most
recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (2) a more
recent public announcement by the Company, or (3) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of any
Holder, the Company shall within one (1) Business Day following the receipt
of such notice, confirm orally and in writing to any such Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including the Preferred Shares, by
such Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may from time to
- 11 -
time increase or
decrease the Maximum Percentage to any other percentage specified in such notice
not in excess of 9.99%; provided that (i) any such increase will not be
effective until the sixty-first (61st) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to the
Holder providing such written notice and not to any other Holder.
(7) Liquidation Events. In
the event of a Liquidation Event, the Holders shall be entitled, on a pari
passu basis with the holders of Common Stock and treating for the purpose
thereof all of the Preferred Shares as having been converted into Common Stock
pursuant to Section 2 (without regard to any limitations in conversion set
forth herein or elsewhere), to participate in the distribution of any assets of
the Company to the holders of the outstanding Common Stock. To the extent
necessary, the Company shall cause such actions to be taken by any of its
Subsidiaries so as to enable, to the maximum extent permitted by law, the
proceeds of a Liquidation Event to be distributed to the Holders in accordance
with this Section. The purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a Liquidation Event.
(8) Limitation on Number of
Conversion Shares. The Company shall not be obligated to issue any shares of
Common Stock upon conversion of the Preferred Shares, and no Holder shall have
the right to receive upon conversion of Preferred Shares any shares of Common
Stock, if the issuance of such shares of Common Stock would exceed the aggregate
number of shares of Common Stock which the Company may issue upon conversion of
the Preferred Shares without breaching the Company’s obligations under the rules
or regulations of the Principal Market and the market or exchange where the
Common Stock is then traded (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market (or any successor rule or regulation) for issuances of Common
Stock in excess of such amount, or (b) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. The Company shall not
give effect to any voting rights of the Preferred Shares to the extent that
giving effect to such voting rights would result in the Holder having such
voting rights in excess of the Exchange Cap. Until such approval or written
opinion is obtained, the investor in Preferred Shares pursuant to the Exchange
Agreement (the “Investor”) shall not be issued, in the aggregate, upon
conversion of Preferred Shares, shares of Common Stock in an amount greater than
the Exchange Cap amount (the “Exchange Cap Allocation”). In the event
that the Investor shall sell or otherwise transfer any of its Preferred Shares,
the transferee shall be allocated a pro rata portion of the Investor’s Exchange
Cap Allocation and the restrictions of the prior sentence shall apply to such
transferee with respect to the Exchange Cap Allocation allocated to such
transferee. In the event that any Holder shall convert all of such Holder’s
Preferred Shares into a number of shares of Common Stock which, in the
aggregate, is less than such Holder’s Exchange Cap Allocation, then the
difference between such Holder’s Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such Holder shall be allocated to the
respective Exchange Cap Allocations of the remaining Holders on a pro-rata basis
in proportion to the number of Preferred Shares then held by each such Holder.
(9) Participation. Subject
to the rights of the holders, if any, of shares of other classes or series that
are of equal rank with the Preferred Shares as to liquidation preference, the
Holders shall, as holders of Preferred Stock, be entitled to such dividends paid
and distributions
- 12 -
made to the holders of
Common Stock to the same extent as if such Holders had converted the Preferred
Shares into Common Stock (without regard to any limitations on conversion herein
or elsewhere) and had held such shares of Common Stock on the record date for
such dividends and distributions. Payments under the preceding sentence shall be
made concurrently with the dividend or distribution to the holders of Common
Stock.
(10) Vote to Change the Terms
of the Preferred Shares. Except where the vote or written consent of the
holders of a greater number of shares is required by law or by another provision
of the Certificate of Incorporation, the affirmative vote at a meeting duly
called for such purpose or the written consent without a meeting of the Required
Holders, voting together as a single class, shall be required before the Company
may: (a) amend or repeal any provision of, or add any provision to, the
Certificate of Incorporation, or file any certificate of designations,
preferences, limitations and relative rights of any series of preferred stock
(including any amendment to the Certificate of Designations for the
Series A Preferred Stock), if such action would adversely alter or change
the preferences, rights privileges or powers of, or restrictions provided for
the benefit of the Preferred Shares, regardless of whether any such action shall
be by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; (b) increase or decrease (other than by
conversion) the authorized number of Preferred Shares; or (c) whether or
not prohibited by the terms of the Preferred Shares, circumvent a right of the
Preferred Shares.
(11) Lost or Stolen
Certificates. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing the Preferred Shares, and, in the case
of loss, theft or destruction, of an indemnification undertaking by the Holder
to the Company in customary form 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 Preferred Shares into Common Stock.
(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. 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. The Company
covenants to each Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. 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).
(13) Construction. This
Certificate of Designations shall be deemed to be jointly drafted by the Company
and the Investors and shall not be construed against any person as the drafter
hereof.
- 13 -
(14) Failure or Indulgence Not
Waiver. No failure or delay on the part of a Holder 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.
(15) Notice. Whenever
notice or other communication is required to be given under this Certificate of
Designations, unless otherwise provided herein, such notice shall be given in
accordance with Section 7(j) of the Exchange Agreement (provided that if the
Preferred Shares are not held by the Investor then to the Holder at such address
as shall have been provided to the Company in writing).
(16) Transfer of Preferred
Shares. A Holder may assign some or all of the Preferred Shares and the
accompanying rights hereunder held by such Holder without the consent of the
Company; provided that such assignment is in compliance with applicable
securities laws.
(17) Preferred Share
Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
Holders), a register for the Preferred Shares, in which the Company shall record
the name and address of the persons in whose name the Preferred Shares have been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Preferred Share is registered on the register
as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, but in all events recognizing any properly made transfers.
(18) Stockholder Matters.
Any stockholder action, approval or consent required, desired or otherwise
sought by the Company pursuant to the rules and regulations of the Principal
Market, the DGCL, this Certificate of Designations or otherwise with respect to
the issuance of the Preferred Shares or the Common Stock issuable upon
conversion thereof may be effected by written consent of the Company’s
stockholders or at a duly called meeting of the Company’s stockholders to the
extent permitted by and all in accordance with the applicable rules and
regulations of the Principal Market and the DGCL. This provision is intended to
comply with the applicable sections of the DGCL permitting stockholder action,
approval and consent affected by written consent in lieu of a meeting.
* * * * *
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IN WITNESS WHEREOF, the Company has
caused this Certificate of Designations to be signed by Andrew Sheldrick, its
Secretary and General Counsel, as of the 26th day of December, 2006.
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ASCENDIA BRANDS, INC.
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By: |
/s/
Andrew Sheldrick |
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Name: |
Andrew Sheldrick |
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EXHIBIT I
ASCENDIA BRANDS, INC.
CONVERSION NOTICE
Reference
is made to the Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of Ascendia Brands, Inc. (the
“Certificate of Designations”). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series B Convertible Preferred Stock, par value $.001 per
share (the “Preferred Shares”), of Ascendia Brands, Inc., a Delaware
corporation (the “Company”), indicated below into shares of Common Stock,
par value $.001 per share (the “Common Stock”), of the Company, 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:
Tax ID Number (If
applicable):
Please confirm the
following information:
Conversion
Price:
Number of shares of Common Stock to be
issued:
Please
issue the Common Stock into which the Preferred Shares are being converted in
the following name and to the following address:
Issue
to:
Address:
Telephone Number:
Facsimile Number:
Authorization:
By:
Title:
Dated:
Account Number (if electronic book
entry transfer):
Transaction Code Number (if electronic
book entry transfer):
[NOTE TO HOLDER —
THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
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ACKNOWLEDGMENT
The Company hereby acknowledges this
Conversion Notice and hereby directs American Stock Transfer & Trust Company
to issue the above indicated number of shares of Common Stock in accordance with
the Irrevocable Transfer Agent Instructions dated December ___, 2006 from the
Company and acknowledged and agreed to by American Stock Transfer & Trust
Company.
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ASCENDIA BRANDS, INC. |
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- 17 -
Exhibit C
CERTIFICATE OF
DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B-1 CONVERTIBLE PREFERRED
STOCK
OF
ASCENDIA BRANDS, INC.
Ascendia Brands, Inc. (the
“Company”), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “DGCL”), does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company (the “Board”) by the Amended and Restated Certificate of
Incorporation of the Company, and pursuant to Sections 151 and 141 of the
DGCL, the Board of Directors of the Company adopted resolutions
(i) designating a series of the Company’s previously authorized preferred
stock, par value $.001 per share, and (ii) providing for the designations,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, of Thirty (30) shares
of Series B-1 Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is
authorized to issue 30 shares of Series B-1 Convertible Preferred Stock
(the “Preferred Shares”), par value $.001 per share, which shall have the
following powers, designations, preferences and other special rights:
(1) Dividends. Other than
as specifically set forth herein, the holders of Preferred Shares (each, a
“Holder” and collectively, the “Holders”) shall not be entitled to
receive any dividends.
(2) Conversion of Preferred
Shares. Preferred Shares shall be convertible into shares of Common Stock,
par value $.001 per share (the “Common Stock”), of the Company on the
terms and conditions set forth in this Section 2.
(a) Certain Defined Terms. For
purposes of this Certificate of Designations, the following terms shall have the
following meanings:
(i) “AMEX” means the American
Stock Exchange.
(ii) “Bloomberg” means Bloomberg
Financial Markets.
(iii) “Business Day” means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.
(iv) “Closing Sale Price” means,
for any security as of any date, the last closing trade price for such security
on the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price then the last trade price of such security prior to
4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal
Market is not the principal securities exchange or trading market for such
security the last trade price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last trade price of such
security in the over-the-
counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Required Holders. If the Company and
the Required Holders are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to
Section 2(d)(iii). All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
(v) “Conversion Price” means
$1.50, subject to adjustment as provided herein.
(vi) “Convertible Securities”
means any stock or securities (other than Options) of the Company directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.
(vii) “Eligible Market” means
the NYSE, The NASDAQ Global Market, The NASDAQ Global Select Market or The
NASDAQ Capital Market.
(viii) “Exchange Act” means The
Securities Exchange Act of 1934, as amended.
(ix) “Exchange Agreement” means
the Amendment and Exchange Agreement by and among the Company, Precen LLC and
Prencen Lending LLC, as such agreement may be amended from time to time, which
is anticipated to be dated on or after December 29, 2006.
(x) “Fundamental Transaction”
means that the Company shall (or in the case of clause (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act)), directly or indirectly, in one or more related transactions,
(i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person or
Persons to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Person or Persons making or party
to, such purchase, tender or exchange offer), or (iv)
- 2 -
consummate a stock 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 the 50% of either the outstanding shares of Voting Stock (not
including any shares of Voting 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 purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Common Stock, or
(vi) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.
(xi) “Initial Issuance Date”
means the first day that any Preferred Shares are issued, which date is
anticipated to be on or after December 26, 2006.
(xii) “Liquidation Event” means
the voluntary or involuntary liquidation, dissolution or winding up of the
Company or such Subsidiaries the assets of which constitute all or substantially
all the assets of the business of the Company and its Subsidiaries taken as a
whole, in a single transaction or series of transactions.
(xiii) “NYSE” means The New York
Stock Exchange, Inc.
(xiv) “Options” means any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(xv) “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(xvi) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xvii) “Principal Market” means
AMEX, or if the Common Stock is not traded on the Principal Market, an Eligible
Market.
(xviii) “Required Holders” means
the Holders of Preferred Shares representing at least a majority of the
aggregate Preferred Shares then outstanding.
(xix) “SEC” means the Securities
and Exchange Commission.
- 3 -
(xx) “Series A Preferred
Stock” shall mean the Series A Junior Participating Preferred Stock of
the Company, par value $0.001 per share.
(xxi) “Stated Value” means
$10,000.
(xxii) “Subsidiary” means any
joint venture or any entity in which the Company, directly or indirectly, owns
in excess of fifty percent (50%) of the capital stock or holds in excess of
fifty percent (50%) of an equity or similar interest.
(xxiii) “Successor Entity” means
the Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.
(xxiv) “Trading Day” means any
day on which the Common Stock is traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the shares of
Common Stock are then traded; provided that “Trading Day” shall not include any
day on which the shares of Common Stock are scheduled to trade on such exchange
or market for less than 4.5 hours or any day that the shares of Common Stock are
suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York Time).
(xxv) “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
(xxvi) “Weighted Average Price”
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market during the period beginning at
9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New York
City Time, as reported by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York
City Time, and ending at 4:00:00 p.m., New York City Time, as
- 4 -
reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Required
Holders. If the Company and the Required Holders are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(d)(iii)below with the term “Weighted Average Price”
being substituted for the term “Closing Sale Price.” All such determinations
shall be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
(b) Holder’s Conversion Right.
Subject to Section 6 hereof, at any time or times on or after the Initial
Issuance Date, any Holder shall be entitled to convert any whole number of
Preferred Shares into fully paid and nonassessable shares of Common Stock in
accordance with Section 2(d) at the Conversion Rate (as defined below).
(c) Conversion. The number of
shares of Common Stock issuable upon conversion of each Preferred Share pursuant
to Section 2(b) shall be determined according to the following formula (the
“Conversion Rate”):
Stated
Value
Conversion Price
(d) Mechanics of Conversion. The
conversion of Preferred Shares shall be conducted in the following manner:
(i) Holder’s Delivery
Requirements. To convert Preferred Shares into shares of Common Stock on any
date (the “Conversion Date”), the Holder shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m.,
New York City Time, on such date, a copy of a properly completed notice of
conversion executed by the registered Holder of the Preferred Shares subject to
such conversion in the form attached hereto as Exhibit I (the
“Conversion Notice”) to the Company and the Company’s designated transfer
agent (the “Transfer Agent”) and (B) if required by
Section 2(d)(viii), deliver to the Company as soon as practicable following
such date the original certificates representing the Preferred Shares being
converted (or comply with the procedures set forth in Section 11) (the
“Preferred Stock Certificates”).
(ii) Company’s Response. Upon
receipt by the Company of a copy of a Conversion Notice, and if so required by
Section 2(d)(viii), the
- 5 -
Preferred Stock Certificates, the Company shall (I) as soon as
practicable, but in any event within one (1) Trading Day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such Holder
and the Transfer Agent, which confirmation shall constitute an instruction to
the Transfer Agent to process such Conversion Notice in accordance with the
terms hereof and (II) on or before the third (3rd) Trading Day following
the date of receipt by the Company of such Conversion Notice, (A) provided
the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer Program, credit such aggregate number of shares of Common Stock to
which the Holder shall be entitled to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or
(B) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver to the address as specified in
the Conversion Notice, a certificate, registered in the name of the Holder or
its designee, for the number of shares of Common Stock to which the Holder shall
be entitled. If the number of Preferred Shares represented by the Preferred
Stock Certificate(s) submitted for conversion, as may be required pursuant to
Section 2(d)(viii), is greater than the number of Preferred Shares being
converted, then the Company shall, as soon as practicable and in no event later
than three (3) Business Days after receipt of the Preferred Stock
Certificate(s) and at its own expense, issue and deliver to the Holder a new
Preferred Stock Certificate representing the number of Preferred Shares not
converted.
(iii) Dispute Resolution. In the
case of a dispute as to the determination of the Closing Sale Price or the
arithmetic calculation of the Conversion Rate, the Company shall instruct the
Transfer Agent to issue to the Holder the number of shares of Common Stock that
is not disputed and shall transmit an explanation of the disputed determinations
or arithmetic calculations to the Holder via facsimile within (a) one
(1) Business Day in the case of a dispute as to the arithmetic calculation
of the Conversion Rate and (b) three (3) Business Days in the case of
a dispute as to the determination of the Closing Sale Price of receipt of such
Holder’s Conversion Notice or other date of determination. If such Holder and
the Company are unable to agree upon the determination of the Closing Sale Price
or the arithmetic calculation of the Conversion Rate within two
(2) Business Days of such disputed determination or arithmetic calculation
being transmitted to the Holder, then the Company shall within three
(3) Business Days with respect to the determination of the Closing Sale
Price and within one (1) Business Day with respect to the arithmetic
calculation of the Conversion Rate, in each case after the end of such two
(2) Business Day period, submit via facsimile (A) the disputed
determination of the Closing Sale Price to an independent, reputable investment
bank selected by the Company and approved by the Required Holders or
(B) the disputed arithmetic calculation of the Conversion Rate to the
Company’s independent, outside accountant. The Company shall
- 6 -
cause,
at the Company’s expense, the investment bank or the accountant, as the case may
be, to perform the determinations or calculations and notify the Company and the
Holders of the results no later than five (5) Business Days with respect to
the determination of the Closing Sale Price and no later than two
(2) Business Days with respect to the calculation of the Conversion Rate,
in each case from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
(iv) Record Holder. The Person
or Persons entitled to receive the shares of Common Stock issuable upon a
conversion of Preferred Shares shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion Date.
(v) Company’s Failure to Timely
Convert. If within three (3) Trading Days after the Company’s receipt
of the facsimile copy of a Conversion Notice, and if required by
Section 2(d)(viii), the Preferred Stock Certificates, the Company shall
fail to issue and deliver a certificate to a Holder or credit such Holder’s
balance account with DTC for the number of shares of Common Stock to which there
is no dispute, such Holder is entitled upon such Holder’s conversion of
Preferred Shares, and if on or after such third (3rd) Trading 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 the shares of Common
Stock issuable upon such conversion that the Holder anticipated receiving from
the Company, 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 such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such 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 Closing Sale Price on the
Conversion Date.
(vi) Pro Rata Conversion. In the
event the Company receives a Conversion Notice from more than one Holder for the
same Conversion Date and the Company can convert some, but not all, of such
Preferred Shares, the Company shall convert from each Holder electing to have
Preferred Shares converted at such time a pro rata amount of such Holder’s
Preferred Shares submitted for conversion based on the number of Preferred
Shares submitted for conversion on such date by such Holder relative to the
number of Preferred Shares submitted for conversion on such date.
- 7 -
(vii) No Redemption. The
Preferred Shares may not be redeemed at the option of the Company at any time,
in whole or in part, without the prior written consent of, and on terms and
conditions satisfactory to, the Required Holders.
(viii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of
Preferred Shares in accordance with the terms hereof, the Holder thereof shall
not be required to physically surrender the certificate representing the
Preferred Shares to the Company unless (A) the full or remaining number of
Preferred Shares represented by the certificate are being converted or
(B) a Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of
Preferred Shares upon physical surrender of any Preferred Shares. The Holder and
the Company shall maintain records showing the number of Preferred Shares so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of the certificate representing the Preferred Shares upon
each such conversion. In the event of any dispute or discrepancy, such records
of the Company establishing the number of Preferred Shares to which the record
holder is entitled shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if Preferred Shares represented
by a certificate are converted as aforesaid, the Holder may not transfer the
certificate representing the Preferred Shares unless the Holder first physically
surrenders the certificate representing the Preferred Shares to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new certificate of like tenor, registered as the Holder may request,
representing in the aggregate the remaining number of Preferred Shares
represented by such certificate. The Holder and any assignee, by acceptance of a
certificate, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any Preferred Shares, the number of Preferred
Shares represented by such certificate may be less than the number of Preferred
Shares stated on the face thereof. Each certificate for Preferred Shares shall
bear the following legend:
ANY
TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE
COMPANY’S CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 2(d)(viii) THEREOF. THE
NUMBER OF PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE
NUMBER OF PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO
- 8 -
SECTION 2(d)(viii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE.
(e) Taxes. The Company shall pay
any and all documentary, stamp, transfer (but only in respect of the registered
holder thereof) and other similar taxes that may be payable with respect to the
issuance and delivery of Common Stock upon the conversion of Preferred Shares.
(f) Adjustment of Conversion Price
upon Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.
(g) Notices.
(i) As promptly as practicable after
any adjustment of the Conversion Price pursuant to Section 2(f), the
Company will give written notice thereof to each Holder, setting forth in
reasonable detail, and certifying, the calculation of such adjustment. In the
case of a dispute as to the determination of such adjustment, then such dispute
shall be resolved in accordance with the procedures set forth in
Section 2(d)(iii).
(ii) The Company will give written
notice to each Holder at least ten (10) Business Days prior to the date on
which the Company closes its books or takes a record for determining rights to
vote with respect to any Fundamental Transaction or Liquidation Event, provided
that such information shall have been made known to the public prior to or in
conjunction with such notice being provided to such Holder.
(iii) The Company will also give
written notice to each Holder at least ten (10) Business Days prior to the
date on which any Fundamental Transaction or Liquidation Event will take place,
provided that such information shall have been made known to the public prior to
or in conjunction with such notice being provided to such Holder.
(3) Purchase Rights. If at
any time the Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property pro-rata to
the record holders of any class of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Preferred
- 9 -
Shares (without taking
into account any limitations or restrictions on the convertibility of the
Preferred Shares) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
(4) Reservation of Shares.
(a) The Company shall, so long as any
of the Preferred Shares are outstanding, take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares 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 Common Stock for which the Preferred Shares are at
any time convertible (without regard to any limitations on conversions (the
“Required Reserve Amount”). The initial number of shares of Common Stock
reserved for conversions of the Preferred Shares and each increase in the number
of shares so reserved shall be allocated pro rata among the Holders based on the
number of Preferred Shares held by each Holder at the time of issuance of the
Preferred Shares or increase in the number of reserved shares, as the case may
be (the “Authorized Share Allocation”). In the event a Holder shall sell
or otherwise transfer any of such Holder’s Preferred Shares, each transferee
shall be allocated a pro rata portion of such Holder’s Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to any Person
which ceases to hold any Preferred Shares (other than pursuant to a transfer of
Preferred Shares in accordance with the immediately preceding sentence) shall be
allocated to the remaining Holders of Preferred Shares, pro rata based on the
number of Preferred Shares then held by such Holders.
(b) Insufficient Authorized
Shares. If at any time while any of the Preferred Shares remain outstanding
the Company does not have a sufficient number of authorized and unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
conversion of the Preferred Shares at least a number of shares of Common Stock
equal to the Required Reserve Amount (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Preferred Shares then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its reasonable best efforts to
solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
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(5) Voting Rights. Subject
to Sections 6 and 8, each Holder shall be entitled to the whole number of
votes equal to the number of shares of Common Stock into which such Holder’s
Preferred Shares would be convertible on the record date for the vote or consent
of stockholders, and shall otherwise have voting rights and powers equal to the
voting rights and powers of the Common Stock. Each Holder shall be entitled to
receive the same prior notice of any stockholders’ meeting as is provided to the
holders of Common Stock in accordance with the bylaws of the Company, as well as
prior notice of all stockholder actions to be taken by legally available means
in lieu of a meeting, and shall vote with holders of the Common Stock as if they
were a single class of securities upon any matter submitted to a vote of
stockholders, except those matters required by law or by the terms hereof to be
submitted to a class vote of the Holders of Preferred Shares, in which case the
Holders of Preferred Shares only shall vote as a separate class.
(6) Limitation on Beneficial
Ownership. Other than in connection with a Fundamental Transaction, the
Company shall not effect any conversion of Preferred Shares, and no Holder shall
have the right to convert any Preferred Shares, to the extent that after giving
effect to such conversion, a Holder (together with such Holder’s affiliates)
would beneficially own in excess of 9.99% (“Maximum Percentage”) of the
number of shares of Common Stock outstanding immediately after giving effect to
such conversion. The Company shall not give effect to any voting rights of the
Preferred Shares, and any Holder shall not have the right to exercise voting
rights with respect to any Preferred Shares pursuant hereto, to the extent that
giving effect to such voting rights would result in such Holder (together with
its affiliates) being deemed to beneficially own in excess of the Maximum
Percentage of the number of shares of Common Stock outstanding immediately after
giving effect to such exercise, assuming such exercise as being equivalent to
conversion. For purposes of the foregoing sentences, the number of shares of
Common Stock beneficially owned by a Holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares with respect to which the determination of such sentences is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted Preferred Shares
beneficially owned by such Holder or any of its affiliates and (B) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company (including, without limitation, any notes or warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained in
this Section beneficially owned by such Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 6,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act. For purposes of this Section 6, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most
recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (2) a more
recent public announcement by the Company, or (3) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of any
Holder, the Company shall within one (1) Business Day following the receipt
of such notice, confirm orally and in writing to any such Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including the Preferred Shares, by
such Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may from time to
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time increase or
decrease the Maximum Percentage to any other percentage specified in such notice
not in excess of 9.99%; provided that (i) any such increase will not be
effective until the sixty-first (61st) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to the
Holder providing such written notice and not to any other Holder.
(7) Liquidation Events. In
the event of a Liquidation Event, the Holders shall be entitled, on a pari
passu basis with the holders of Common Stock and treating for the purpose
thereof all of the Preferred Shares as having been converted into Common Stock
pursuant to Section 2 (without regard to any limitations in conversion set
forth herein or elsewhere), to participate in the distribution of any assets of
the Company to the holders of the outstanding Common Stock. To the extent
necessary, the Company shall cause such actions to be taken by any of its
Subsidiaries so as to enable, to the maximum extent permitted by law, the
proceeds of a Liquidation Event to be distributed to the Holders in accordance
with this Section. The purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a Liquidation Event.
(8) Limitation on Number of
Conversion Shares. The Company shall not be obligated to issue any shares of
Common Stock upon conversion of the Preferred Shares, and no Holder shall have
the right to receive upon conversion of Preferred Shares any shares of Common
Stock, if the issuance of such shares of Common Stock would exceed the aggregate
number of shares of Common Stock which the Company may issue upon conversion of
the Preferred Shares without breaching the Company’s obligations under the rules
or regulations of the Principal Market and the market or exchange where the
Common Stock is then traded (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market (or any successor rule or regulation) for issuances of Common
Stock in excess of such amount, or (b) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. The Company shall not
give effect to any voting rights of the Preferred Shares to the extent that
giving effect to such voting rights would result in the Holder having such
voting rights in excess of the Exchange Cap. Until such approval or written
opinion is obtained, the investor in Preferred Shares pursuant to the Exchange
Agreement (the “Investor”) shall not be issued, in the aggregate, upon
conversion of Preferred Shares, shares of Common Stock in an amount greater than
the Exchange Cap amount (the “Exchange Cap Allocation”). In the event
that the Investor shall sell or otherwise transfer any of its Preferred Shares,
the transferee shall be allocated a pro rata portion of the Investor’s Exchange
Cap Allocation and the restrictions of the prior sentence shall apply to such
transferee with respect to the Exchange Cap Allocation allocated to such
transferee. In the event that any Holder shall convert all of such Holder’s
Preferred Shares into a number of shares of Common Stock which, in the
aggregate, is less than such Holder’s Exchange Cap Allocation, then the
difference between such Holder’s Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such Holder shall be allocated to the
respective Exchange Cap Allocations of the remaining Holders on a pro-rata basis
in proportion to the number of Preferred Shares then held by each such Holder.
(9) Participation. Subject
to the rights of the holders, if any, of shares of other classes or series that
are of equal rank with the Preferred Shares as to liquidation preference, the
Holders shall, as holders of Preferred Stock, be entitled to such dividends paid
and distributions
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made to the holders of
Common Stock to the same extent as if such Holders had converted the Preferred
Shares into Common Stock (without regard to any limitations on conversion herein
or elsewhere) and had held such shares of Common Stock on the record date for
such dividends and distributions. Payments under the preceding sentence shall be
made concurrently with the dividend or distribution to the holders of Common
Stock.
(10) Vote to Change the Terms
of the Preferred Shares. Except where the vote or written consent of the
holders of a greater number of shares is required by law or by another provision
of the Certificate of Incorporation, the affirmative vote at a meeting duly
called for such purpose or the written consent without a meeting of the Required
Holders, voting together as a single class, shall be required before the Company
may: (a) amend or repeal any provision of, or add any provision to, the
Certificate of Incorporation, or file any certificate of designations,
preferences, limitations and relative rights of any series of preferred stock
(including any amendment to the Certificate of Designations for the
Series A Preferred Stock), if such action would adversely alter or change
the preferences, rights privileges or powers of, or restrictions provided for
the benefit of the Preferred Shares, regardless of whether any such action shall
be by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; (b) increase or decrease (other than by
conversion) the authorized number of Preferred Shares; or (c) whether or
not prohibited by the terms of the Preferred Shares, circumvent a right of the
Preferred Shares.
(11) Lost or Stolen
Certificates. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing the Preferred Shares, and, in the case
of loss, theft or destruction, of an indemnification undertaking by the Holder
to the Company in customary form 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 Preferred Shares into Common Stock.
(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. 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. The Company
covenants to each Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. 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).
(13) Construction. This
Certificate of Designations shall be deemed to be jointly drafted by the Company
and the Investors and shall not be construed against any person as the drafter
hereof.
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(14) Failure or Indulgence Not
Waiver. No failure or delay on the part of a Holder 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.
(15) Notice. Whenever
notice or other communication is required to be given under this Certificate of
Designations, unless otherwise provided herein, such notice shall be given in
accordance with Section 7(j) of the Exchange Agreement (provided that if the
Preferred Shares are not held by the Investor then to the Holder at such address
as shall have been provided to the Company in writing).
(16) Transfer of Preferred
Shares. A Holder may assign some or all of the Preferred Shares and the
accompanying rights hereunder held by such Holder without the consent of the
Company; provided that such assignment is in compliance with applicable
securities laws.
(17) Preferred Share
Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
Holders), a register for the Preferred Shares, in which the Company shall record
the name and address of the persons in whose name the Preferred Shares have been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Preferred Share is registered on the register
as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, but in all events recognizing any properly made transfers.
(18) Stockholder Matters.
Any stockholder action, approval or consent required, desired or otherwise
sought by the Company pursuant to the rules and regulations of the Principal
Market, the DGCL, this Certificate of Designations or otherwise with respect to
the issuance of the Preferred Shares or the Common Stock issuable upon
conversion thereof may be effected by written consent of the Company’s
stockholders or at a duly called meeting of the Company’s stockholders to the
extent permitted by and all in accordance with the applicable rules and
regulations of the Principal Market and the DGCL. This provision is intended to
comply with the applicable sections of the DGCL permitting stockholder action,
approval and consent affected by written consent in lieu of a meeting.
* * * * *
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IN WITNESS WHEREOF, the Company has
caused this Certificate of Designations to be signed by Andrew Sheldrick, its
Secretary and General Counsel, as of the 29th day of December, 2006.
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ASCENDIA BRANDS, INC.
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EXHIBIT I
ASCENDIA BRANDS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of
Designations, Preferences and Rights of Series B-1 Convertible Preferred Stock
of Ascendia Brands, Inc. (the “Certificate of Designations”). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series B-1 Convertible
Preferred Stock, par value $.001 per share (the “Preferred Shares”), of
Ascendia Brands, Inc., a Delaware corporation (the “Company”), indicated
below into shares of Common Stock, par value $.001 per share (the “Common
Stock”), of the Company, 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:
Tax ID Number (If applicable):
Please confirm the
following information:
Conversion Price:
Number of shares of Common Stock to be
issued:
Please
issue the Common Stock into which the Preferred Shares are being converted in
the following name and to the following address:
Issue to:
Address:
Telephone Number:
Facsimile Number:
Authorization:
By:
Title:
Dated:
Account Number (if electronic book
entry transfer):
Transaction Code Number (if electronic
book entry transfer):
[NOTE TO HOLDER —
THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
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ACKNOWLEDGMENT
The Company hereby acknowledges this
Conversion Notice and hereby directs American Stock Transfer & Trust Company
to issue the above indicated number of shares of Common Stock in accordance with
the Irrevocable Transfer Agent Instructions dated December ___, 2006 from the
Company and acknowledged and agreed to by American Stock Transfer & Trust
Company.
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- 17 -
EXHIBIT D
AMENDMENT AND
EXCHANGE AGREEMENT
AMENDMENT
AND EXCHANGE AGREEMENT (the “Agreement”), dated as of
December 27, 2006, by and among Ascendia Brands, Inc. (f/k/a Cenuco, Inc.),
a Delaware corporation, with headquarters located at 100 American Metro
Boulevard, Suite 108, Hamilton, NJ 08619 (the “Company”), Prencen
Lending LLC, a Delaware limited liability company (the “Debt Investor”)
and Prencen LLC, a Delaware limited liability company (the “Equity
Investor”, and collectively with the Debt Investor, the “Investors”).
Capitalized terms not defined herein shall have the meaning as set forth in the
Amended Securities Purchase Agreement (as defined below).
WHEREAS:
A. The
Company and the Investors have entered into (i) that certain Second Amended
and Restated Securities Purchase Agreement, dated as of June 30, 2006 (as
amended prior to the date hereof, the “Existing Securities Purchase
Agreement”) and (ii) that certain Amended and Restated Registration
Rights Agreement, dated as of August 2, 2006 (as amended prior to the date
hereof, the “Existing Registration Rights Agreement”).
B.
Pursuant to that certain stock purchase agreement, dated as of June 30,
2006 (the “Stock Purchase Agreement”) between Steven Bettinger and Jodi
Bettinger and the Equity Investor, the Equity Investor acquired Three Million,
Three Hundred and Twenty Two Thousand, Four Hundred and Eighty Two (3,322,482)
shares of common stock, par value $0.001 (the “Common Stock”) of the
Company.
C. The
Company has authorized a new series of convertible preferred stock of the
Company designated as Series B Convertible Preferred Stock, the terms of
which are set forth in the certificate of designations for such series of
preferred shares (the “Certificate of Designations”) in the form attached
hereto as Exhibit A (together with any convertible preferred shares
issued in replacement thereof in accordance with the terms thereof, the
“Preferred Stock”), which Preferred Stock shall be convertible into
shares of Common Stock (as converted, the “Preferred Conversion Shares”)
in accordance with the terms of the Certificate of Designations.
D. The
Company and the Investors desire to enter into this Agreement, pursuant to
which, among other things, (i) the Equity Investor shall exchange two
million (2,000,000) shares of Common Stock (the “Common Shares”) for 300
shares of Preferred Stock (the “Preferred Shares”) and (ii) the
Investors shall waive their right to receive all Registration Delay Payments (as
defined in the Existing Registration Rights Agreement) accrued and unpaid as of
the Closing Date (as defined below) (the “Outstanding Registration Delay
Payments”).
E. The
exchange of the Common Shares for the Preferred Shares is being made in reliance
upon the exemption from registration provided by Section 3(a)(9) of the
1933 Act.
F. In
connection herewith, the Company and the Investors anticipate entering into that
certain Amendment Agreement in the form attached hereto as Exhibit G
(the “Note Amendment Agreement”), whereby the Senior Secured Convertible
Note of the Company
issued to the Debt
Investor shall be amended and restated in the form of the Amended and Restated
Senior Secured Convertible Note attached thereto (the “Amended Note”).
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investors hereby agree as
follows:
1.
EXCHANGE AND ISSUANCE OF PREFERRED SHARES.
(a) Exchange
and Issuance of Preferred Shares. Subject to satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, (i) the Equity
Investor shall surrender to the Company at the closing contemplated by this
Agreement (the “Closing”) the Common Shares of the Equity Investor and
(ii) the Company shall issue and deliver to the Equity Investor the
Preferred Shares.
(b) Closing
Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York Time, on the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 5 and 6 below (or such later date as is mutually agreed to by the
Company and the Investors). The Closing shall occur on the Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022.
2.
AMENDMENTS; WAIVER; CONSENT.
(a) Existing
Securities Purchase Agreement. The Existing Securities Purchase Agreement
(as amended hereby, the “Amended Securities Purchase Agreement”) shall be
amended as of the Closing as follows:
(i)
All references to “Bettinger Shares” shall mean, and are hereby replaced with,
the “Bettinger Shares held by the Investors immediately following the Common
Exchange Date (as defined below) and the Preferred Conversion Shares (as defined
in that certain Amendment and Exchange Agreement, dated as of December 27,
2006, by and between the Company and the Buyers (the “Common Exchange
Agreement”)”;
(ii)
The defined term “Common Exchange Date” shall mean the Closing Date (as defined
in the Common Exchange Agreement).
(iii)
All references to “Conversion Shares” shall mean, and are hereby replaced with,
the “Conversion Shares and the Preferred Conversion Shares”;
(iv)
All references to “Notes” shall mean, and are hereby replaced with, the “Notes
and Preferred Shares (as defined in the Common Exchange Agreement)”;
(v)
All references to “Registration Rights Agreement” shall mean, the Amended
Registration Rights Agreement.
- 2 -
(vi)
The defined term “Securities” is hereby amended to include “the Preferred Shares
and the Preferred Conversion Shares”;
(vii)
All references to “Securities Purchase Agreement” shall mean, the Amended
Securities Purchase Agreement.
(viii)
The defined term “Transaction Documents” is hereby amended to include this
Agreement and the Certificate of Designations.
(ix)
Section 4(t) of the Existing Securities Purchase Agreement is hereby amended and
restated as follows:
(t)
Nomination of Prentice Director. For so long as Prentice or any of its
affiliates owns (x) at least $5,000,000 in aggregate principal amount of
the Notes outstanding, (y) at least $5,000,000 of stated value of any
preferred stock of the Company issued by the Company in exchange for the Notes
or (z) at least 25% of the Series A Warrants purchased by Prentice or
its affiliates, as applicable, and subject to limitations, if any, imposed by
stock exchange rules in effect from time to time, the Company agrees to cause
one (1) person designated by Prentice to be nominated for election at every
meeting of the stockholders of the Company called with respect to the election
of members of the board of directors of the Company, and at every adjournment or
postponement thereof, and on every action or approval by written consent of the
stockholders or the board of directors with respect to the election of members
of the board of directors of the Company so that at any time there shall be one
(1) director designated by Prentice in the board of directors of the
Company. Should a person designated pursuant to this Section 4(t) be unwilling
or unable to serve, or otherwise cease to serve, the Company shall cause one
(1) person designated by Prentice to replace such member on the board of
directors. If Prentice desires to remove any person designated by Prentice
pursuant to this Section 4(t), the Company shall cooperate with and shall
support such removal and any vacancy shall be filled in accordance with the
preceding sentence.
(b) Existing
Registration Rights Agreement. The Existing Registration Rights Agreement
shall be amended and restated as of the Closing in the form attached hereto as
Exhibit B (as amended, the “Amended Registration Rights
Agreement”).
(c) Ratifications.
Except as otherwise expressly provided herein, (i) the Amended Securities
Purchase Agreement, Amended Registration Rights Agreement and each other
Transaction Document is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, except that on and after the
Closing Date (A) all references in the Transaction Documents to the
“Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or words of
like import referring to the Securities Purchase Agreement shall mean the
Existing Securities Purchase Agreement as amended by this Agreement, and
(B) all references in the other Transaction Documents to the “Registration
Rights Agreement”,
- 3 -
“thereto”, “thereof”,
“thereunder” or words of like import referring to the Registration Rights
Agreement shall mean the Existing Registration Rights Agreement as amended by
this Agreement, and (ii) the execution, delivery and effectiveness of this
Agreement shall not operate as an amendment of any right, power or remedy of the
Debt Investor or the Equity Investor under any Transaction Document, nor
constitute an amendment of any provision of any Transaction Document.
(d) Waiver.
Effective as of the Closing Date, the Investors hereby waive the right to
receive the Outstanding Registration Delay Payments; provided, however, that
such waiver shall only apply to the Outstanding Registration Delay Payments and
shall not apply to any Registration Delay Payments incurred after the Closing
Date.
(e) Consent.
The Debt Investor hereby consents to (i) the amendments set forth in this
Agreement and (ii) the consummation of the transactions contemplated
hereby, in each case, as required by the terms of the Note (as defined in the
Amended Securities Purchase Agreement).
3.
REPRESENTATIONS AND WARRANTIES
(a) Investor
Representations. Each Investor hereby represents and warrants to the Company
as set forth in Section 2 of the Amended Securities Purchase
Agreement as if such representations and warranties were made as of the date
hereof and set forth in their entirety in this Agreement.
(b) Company
Representations. The Company represents and warrants to each Investor as set
forth in Section 3 of the Amended Securities Purchase Agreement as
if such representations and warranties were made as of the date hereof and set
forth in their entirety in this Agreement, except as set forth on the Schedules
of the Company attached hereto and except for such representations and
warranties that are not true and correct as of the date hereof solely by virtue
of the Stockholder Approval (as defined in the Note Amendment Agreement) not
being obtained as of the Closing Date and the amendments to the certificate of
incorporation of the Company not having been filed with the Secretary of State
of Delaware to effectuate the amendments specified in clauses (x) and
(y) of Section 7(b)(ii) of the Note Amendment Agreement as of the
Closing Date.
(c) Holding
Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of the Preferred Shares and the shares of Common Stock issuable
upon conversion of the Preferred Shares may be tacked onto the holding period of
the Common Shares being exchanged in connection herewith and, so long as the
Company receives a legal opinion in a generally acceptable form in connection
with a resale of the shares of Common Stock issuable upon conversion of the
Preferred Shares in reliance upon Rule 144, the Company agrees not to take
a position contrary to this Section 3(c).
4.
FEES AND EXPENSES
(a) At
the Closing, the Company shall reimburse the Investors for their reasonable
legal fees and expenses in connection with the preparation and negotiation of
this Agreement and the related documents by paying such amount to Schulte Roth
& Zabel LLP (the
- 4 -
“Investor Counsel
Expense”). Except as otherwise set forth in this Agreement, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other non-income taxes and duties levied in
connection with the issuance (but not the exercise or conversion) of the
Preferred Shares.
5.
CONDITIONS TO COMPANY’S OBLIGATIONS HEREUNDER.
The
obligations of the Company to each Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion by providing such Investor with prior written notice
thereof:
(a) Each
Investor shall have executed this Agreement and delivered the same to the
Company.
(b) The
Equity Investor shall have delivered to the Company its Common Shares for
cancellation or such other documentation reasonably satisfactory to the Company
that such Equity Investor’s Common Shares have been lost or destroyed.
(c) The
representations and warranties of the Investors in Section 3(a)
hereof shall be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date). The Company shall have received a certificate of
the Investors, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Company in the form
attached hereto as Exhibit F-1.
6.
CONDITIONS TO THE INVESTORS’ OBLIGATIONS HEREUNDER.
The
obligations of each Investor hereunder is subject to the satisfaction of each of
the following conditions, provided that these conditions are for each Investor’s
sole benefit and may be waived by such Investor at any time in its sole
discretion by providing the Company with prior written notice thereof:
(a) The
Company shall have executed this Agreement and delivered the same to such
Investor.
(b) Such
Investor shall have received the opinion of Kramer Levin Naftalis & Frankel
LLP, the Company’s outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit C attached hereto.
(c) The
Company shall have executed and delivered to the Equity Investor the Preferred
Shares being issued to the Equity Investor at the Closing.
(d) The
Company shall have delivered to such Investor a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (x) the
resolutions as adopted by the Company’s board of directors in a form reasonably
acceptable to
- 5 -
the Investors,
(y) the Certificate of Incorporation and (z) the Bylaws, each as in
effect at the Closing, in the form attached hereto as Exhibit D.
(e) The
Company shall have delivered to such Investor a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit E attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(f) The
Company shall have delivered to such Investor a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in each
such entity’s jurisdiction of formation issued by the Secretary of State (or
equivalent) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.
(g) The
Company shall have delivered to such Investor a certified copy of the
Certificate of Incorporation of the Company as certified by the Secretary of
State of the State of Delaware within ten (10) days of the Closing Date.
(h) The
Certificate of Designations in the form attached as Exhibit A shall
have been filed on or prior to the Closing Date with the Secretary of State of
the State of Delaware and shall be in full force and effect, enforceable against
the Company in accordance with its terms and shall not have been amended.
(i) The
representations and warranties of the Company in Section 3(b) shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except (x) for representations and warranties
that shall not be true and correct as of the date when made and/or as of the
Closing Date as though made at that time, in each case solely by virtue of the
Stockholder Approval not being obtained as of the date when made and/or as of
the Closing Date and the amendments to the certificate of incorporation of the
Company not having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 7(b)(ii) of the Note Amendment Agreement as of the date when made
and/or as of the Closing Date and (y) for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date (except for any
breach of any such covenants or agreements solely by virtue of the Stockholder
Approval not being obtained at or prior to the Closing Date and the amendments
to the certificate of incorporation of the Company not having been filed with
the Secretary of State of Delaware to effectuate the amendments specified in
clauses (x) and (y) of Section 7(b)(ii) of the Note Amendment
Agreement at or prior to the Closing Date). Such Investor shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Investor in the form attached hereto as
Exhibit F-2.
(j) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the issuance of the Preferred Shares and
the Preferred Conversion Shares.
- 6 -
7.
MISCELLANEOUS.
(a) Disclosure
of Transactions and Other Material Information. On or before 5:30 p.m., New
York time, on the fourth Business Day following the date of this Agreement, the
Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by this Agreement in the
form required by the 1934 Act and attaching the material Transaction Documents
not previously filed (including, without limitation, the form of this Agreement
and the form of the Certificate of Designations) as exhibits to such filing
(including all attachments, the “8-K Filing”). From and after the earlier
to occur of (i) the fourth Business Day following the consummation of the
Acquisition and (ii) sixty (60) calendar days after the Closing Date
(the “Disclosure Deadline”), no Investor shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing or other public filings by the Company
with the SEC prior to the Disclosure Deadline. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Investor with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing with the SEC without the express written
consent of such Investor. If an Investor has, or believes it has, received any
such material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Trading Days of receipt of such notice, make
public disclosure of such material, nonpublic information. In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, an
Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. No Investor
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or agents for any
such disclosure. The Company and the Investors shall work together to adopt
procedures designed to ensure that material non-public information is not
disclosed to the Investors without its consent. Subject to the foregoing,
neither the Company, its Subsidiaries nor any Investor shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Investor, to make any press release or other
public disclosure with respect to such transactions (x) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (y) as
is required by applicable law and regulations (provided that in the case of
clause (y) each Investor shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Without the prior written consent of any applicable Investor, neither the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Investor in any filing, announcement, release or otherwise. Notwithstanding
the foregoing, (I) in the event that the Equity Investor is deemed a
director by deputization by virtue of the rights set forth in Section 4(t) of
the Amended Securities Purchase Agreement, the restrictions set forth in this
Section 7(a) shall not apply to the provision of information in the ordinary
course to such director and the rights of the Equity Investor and its affiliates
to disclose any material non-public information received by such director as set
forth in this Section 7(a) shall not apply and (II) in the event any
Investor receives material non-public
- 7 -
information it
solicited from any employee, officer or director of the Company or any of its
Subsidiaries the rights of such Investor and its affiliates to disclose any
material non-public information received by such director as set forth in this
Section 7(a) shall not apply.
(b) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(c) Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original, not a facsimile signature.
(d) Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
(e) Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(f) No
Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
(g)
Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such
- 8 -
other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
(h) No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(i) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (as defined in the Notes) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes, Warrants and Certificate of Designations). Each Investor may
assign some or all of its rights hereunder without the consent of the Company in
connection with a transfer by such Investor of any of the Securities, in which
event such assignee shall be deemed to be an Investor hereunder with respect to
such assigned rights.
(j) Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to
the Company:
Ascendia Brands, Inc.
100 American Metro
Boulevard
Suite 108
Hamilton, NJ 08619
Telephone:
(609) 219-0930
Facsimile: (609) 219-1238
Attention: General
Counsel
With a
copy (for informational purposes only) to:
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the
Americas
New York, NY 10036
Telephone: (212) 715-9100
Facsimile:
(212) 715-8000
Attention: Thomas D. Balliett, Esq.
- 9 -
If to
the Investors:
c/o
Prentice Capital Management, LP
623 Fifth Avenue
32nd Floor
New York,
NY 10022
Telephone: (212)-756-8045
Facsimile:
(212) 756-1480
Attention: Michael
Weiss
Mathew
Hoffman
with a
copy (for informational purposes only) to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New
York 10022
Telephone: (212) 756-2000
Facsimile:
(212) 593-5955
Attention: Eleazer N. Klein, Esq.
or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service in
accordance with clause (i), (ii) or (iii) above, respectively.
(k) Remedies.
Each Investor and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Investors. The Company therefore agrees that the
Investors shall be entitled to seek temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages and without
posting a bond or other security.
[Signature Page
Follows]
- 10 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment and Exchange Agreement to be duly executed as
of the date first written above.
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COMPANY: |
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ASCENDIA BRANDS, INC. |
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By: |
/s/
Joseph A. Falsetti |
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Name: |
Joseph A. Falsetti |
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Title: |
President and Chief Executive Officer |
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- 11 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment and Exchange Agreement to be duly executed as
of the date first written above.
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INVESTORS: |
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PRENCEN LLC |
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By: |
/s/
Mathew B. Hoffman |
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Name: |
Mathew B. Hoffman |
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Title: |
General Counsel |
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PRENCEN LENDING LLC
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By: |
/s/
Mathew B. Hoffman |
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Name: |
Mathew B. Hoffman |
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Title: |
General Counsel |
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- 12 -
AMENDMENT NO. 1
TO AMENDMENT AND EXCHANGE AGREEMENT
AMENDMENT
NO. 1, dated as of December 29, 2006 (the “ Agreement”), to the
Amendment and Exchange Agreement (the “Common Exchange Agreement”, as
amended hereby, the “Amended Common Exchange Agreement”), dated as of
December 27, 2006, by and among Ascendia Brands, Inc. (f/k/a Cenuco, Inc.),
a Delaware corporation, with headquarters located at 100 American Metro
Boulevard, Suite 108, Hamilton, NJ 08619 (the “Company”), Prencen
Lending LLC, a Delaware limited liability company (the “Debt Investor”)
and Prencen LLC, a Delaware limited liability company (the “Equity
Investor”, and collectively with the Debt Investor, the “Investors”).
Capitalized terms not defined herein shall have the meaning as set forth in the
Common Exchange Agreement.
WHEREAS:
A. The
Investors have requested that the Company exchange an additional two hundred
thousand (200,000) shares of Common Stock of the Company (the “ Additional
Common Shares”) for thirty (30) shares of Additional Preferred Stock
(as defined below) (the “Additional Preferred Shares”).
B.
Concurrently herewith, the Company will file with the Secretary of State of
Delaware the certificate of designations for the Series B-1 Convertible
Preferred Stock of the Company (the “Additional Certificate of
Designations”) in the form attached hereto as Exhibit A (together
with any convertible preferred shares issued in accordance with the terms
thereof, the “ Additional Preferred Stock”), which Additional Preferred
Stock shall be convertible into shares of Common Stock (as converted, the
“Additional Preferred Conversion Shares ”) in accordance with the terms
of the Additional Certificate of Designations.
C. The
exchange of the Additional Common Shares for the Additional Preferred Shares is
being made in reliance upon the exemption from registration provided by
Section 3(a)(9) of the 1933 Act.
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investors hereby agree as
follows:
1.
CERTIFICATE OF DESIGNATIONS; CONSENT
(a) On
or prior to the date hereof, the Company shall file the Additional Certificate
of Designations with the Secretary of State of the State of Delaware.
(b) On
or prior to the date hereof, the Company shall have delivered to the Investors
the written consent of the board of directors of the Company to the resolutions
authorizing the transactions contemplated hereby in the form previously provided
to the Investors.
2.
AMENDMENTS.
(a) Securities
Purchase Agreement; Registration Rights Agreement. The Amended Securities
Purchase Agreement (as amended hereby, the “Second Amended
Securities Purchase
Agreement”) and the Amended Registration Rights Agreement (as amended
hereby, the “Second Amended Registration Rights Agreement”) shall each be
amended as of the date hereof as follows:
(i)
All references to “Certificate of Designations” shall include the Additional
Certificate of Designations.
(ii)
All references to “Common Exchange Agreement” shall mean, the Amended Common
Exchange Agreement.
(iii)
All references to “Conversion Shares” shall include the Additional Preferred
Conversion Shares.
(iv)
All references to “Common Shares” shall include the Additional Common Shares.
(v)
All references to “Preferred Shares” shall include the Additional Preferred
Shares.
(vi)
All references to “Preferred Stock” shall include the Additional Preferred
Stock.
(vii)
All references to “Registration Rights Agreement” shall mean, the Second Amended
Registration Rights Agreement.
(viii)
All references to “Securities Purchase Agreement” shall mean, the Second Amended
Securities Purchase Agreement.
(ix)
The defined term “Transaction Documents” is hereby amended to include this
Agreement and the Amended Certificate of Designations.
(b) Ratifications.
Except as otherwise expressly provided herein, the Second Amended Securities
Purchase Agreement, Second Amended Registration Rights Agreement, the Amended
Common Exchange Agreement and each other Transaction Document is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects.
3.
REPRESENTATIONS AND WARRANTIES
(a) Investor
Representations. Each Investor hereby represents and warrants to the Company
as set forth in Section 2 of the Second Amended Securities Purchase
Agreement as if such representations and warranties were made as of the date
hereof and set forth in their entirety in this Agreement.
(b) Company
Representations. The Company represents and warrants to each Investor as set
forth in Section 3 of the Second Amended Securities Purchase
Agreement as if such representations and warranties were made as of the date
hereof and set forth in their entirety in this Agreement, except as set forth on
the Schedules of the Company attached thereto
- 2 -
and except for such
representations and warranties that are not true and correct as of the date
hereof solely by virtue of the Stockholder Approval (as defined in the Note
Amendment Agreement) not being obtained as of the date hereof and the amendments
to the certificate of incorporation of the Company not having been filed with
the Secretary of State of Delaware to effectuate the amendments specified in
clauses (x) and (y) of Section 7(b)(ii) of the Note Amendment
Agreement as of the date hereof.
(c) Holding
Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of the Additional Preferred Shares and the shares of Common Stock
issuable upon conversion of the Additional Preferred Shares may be tacked onto
the holding period of the Additional Common Shares being exchanged in connection
herewith and, so long as the Company receives a legal opinion in a generally
acceptable form in connection with a resale of the shares of Common Stock
issuable upon conversion of the Additional Preferred Shares in reliance upon
Rule 144, the Company agrees not to take a position contrary to this
Section 3(c).
4.
MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original, not a facsimile signature.
- 3 -
(c) Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) No
Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
(f) Further
Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(g) No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(h) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (as defined in the Notes) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes, Warrants and Certificate of Designations). Each Investor may
assign some or all of its rights hereunder without the consent of the Company in
connection with a transfer by such Investor of any of the Securities, in which
event such assignee shall be deemed to be an Investor hereunder with respect to
such assigned rights.
(i) Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to
the Company:
Ascendia Brands, Inc.
100 American Metro
Boulevard
Suite 108
Hamilton, NJ 08619
Telephone:
(609) 219-0930
- 4 -
Facsimile: (609) 219-1238
Attention: General Counsel
With a
copy (for informational purposes only) to:
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the
Americas
New York, NY 10036
Telephone: (212) 715-9100
Facsimile:
(212) 715-8000
Attention: Thomas D. Balliett, Esq.
If to
the Investors:
c/o
Prentice Capital Management, LP
623 Fifth Avenue
32nd Floor
New York,
NY 10022
Telephone: (212)-756-8045
Facsimile:
(212) 756-1480
Attention: Michael
Weiss
Mathew
Hoffman
with a
copy (for informational purposes only) to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New
York 10022
Telephone: (212) 756-2000
Facsimile:
(212) 593-5955
Attention: Eleazer N. Klein, Esq.
or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service in
accordance with clause (i), (ii) or (iii) above, respectively.
(j) Remedies.
Each Investor and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company
- 5 -
recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to the Investors. The Company therefore agrees that the Investors shall
be entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
other security.
[Signature Page
Follows]
- 6 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment No. 1 to the Amendment and Exchange
Agreement to be duly executed as of the date first written above.
| |
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| |
COMPANY: |
|
| |
| |
ASCENDIA BRANDS, INC.
|
|
| |
By: |
/s/
Joseph A. Falsetti |
|
| |
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Name: |
Joseph A. Falsetti |
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| |
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Title: |
President and Chief Executive Officer |
|
| |
- 7 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment No. 1 to the Amendment and Exchange
Agreement to be duly executed as of the date first written above.
| |
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| |
INVESTORS: |
|
| |
| |
PRENCEN LLC
|
|
| |
By: |
/s/
Mathew B. Hoffman |
|
| |
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Name: |
Mathew B. Hoffman |
|
| |
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Title: |
General Counsel |
|
| |
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| |
PRENCEN LENDING LLC
|
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| |
By: |
/s/
Mathew B. Hoffman |
|
| |
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Name: |
Mathew B. Hoffman |
|
| |
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Title: |
General Counsel |
|
| |
- 8 -
EXHIBIT E
REGISTRATION RIGHTS
AGREEMENT
SECOND AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of December 27,
2006, by and among Ascendia Brands, Inc. (f/k/a Cenuco, Inc.), a Delaware
corporation, with headquarters located at 100 American Metro Boulevard,
Suite 108, Hamilton, NJ 08619 (the “Company”), and the undersigned
buyers (each, a “Buyer”, and collectively, the “Buyers”).
WHEREAS:
A. In
connection with the Second Amended and Restated Securities Purchase Agreement by
and among the Company and the Buyers, dated as of June 30, 2006, (as
amended from time to time in accordance with its terms, the “Securities
Purchase Agreement”) the Company issued and sold to (i) Prencen Lending
LLC, a Delaware limited liability company, a senior secured convertible note of
the Company (as amended from time to time in accordance with its terms, the
“Note”) which will, among other things, be convertible into shares of the
Company’s common stock, par value $0.001 per share (the “Common Stock”)
(as converted, collectively, the “Conversion Shares”), and
(ii) Prencen LLC, a Delaware limited liability company (the “Equity
Investor”), two series of warrants (as amended from time to time in
accordance with their terms, the “Warrants”) which will be exercisable to
purchase shares of Common Stock (as exercised collectively, the “Warrant
Shares”).
B.
Contemporaneously with the execution and delivery of the Securities Purchase
Agreement, Steven Bettinger and the Equity Investor executed and delivered that
certain Securities Purchase Agreement, dated as of June 30, 2006 (the
“Bettinger Agreement”), whereby the Equity Investor acquired shares of
Common Stock (the “Bettinger Shares”).
C.
Contemporaneously herewith, the Company and the Buyers are entering into that
certain Amendment and Exchange Agreement (the “Common Exchange
Agreement”), pursuant to which the Equity Investor shall exchange certain
Common Stock of the Company held by the Equity Investor for Series B
Convertible Preferred Stock of the Company (the “Preferred Shares”) which
will, among other things, be convertible into Common Stock (as converted,
collectively, the “Preferred Conversion Shares”).
D. To
induce the Buyers to execute and deliver the Common Exchange Agreement, the
Company has agreed to execute and deliver this Agreement which amends and
restates that certain Amended and Restated Registration Rights Agreement, dated
as of August 2, 2006 (as amended prior to the date hereof, the “Existing
Registration Rights Agreement”), by and among the Company and the Buyers,
pursuant to which the Company agreed to provide certain registration rights with
respect to the Registrable Securities (as defined in the Existing Registration
Rights Agreement) under the Securities Act of 1933, as amended (the “1933
Act”), and the rules and regulations promulgated thereunder, and applicable
state securities laws.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
- 1 -
1.
Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
a. “Business Day” means any day
other than Saturday, Sunday or any other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.
b. “Closing Date” shall have the
meaning set forth in the Common Exchange Agreement
c. “Effective Date” means the
date that the Registration Statement has been declared effective by the SEC.
d. “Effectiveness Deadline”
means the date which is (i) in the event the Registration Statement is not
subject to a full review by the SEC, 60 days after the Filing Deadline or
(ii) in the event the Registration Statement is subject to a full review by
the SEC, 90 days after the Filing Deadline.
e. “Filing Deadline” means
June 30, 2007.
f. “Investor” means a Buyer or
any transferee or assignee of the Notes, Preferred Shares, Bettinger Shares held
by the Equity Investor immediately following the Closing Date or Warrants, as
applicable, to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a transferee or
assignee of the Notes, Preferred Shares, Bettinger Shares held by the Equity
Investor immediately following the Closing Date or Warrants, as applicable,
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.
g. “Person” means an individual,
a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
h. “register,”
“registered,” and “registration” refer to a registration effected
by preparing and filing one or more Registration Statements (as defined below)
in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.
i. “Registrable Securities”
means (i) the Conversion Shares issued or issuable upon conversion of the
Notes, (ii) the Preferred Conversion Shares issued or issuable upon
conversion of the Preferred Shares, (iii) the Warrant Shares issued or
issuable upon exercise of the Warrants, (iv) the Bettinger Shares held by
the Equity Investor immediately following the Closing Date, (v) any Common
Stock currently held or subsequently acquired by the Buyers, and (vi) any
capital stock of the Company issued or issuable, with respect to the
- 2 -
Notes,
the Preferred Shares, the Conversion Shares, the Preferred Conversion Shares,
the Warrant Shares, the Bettinger Shares held by the Equity Investor immediately
following the Closing Date or the Warrants as a result of any stock split, stock
dividend, recapitalization, exchange or similar event, without regard to any
limitations on conversions of the Notes or conversions of the Preferred Shares
or exercises of the Warrants.
j. “Registration Statement”
means a registration statement or registration statements of the Company filed
under the 1933 Act covering the Registrable Securities.
k. “Required Holders” means the
holders of at least a majority of the Registrable Securities.
l. “Required Registration
Amount” means 130% of the sum of (i) the maximum number of Conversion
Shares issued or issuable pursuant to the Notes, as of the trading day
immediately preceding the applicable date of determination, (ii) the
maximum number of Preferred Conversion Shares issued or issuable pursuant to the
Preferred Shares, as of the trading day immediately preceding the applicable
date of determination, (iii) the number of Bettinger Shares held by the
Equity Investor immediately following the Closing Date and (iv) the maximum
number of Warrant Shares issued and issuable pursuant to the Warrants as of the
trading day immediately preceding the applicable date of determination (subject
to adjustment for stock splits and stock dividends and without regard to any
limitations on conversion of the Notes or Preferred Shares or the exercise of
the Warrants), all subject to adjustment as provided in Section 2(e).
m. “Rule 415” means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
n. “SEC” means the United States
Securities and Exchange Commission.
2.
Registration.
a.
Mandatory Registration. The Company shall prepare, and, as soon as
practicable, but in no event later than the Filing Deadline, file with the SEC
the Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities (the date of such filing, the “Filing Date”). In
the event that Form S-3 is unavailable for such a registration, the Company
shall use such other form as is available for such a registration and reasonably
acceptable to the Required Holders, subject to the provisions of
Section 2(d). The Registration Statement prepared pursuant hereto shall
register for resale at least the number of shares of Common Stock equal to the
Required Registration Amount as of the Filing Date. The Registration Statement
filed on the Filing Date shall contain (except if otherwise directed by the
Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as
Exhibit B. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the Effectiveness Deadline. By 9:30 a.m. on the Business
Day following the Effective Date, the Company shall file with the SEC in
accordance with Rule 424 under the 1933 Act the final prospectus to be used
in connection with sales pursuant to such Registration Statement.
- 3 -
b. Allocation of Registrable
Securities. The initial number of Registrable Securities included in any
Registration Statement and any increase in the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time the
Registration Statement covering such initial number of Registrable Securities or
increase thereof is declared effective by the SEC. In the event that an Investor
sells or otherwise transfers any of such Investor’s Registrable Securities, each
transferee that becomes an Investor shall be allocated a pro rata portion of the
then remaining number of Registrable Securities included in such Registration
Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. In no event shall the Company include any securities
other than Registrable Securities on any Registration Statement without the
prior written consent of the Required Holders.
c. Legal Counsel. Subject to
Section 5 hereof, the Required Holders shall have the right to select one
legal counsel to review any registration pursuant to this Section 2
(“Legal Counsel”), which shall be Schulte Roth & Zabel LLP or such
other counsel as thereafter designated by the Required Holders. The Company and
Legal Counsel shall reasonably cooperate with each other in regards to the
performance of the Company’s obligations under this Agreement.
d. Ineligibility for
Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and
(ii) undertake to register the Registrable Securities on Form S-3 as soon
as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.
e. Sufficient Number of Shares
Registered. In the event the number of shares available under a Registration
Statement filed pursuant to Section 2(a) is insufficient to cover all of the
Registrable Securities required to be covered by such Registration Statement or
an Investor’s allocated portion of the Registrable Securities pursuant to
Section 2(b), the Company shall amend the applicable Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the
filing of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed “insufficient to cover all of the Registrable Securities” if at any
time the number of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by multiplying
(i) the Required Registration Amount as of such time by (ii) 0.90. The
calculation set forth in the foregoing sentence shall be made without regard to
any
- 4 -
limitations on the conversion of the Notes or the Preferred Shares or
the exercise of the Warrants and such calculation shall assume that the Notes
are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Notes), that the Preferred Shares are then
convertible into shares of Common Stock at the then prevailing Conversion Rate
(as defined in the Certificate of Designations (as defined in the Common
Exchange Agreement)) and that the Warrants are then exercisable for shares of
Common Stock at the then prevailing Exercise Price (as defined in the applicable
Warrant).
f. Effect of Failure to File and
Obtain and Maintain Effectiveness of Registration Statement. If (i) a
Registration Statement covering all of the Registrable Securities required to be
covered thereby and required to be filed by the Company pursuant to this
Agreement is (A) not filed with the SEC on or before the Filing Deadline (a
“Filing Failure”) or (B) filed with the SEC but not declared
effective by the SEC on or before the Effectiveness Deadline (an
“Effectiveness Failure”) or (ii) on any day after the Effective Date
sales of all of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement, a suspension or delisting of
the Common Stock on its principal trading market or exchange, or to register a
sufficient number of shares of Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any Investor by reason of any such
delay in or reduction of its ability to sell the underlying shares of Common
Stock (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company shall pay to each Investor which holds
Registrable Securities relating to such Registration Statement an amount in cash
equal to two percent (2.0%) of the aggregate Purchase Price (as such term is
defined in the Securities Purchase Agreement) of such Investor’s Registrable
Securities included in such Registration Statement on each of the following
dates: (i) the day of a Filing Failure and on every thirtieth day (pro rated for
periods totaling less than thirty days) after a Filing Failure until such Filing
Failure is cured; (ii) the day of an Effectiveness Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) after an
Effectiveness Failure until such Effectiveness Failure is cured; and
(iii) the initial day of a Maintenance Failure and on every thirtieth day
(pro rated for periods totaling less than thirty days) after a Maintenance
Failure until such Maintenance Failure is cured. The payments to which an
Investor shall be entitled pursuant to this Section 2(f) are referred to herein
as “Registration Delay Payments.” Registration Delay Payments shall be
paid on the day of the Filing Failure, Effectiveness Failure and the initial day
of a Maintenance Failure, as applicable, and thereafter on the earlier of
(I) the thirtieth day after the event or failure giving rise to the
Registration Delay Payments has occurred and (II) the third Business Day
after the event or failure giving rise to the Registration Delay Payments is
cured. In the event the Company fails to make Registration Delay Payments in a
timely manner, such Registration Delay Payments shall bear interest at the rate
of two percent (2.0%) per month (prorated for partial months) until paid in
full. Notwithstanding anything herein or in the Securities Purchase Agreement to
the contrary, (i) no Registration Delay Payments shall be due and payable
with respect to the Warrants or the Warrant Shares and (ii) in no event
shall the aggregate amount of Registration Delay Payments (other than
Registration Delay Payments payable pursuant to events that are within the
control of the Company) exceed, in the aggregate, 10% of the aggregate Purchase
Price of the Notes.
- 5 -
3.
Related Obligations.
At such
time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(d) or 2(e), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:
a. The Company shall promptly prepare
and file with the SEC a Registration Statement with respect to the Registrable
Securities and use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the Effectiveness
Deadline). Subject to allowable Grace Periods (as defined below), the Company
shall keep each Registration Statement effective pursuant to Rule 415 at
all times until the earlier of (i) the date as of which all of the
Investors may sell all of the Registrable Securities covered by such
Registration Statement without restriction pursuant to Rule 144(k) (or any
successor thereto) promulgated under the 1933 Act or (ii) the date on which
the Investors shall have sold all of the Registrable Securities covered by such
Registration Statement (the “Registration Period”). The Company shall
ensure that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading. The Company shall submit to the SEC, within two (2) Business
Days after the later of the date that (i) the Company learns that no review of a
particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on a particular Registration Statement, as the
case may be, and (ii) the approval of Legal Counsel pursuant to Section
3(c) (which approval shall be sought within one day), a request for acceleration
of effectiveness of such Registration Statement to a time and date not later
than two (2) Business Days after the submission of such request.
b. The Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-Q,
or Form 10-QSB, Form 10-K, or Form 10-KSB or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company
shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration Statement.
- 6 -
c. The Company shall (A) permit
Legal Counsel to review and comment upon (i) a Registration Statement at
least seven (7) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K or Form 10-KSB, Quarterly Reports on Form 10-Q or Form
10-QSB, Current Reports on Form 8-K, and any similar or successor reports)
within a reasonable number of days prior to their filing with the SEC, and
(B) incorporate any reasonable comments (such comments to be reasonably
drafted by Legal Counsel) of Legal Counsel that are received by the Company by
no later than 5:00 p.m. New York City time, two (2) Business Days prior to
their filing with the SEC into any Registration Statement or amendment or
supplement thereto. In the event that Legal Counsel does not provide its
comments within the time provided, the Company shall not be obligated to
incorporate any such comments. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld and
shall be provided within two (2) Business Days of the Company’s written
request for such approval; provided, that, if such approval is not
provided within such two (2) Business Day period, the Effectiveness
Deadline shall be extended until such time as such approval is provided by Legal
Counsel. The Company shall furnish to Legal Counsel, without charge,
(i) copies of any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement,
(ii) promptly after the same is prepared and filed with the SEC, one copy
of any Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness
of any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company’s
obligations pursuant to this Section 3.
d. The Company shall furnish to each
Investor whose Registrable Securities are included in any Registration
Statement, without charge, (i) promptly after the same is prepared and
filed with the SEC, at least one copy of such Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in
such Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Investor may reasonably request) and
(iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
e. The Company shall use its best
efforts to (i) register and qualify, unless an exemption from registration
and qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of all applicable jurisdictions in the United States, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or advisable
to qualify the Registrable Securities for
- 7 -
sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in
any such jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall promptly notify Legal Counsel and
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or “blue sky” laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
f. The Company shall notify Legal
Counsel and each Investor in writing of the happening of any event, as promptly
as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement
or amendment to such Registration Statement to correct such untrue statement or
omission and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each
Investor by facsimile or e-mail on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement is appropriate.
g. The Company shall use its best
efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
h. If any Investor may be required
under applicable securities law to be described in the Registration Statement as
an underwriter, at the reasonable request of such Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company’s independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to such Investor, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Investors.
- 8 -
i. If any Investor may be required
under applicable securities law to be described in the Registration Statement as
an underwriter, the Company shall make available for inspection by (i) any
such Investor, (ii) Legal Counsel and (iii) one firm of accountants or
other agents retained by the Investors (collectively, the “Inspectors”),
all pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree in
writing to hold in strict confidence and not to make any disclosure (except to
such Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other Transaction Document
or any confidentiality agreement entered into among the parties hereto. Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. Nothing herein
(or in any other confidentiality agreement between the Company and any Investor)
shall be deemed to limit the Investors’ ability to sell Registrable Securities
in a manner which is otherwise consistent with applicable laws and regulations.
j. The Company shall hold in confidence
and not make any disclosure of information concerning an Investor provided to
the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this Agreement or any other Transaction Document. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall use its best
efforts either to (i) cause all of the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange, or (ii) secure designation and quotation of all of the
Registrable Securities covered by a Registration Statement on The NASDAQ Global
Market, or (iii) if, despite the Company’s best efforts to satisfy the
preceding clauses (i) and (ii) the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the inclusion for
quotation on The
- 9 -
NASDAQ
Capital Market for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. (“NASD”) as such with respect to such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend after such time as a Registration Statement
covering such Registrable Securities is effective) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
Investors may reasonably request and registered in such names as the Investors
may request.
m. If requested by an Investor, the
Company shall as soon as practicable (i) incorporate in a prospectus supplement
or post-effective amendment such information as an Investor reasonably requests
to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price being
paid therefor and any other terms of the offering of the Registrable Securities
to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make appropriate and reasonable amendments to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.
n. The Company shall use its best
efforts to cause the Registrable Securities covered by a Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
o. The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company’s fiscal quarter next following the
Effective Date of the Registration Statement.
p. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
q. Within two (2) Business Days
after a Registration Statement which covers Registrable Securities is declared
effective by the SEC, the Company shall deliver, and shall cause legal counsel
for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC substantially in the form
attached hereto as Exhibit A.
- 10 -
r. Notwithstanding anything to the
contrary herein, at any time after the Effective Date, the Company may delay the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company, in the best interest of the Company and, in the
opinion of counsel to the Company, otherwise required (a “Grace Period”);
provided, that the Company shall promptly (i) notify the Investors in
writing of the existence of material, non-public information giving rise to a
Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the date
on which the Grace Period will begin, and (ii) notify the Investors in
writing of the date on which the Grace Period ends; and, provided further, that
no Grace Period shall exceed five (5) consecutive Business Days and during
any three hundred sixty five (365) day period such Grace Periods shall not
exceed an aggregate of twenty (20) Business Days and the first day of any
Grace Period must be at least five (5) trading days after the last day of
any prior Grace Period (each, an “Allowable Grace Period”). For purposes
of determining the length of a Grace Period above, the Grace Period shall begin
on and include the date the Investors receive the notice referred to in clause
(i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in
such notice. The provisions of Section 3(f) hereof shall not be applicable
during the period of any Allowable Grace Period. Upon expiration of the Grace
Period, the Company shall again be bound by the first sentence of Section 3(f)
with respect to the information giving rise thereto unless such material,
non-public information is no longer applicable. Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale, and delivered a copy of the prospectus included as part of
the applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists), prior to the Investor’s receipt of the notice of a
Grace Period and for which the Investor has not yet settled.
4. Obligations of the Investors.
a. At least seven (7) Business
Days prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor in writing of the information the Company
requires from each such Investor if such Investor elects to have any of such
Investor’s Registrable Securities included in such Registration Statement and
such Investor shall furnish such information by no later than 5:00 p.m. New York
City time at least three (3) Business Days prior to the intended filing
date. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect and maintain the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor’s
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection
- 11 -
with
the preparation and filing of any Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.
c. Each Investor agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Investor’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice
that no supplement or amendment is required. Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet settled.
d. Each Investor covenants and agrees
that it will comply with the prospectus delivery requirements of the 1933 Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
5.
Expenses of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the Company. The
Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to
$15,000.
6.
Indemnification.
In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a. To the fullest extent permitted by
law, the Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls, any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified
Person”), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or
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threatened, whether or not an indemnified party is or may be a party
thereto (“Indemnified Damages”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other “blue sky” laws of any jurisdiction in which Registrable Securities are
offered (“Blue Sky Filing”), or the omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any violation of this Agreement (the matters
in the foregoing clauses (i) through (iv) being, collectively,
“Violations”). Subject to Section 6(c), the Company shall reimburse
the Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto if such prospectus was timely made
available by the Company pursuant to section 3(a) and (ii) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company,
each of the Company’s directors, each of the Company’s officers who signs the
Registration Statement and each Person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor will reimburse any
legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim; provided,
- 13 -
however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld or delayed; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
c. Promptly after receipt by an
Indemnified Person or Indemnified Party under this Section 6 of notice of
the commencement of any action or proceeding (including any governmental action
or proceeding) involving a Claim, such Indemnified Person or Indemnified Party
shall, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control
of the defense thereof with counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Investors holding at
least a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate reasonably with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, Claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made.
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The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action.
d. No Person involved in the sale of
Registrable Securities who is guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) in connection with such sale
shall be entitled to indemnification from any Person involved in such sale of
Registrable Securities who is not guilty of fraudulent misrepresentation.
e. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
f. The indemnity agreements contained
herein shall be in addition to (i) any cause of action or similar right of
the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7.
Contribution.
To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the indemnifying party
would not have been liable for indemnification under the fault standards set
forth in Section 6 of this Agreement, (ii) no Person involved in the
sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to contribution from any Person
involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (iii) contribution by any Investor which sells
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such Investor from the sale of such Registrable Securities pursuant
to such Registration Statement.
8.
Reports Under the 1934 Act.
With a
view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration (“Rule 144”), the Company agrees
to:
a. make and keep public information
available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the 1934 Act so long as the Company remains subject to such requirements (it
being understood that nothing herein shall limit the
- 15 -
Company’s obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish to each Investor so long as
such Investor owns Registrable Securities, promptly upon request, (i) a
written statement by the Company, if true, that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
(ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company if such reports are
not publicly available via EDGAR, and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities pursuant
to Rule 144 without registration.
9.
Assignment of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor’s Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are
being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance
with the applicable requirements of the Securities Purchase Agreement.
10.
Amendment of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
11.
Miscellaneous.
a. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the record owner of such Registrable
Securities.
b. Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed
- 16 -
to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile or email (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
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If to the Company: |
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Ascendia Brands, Inc.
100 American
Metro Boulevard
Suite 108
Hamilton, NJ 08619 |
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Telephone: |
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(609) 219-0930 |
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Facsimile: |
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(609) 219-1238 |
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Email:
asheldrick@ascendiabrands.com |
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Attention: |
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General Counsel |
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With a copy (for informational
purposes only) to: |
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Kramer Levin Naftalis & Frankel
LLP
1177 Avenue of the Americas
New York, New York 10036 |
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Telephone: |
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(212) 715-9100 |
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(212) 715-9121 |
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Email: Tballiett@kramerlevin.com |
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Attention: |
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Thomas D. Balliett, Esq. |
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If to the Transfer Agent: |
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American Stock Transfer & Trust
Co.
6201 15th Avenue
Brooklyn, NY 11219
Attention: Joe Wolf, Vice
President |
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Telephone: |
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(718) 921-8143 |
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(718) 921-8116 |
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If to Legal Counsel: |
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Schulte Roth & Zabel LLP
919
Third Avenue
New York, New York 10022
Telephone:
(212) 756-2000
Facsimile: (212) 593-5955
Email:
ele.klein@srz.com
Attention: Eleazer N. Klein, Esq. |
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If to a Buyer, to its
address, facsimile number or email address set forth on the Schedule of Buyers
attached hereto, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers, or to such other address and/or facsimile number and/or to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image of
the first page of such transmission or confirmation of email delivery or
(C) provided by a courier or overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
c.
Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
d. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the other Transaction Documents and
- 18 -
the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f.
Subject to the requirements of Section 9, this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each of
the parties hereto.
g. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
j. All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
k. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.
l. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
m. The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other Investor.
Nothing contained herein, and no action taken by any Investor pursuant hereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.
* * * * * *
- 19 -
IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Second Amended and Restated Registration Rights Agreement
to be duly executed as of the date first written above.
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COMPANY:
ASCENDIA BRANDS, INC. (f/k/a
Cenuco, Inc.)
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By: |
/s/
Joseph A. Falsetti |
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Name: |
Joseph A. Falsetti |
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Title: |
President and Chief Executive Officer |
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IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Second Amended and Restated Registration Rights Agreement
to be duly executed as of the date first written above.
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BUYERS: |
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PRENCEN LLC
By:Prentice
Capital Management, LP,
as Manager |
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By: |
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/s/ Mathew B. Hoffman
Name:
Mathew B. Hoffman |
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Title: General Counsel |
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IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Second Amended and Restated Registration Rights Agreement
to be duly executed as of the date first written above.
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BUYERS: |
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PRENCEN LENDING LLC,
as
Buyer
By: Prentice Capital Management, LP,
as Manager |
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By: |
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/s/ Mathew B. Hoffman
Name:
Mathew B. Hoffman |
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Title: General Counsel |
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- 22 -
SCHEDULE OF BUYERS
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Buyer Address |
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Buyer’s Representative’s Address |
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and Facsimile Number |
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and
Facsimile Number |
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Prencen LLC |
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c/o Prentice Capital Management, LP |
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623 Fifth Avenue, |
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32nd Floor |
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New York, NY 10022 |
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Schulte Roth & Zabel LLP |
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Facsimile: (212) 756-1480 |
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919 Third Avenue |
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Telephone: (212)-756-8045 |
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New York, New York 10022 |
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Attention: Michael Weiss |
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Attention: Eleazer Klein, Esq. |
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Mathew
Hoffman |
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Facsimile: (212) 593-5955 |
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Email: MichaelW@prenticecapital.com |
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Telephone: (212) 756-2000 |
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Matth@prenticecapital.com |
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Email: ele.klein@srz.com |
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Prencen Lending LLC
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c/o Prentice Capital Management, LP |
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623 Fifth Avenue, |
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32nd Floor |
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New York, NY 10022 |
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Schulte Roth & Zabel LLP |
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Facsimile: (212) 756-1480 |
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919 Third Avenue |
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Telephone: (212) 756-8045 |
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New York, New York 10022 |
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Attention: Michael Weiss |
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Attention: Eleazer Klein, Esq. |
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Mathew
Hoffman |
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Facsimile: (212) 593-5955 |
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Email: MichaelW@prenticecapital.com |
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Telephone: (212) 756-2376 |
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Matth@prenticecapital.com |
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Email: ele.klein@srz.com |
- 23 -
EXHIBIT A
FORM OF NOTICE
OF EFFECTIVENESS
OF REGISTRATION STATEMENT
American Stock Transfer
& Trust Co.
6201 15th Avenue
Brooklyn, NY 11219
Attention: Joe
Wolf, Vice President
Re:
ASCENDIA BRANDS, INC..
Ladies and Gentlemen:
[We
are][I am] counsel to Ascendia Brands, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with
(i) that certain Second Amended and Restated Securities Purchase Agreement
(as amended, the “Securities Purchase Agreement”) entered into by and
among the Company and the buyers named therein (collectively, the
“Holders”) pursuant to which the Company issued to Prencen Lending LLC, a
Holder, notes (the “Notes”) convertible into the Company’s common stock,
$0.001 par value (the ”Common Stock”) and to Prencen LLC, a Holder, two
series of warrants exercisable for shares of Common Stock (the
“Warrants”) and (ii) that certain Amendment and Exchange Agreement
(the “Common Exchange Agreement”), entered into by and among the Company
and the Holders pursuant to which the Company issued to the Prencen LLC,
Series B Convertible Preferred Stock of the Company (the “Preferred
Shares”) convertible into shares of Common Stock. Pursuant to the Securities
Purchase Agreement and the Common Exchange Agreement, the Company also has
entered into a Second Amended and Restated Registration Rights Agreement with
the Holders (the “Registration Rights Agreement”) pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issuable upon conversion of the Notes, [ ] shares of Common Stock, the
shares of Common Stock issuable upon conversion of the Preferred Shares and the
shares of Common Stock issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the “1933 Act”). In connection with
the Company’s obligations under the Registration Rights Agreement, on
___, 200_, the Company filed a Registration Statement on Form S-3 (File
No. 333- )
(the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the Registrable Securities which names
each of the Holders as a selling stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of
a member of the SEC’s staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for resale
under the 1933 Act pursuant to the Registration Statement.
- A1 -
This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
July 27, 2006 and December ___, 2006.
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Very truly yours, |
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[ISSUER’S COUNSEL] |
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By: |
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CC: [LIST NAMES OF
HOLDERS] |
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- A2 -
EXHIBIT B
SELLING
STOCKHOLDERS
The shares of Common Stock being
offered by the selling stockholders are issuable upon conversion of the Notes,
conversion of the Preferred Shares upon exercise of the Warrants and shares of
Common Stock. For additional information regarding the issuance of the Notes,
the Preferred Shares and Warrants and shares of Common Stock see “Private
Placement of Notes, Preferred Shares, Warrants and Common Stock” above. We are
registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
Bridge Agreement (as defined in the Securities Purchase Agreement) and the
ownership of the Notes, Preferred Shares ,Warrants and Common Stock issued
pursuant to the Securities Purchase Agreement and the Amendment and Exchange
Agreement, the selling stockholders have not had any material relationship with
us within the past three years.
The table below lists the selling
stockholders and other information regarding the beneficial ownership of the
shares of Common Stock by each of the selling stockholders. The second column
lists the number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of the Notes, Preferred Shares, Warrants and
Common Stock currently held by the selling stockholders, as of
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200_, assuming conversion of all the Notes and Preferred Shares and exercise of
the Warrants held by the selling stockholders on that date, without regard to
any limitations on conversions or exercise.
The third column lists the shares of
Common Stock being offered by this prospectus by the selling stockholders.
In accordance with the terms of a
registration rights agreement with the selling stockholders, this prospectus
generally covers the resale of at least 130% of the sum of (i) the maximum
number of shares of Common Stock issuable upon conversion of the Notes as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC, (ii) the maximum number of shares of Common
Stock issuable upon conversion of the Preferred Shares as of the trading day
immediately preceding the date the registration statement is initially filed
with the SEC, (iii) [ ] shares of Common Stock and (iv) the maximum number
of shares of Common Stock issuable upon exercise of the Warrants as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC (subject to adjustment for stock splits and stock
dividends). Because the conversion price of the Notes and the Preferred Shares
and the exercise price of the Warrants may be adjusted, the number of shares
that will actually be issued may be more or less than the number of shares being
offered by this prospectus. The fourth column assumes the sale of all of the
shares offered by the selling stockholders pursuant to this prospectus.
Under the terms of the Notes, the
Preferred Shares and the Warrants, a selling stockholder may not convert the
Notes or the Preferred Shares or exercise the Warrants to the extent such
conversion or exercise would cause such selling stockholder, together with its
affiliates, to beneficially own a number of shares of Common Stock which would
exceed 9.99% of our then outstanding shares of Common Stock following such
conversion or exercise,
- B1 -
excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the Notes or
the Preferred Shares which have not been converted and upon exercise of the
Warrants which have not been exercised. The number of shares in the second
column does not reflect this limitation. The selling stockholders may sell all,
some or none of their shares in this offering. See “Plan of Distribution.”
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Number of Shares of |
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Maximum Number of Shares |
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Number of Shares of |
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Common Stock Owned |
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of Common Stock to be Sold |
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Common Stock Owned |
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Selling Stockholder |
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Prior to Offering |
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Pursuant to this Prospectus |
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After Offering |
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Prencen LLC
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Prencen Lending LLC
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Prentice Capital Management, L.P. has investment and voting power with
respect to the securities held by Prencen LLC. Mr. Michael Zimmerman
controls Prentice Capital Management, L.P. Each of Prentice Capital
Management and Mr. Zimmerman disclaim beneficial ownership of any of
these securities. |
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Prentice Capital Management, L.P. has investment and voting power with
respect to the securities held by Prencen Lending LLC. Mr. Michael
Zimmerman controls Prentice Capital Management, L.P. Each of Prentice
Capital Management and Mr. Zimmerman disclaim beneficial ownership of
any of these securities. |
- B2 -
PLAN OF
DISTRIBUTION
We are registering the shares of Common
Stock issuable upon conversion of the Notes and Preferred Shares, upon exercise
of the Warrants and shares of Common Stock to permit the resale of these shares
of Common Stock by the holders of the Notes, Preferred Shares, Warrants and
Common Stock from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock. We will bear all fees and expenses incident to our
obligation to register the shares of Common Stock.
The selling stockholders may sell all
or a portion of the shares of Common Stock beneficially owned by them and
offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for
underwriting discounts or commissions or agent’s commissions. The shares of
Common Stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
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on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale; |
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in the over-the-counter market; |
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in transactions otherwise than on these exchanges or systems or in the
over-the-counter market; |
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through the writing of options, whether such options are listed on an
options exchange or otherwise; |
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ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers; |
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block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; |
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purchases by a broker-dealer as principal and resale by the
broker-dealer for its account; |
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an exchange distribution in accordance with the rules of the
applicable exchange; |
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privately negotiated transactions; |
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short sales made after the date the Registration Statement is declared
effective by the SEC; |
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sales pursuant to Rule 144; |
- B3 -
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broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share; |
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a combination of any such methods of sale; and |
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any other method permitted pursuant to applicable
law. |
If the selling stockholders effect such
transactions by selling shares of Common Stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from
the selling stockholders or commissions from purchasers of the shares of Common
Stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters,
broker-dealers or agents may be in excess of those customary in the types of
transactions involved). In connection with sales of the shares of Common Stock
or otherwise, the selling stockholders may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the shares of Common
Stock in the course of hedging in positions they assume. The selling
stockholders may also sell shares of Common Stock short and deliver shares of
Common Stock covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales. The selling
stockholders may also loan or pledge shares of Common Stock to broker-dealers
that in turn may sell such shares.
The selling stockholders may pledge or
grant a security interest in some or all of the Notes, Preferred Shares,
Warrants or shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended (the
“Securities Act”), amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of Common Stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.
The selling stockholders and any
broker-dealer participating in the distribution of the shares of Common Stock
may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the shares of Common
Stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of Common Stock being offered and
the terms of the offering, including the name or names of any broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Under the securities laws of some
states, the shares of Common Stock may be sold in such states only through
registered or licensed brokers or dealers. In addition, in some states the
- B4 -
shares of Common Stock
may not be sold unless such shares have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with.
There can be no assurance that any
selling stockholder will sell any or all of the shares of Common Stock
registered pursuant to the registration statement, of which this prospectus
forms a part.
The selling stockholders and any other
person participating in such distribution will be subject to applicable
provisions of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
Common Stock to engage in market-making activities with respect to the shares of
Common Stock. All of the foregoing may affect the marketability of the shares of
Common Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We will pay all expenses of the
registration of the shares of Common Stock pursuant to the registration rights
agreement, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreement, or the selling stockholders will be entitled to contribution. We may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the registration rights agreement, or we may
be entitled to contribution.
Once sold under the registration
statement, of which this prospectus forms a part, the shares of Common Stock
will be freely tradable in the hands of persons other than our affiliates.
- B5 -
EXHIBIT F
NOTE AMENDMENT AGREEMENT
AMENDMENT
AGREEMENT (the “Agreement”), dated as of December 30, 2006, by
and among Ascendia Brands, Inc. (f/k/a Cenuco, Inc.), a Delaware corporation,
with headquarters located at 100 American Metro Boulevard, Suite 108,
Hamilton, NJ 08619 (the “Company”), Prencen Lending LLC, a Delaware
limited liability company (the “Debt Investor”) and Prencen LLC, a
Delaware limited liability company (the “Equity Investor”, and
collectively with the Debt Investor, the "Investors”). Capitalized terms
not defined herein shall have the meaning as set forth in the Amended Securities
Purchase Agreement (as defined below).
WHEREAS:
A. The
Company entered into that certain Second Amended and Restated Securities
Purchase Agreement, dated as of June 30, 2006 (as amended prior to the date
hereof, the “Existing Securities Purchase Agreement”), by and among the
Company and the Investors, pursuant to which, among other things, (i) the
Debt Investor purchased from the Company a Senior Secured Convertible Note (as
amended prior to the date hereof, the “Existing Note”), which is
convertible into shares of the Company’s common stock, par value $0.001 per
share (the “Common Stock”), in accordance with the terms thereof (the
Existing Note as converted, the “Existing Conversion Shares”) and
(ii) the Equity Investor purchased from the Company warrants to acquire
additional shares of Common Stock.
B.
Contemporaneously with the consummation of the transactions contemplated by the
Existing Securities Purchase Agreement, (i) the Company and certain
Subsidiaries of the Company entered into an Amended and Restated Pledge and
Security Agreement, dated as of August 2, 2006, by and among the Company,
certain Subsidiaries of the Company and the Debt Investor (the “Existing
Pledge Agreement”), (ii) the Company and certain Subsidiaries of the
Company entered into an Amended and Restated Security Agreement, dated as of
August 2, 2006, by and among the Company, certain Subsidiaries of the
Company and the Debt Investor (the “Existing Security Agreement”),
(iii) certain of the Subsidiaries of the Company entered into an Amended
and Restated Guaranty (the "Initial Guarantors”) in favor of the Debt
Investor, dated as of August 2, 2006 (the “Existing Guaranty”) and
(iv) certain other Subsidiaries of the Company entered into a Guaranty (the
"Additional Guarantors”) in favor of the Debt Investor, dated as of
August 2, 2006 (the “Existing Additional Guaranty”).
C. The
Company and the Investors desire to enter into this Agreement, pursuant to
which, among other things, (i) the Company shall amend and restate its
Existing Note as set forth in the Amended and Restated Senior Secured
Convertible Note in the form attached hereto as Exhibit A (the
“Amended Note”), which shall be convertible into Common Stock (as
converted, collectively, the “Amended Conversion Shares”), in accordance
with the terms thereof and (ii) the Debt Investor shall waive certain
outstanding Events of Default (as defined in the Existing Note) set forth on
Schedule I attached hereto (the “Existing Events of
Default”).
D. The
exchange of the Existing Note for the Amended Note is being made in reliance
upon the exemption from registration provided by Section 3(a)(9) of the
1933 Act.
E. Prior
to the date hereof, the Company and the Investors have entered into that certain
Amendment and Exchange Agreement (as amended from time to time, the “Common
Exchange Agreement”), pursuant to which the Equity Investor shall exchange
certain Common Stock of the Company held by the Equity Investor for
Series B Convertible Preferred Stock of the Company (the
"Exchange”).
F. Prior
to the date hereof, the Company and the Investors have entered into that certain
Second Amended and Restated Registration Rights Agreement (as amended prior to
the date hereof, the “Existing Registration Rights Agreement”), by and
among the Company and the Investors, pursuant to which the Company agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Existing Registration Rights Agreement) under the Securities
Act of 1933, as amended (the “1933 Act”), and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investors hereby agree as
follows:
1.
AMENDMENT AND RESTATEMENT OF EXISTING NOTE.
(a) Amendment
and Restatement of Existing Note. Subject to satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, (i) the Debt Investor
shall surrender to the Company at the closing contemplated by this Agreement
(the “Closing”) the Existing Note of the Debt Investor and (ii) the
Company shall issue and deliver to the Debt Investor the Amended Note in the
same outstanding principal amount and with such accrued but unpaid interest as
under the Existing Note on the Closing Date (as defined below).
(b) Closing
Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York Time, on the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 5 and 6 below (or such later date as is mutually agreed to by the
Company and the Investors). The Closing shall occur on the Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022.
2.
AMENDMENTS; WAIVER; CONSENT;.
(a) Existing
Securities Purchase Agreement; Existing Registration Rights Agreement. The
Existing Securities Purchase Agreement (as amended hereby, the “Amended
Securities Purchase Agreement”) and the Existing Registration Rights
Agreement (as amended hereby, the “Amended Registration Rights
Agreement”) shall be amended as of the Closing as follows:
(i)
All references to “Notes” in the Transaction Documents shall mean, and are
hereby replaced with, the following:
- 2 -
“Amended Note” (as defined in the Amendment Agreement, dated
December 30, 2006, by and among the Company and the Buyers (the “Note
Amendment Agreement”)).
(ii)
All references to “Registration Rights Agreement” in the Transaction Documents
shall mean, the Amended Registration Rights Agreement.
(iii)
All references to “Securities Purchase Agreement” in the Transaction Documents
shall mean, the Amended Securities Purchase Agreement.
(iv)
The defined term “Transaction Documents” as used in any of the Transaction
Documents is hereby amended to include the Note Amendment Agreement and the
Ratification Agreements (as defined in the Note Amendment Agreement).
(b) Ratifications.
Except as otherwise expressly provided herein, (i) the Securities Purchase
Agreement, Registration Rights Agreement, each Security Document and each other
Transaction Document is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, except that on and after the
Closing Date (A) all references in the Transaction Documents, including
without limitation any Security Document, to the “Securities Purchase
Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring
to the Securities Purchase Agreement shall mean the Existing Securities Purchase
Agreement as amended by this Agreement, and (B) all references in the other
Transaction Documents, including without limitation any Security Document, to
the “Registration Rights Agreement”, “thereto”, “thereof”, “thereunder” or words
of like import referring to the Registration Rights Agreement shall mean the
Existing Registration Rights Agreement as amended by this Agreement,
(ii) to the extent that the Securities Purchase Agreement or any other
Transaction Document purports to pledge to the Debt Investor, or to grant to the
Debt Investor, a security interest in or lien on, any collateral as security,
such pledge or grant of a security interest or lien is hereby ratified and
confirmed in all respects, and (iii) the execution, delivery and
effectiveness of this Agreement shall not operate as an amendment of any right,
power or remedy of the Debt Investor or the Equity Investor under any
Transaction Document, nor constitute an amendment of any provision of any
Transaction Document.
(c) Waiver.
Effective as of the Closing Date, the Debt Investor hereby waives the Existing
Events of Default.
(d) Consent.
The Debt Investor hereby consents to (i) the amendments set forth in this
Agreement and (ii) the consummation of the transactions contemplated
hereby, in each case, as required by the terms of the Existing Note.
3.
REPRESENTATIONS AND WARRANTIES
(a) Investor
Representations. Each Investor hereby represents and warrants to the Company
as set forth in Section 2 of the Amended Securities Purchase
Agreement as if such representations and warranties were made as of the date
hereof and set forth in their entirety in this Agreement.
- 3 -
(b) Company
Representations. The Company represents and warrants to each Investor as set
forth in Section 3 of the Amended Securities Purchase Agreement as
if such representations and warranties were made as of the date hereof and set
forth in their entirety in this Agreement, except as set forth on the Schedules
of the Company attached hereto and except for such representations and
warranties that are not true and correct as of the date hereof solely by virtue
of the Stockholder Approval not being obtained as of the Closing Date and the
amendments to the certificate of incorporation of the Company not having been
filed with the Secretary of State of Delaware to effectuate the amendments
specified in clauses (x) and (y) of Section 7(b)(ii) below as of
the Closing Date.
(c) No
Event of Default. The Company represents and warrants to the Investor that,
other than the Existing Events of Default, after giving effect to the terms of
this Agreement, no Default or Event of Default shall have occurred and be
continuing as of the date hereof. Notwithstanding anything herein or in any
Transaction Document, as amended, to the contrary, no Default or Event of
Default shall be deemed to have occurred and be continuing as of the date hereof
solely by virtue of the Stockholder Approval not being obtained as of the
Closing Date and the amendments to the certificate of incorporation of the
Company not having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 7(b)(ii) below as of the Closing Date.
(d) Holding
Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of the Amended Note may be tacked onto the holding period of the
Existing Note and, so long as the Company receives a legal opinion in a
generally acceptable form in connection with a resale of the shares of Common
Stock issuable upon conversion of the Amended Note in reliance upon
Rule 144, the Company agrees not to take a position contrary to this
Section 3(c).
4.
FEES AND EXPENSES
(a) At
the Closing, the Company shall reimburse the Investors for their reasonable
legal fees and expenses in connection with the preparation and negotiation of
this Agreement and the related documents by paying such amount to Schulte Roth
& Zabel LLP (the “Investor Counsel Expense”). Except as otherwise set
forth in this Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other non-income taxes and duties levied in connection with the issuance (but
not the conversion) of the Amended Note.
5.
CONDITIONS TO COMPANY’S OBLIGATIONS HEREUNDER.
The
obligations of the Company to each Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion by providing such Investor with prior written notice
thereof:
- 4 -
(a) Each
Investor shall have executed this Agreement and delivered the same to the
Company.
(b) The
Debt Investor shall have delivered to the Company its Existing Note for
cancellation or such other documentation reasonably satisfactory to the Company
that such Debt Investor’s Existing Note has been lost or destroyed.
(c) The
representations and warranties of the Investors in Section 3(a)
hereof shall be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date). The Company shall have received a certificate of
the Investors, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Company in the form
attached hereto as Exhibit E-1.
6.
CONDITIONS TO THE INVESTORS’ OBLIGATIONS HEREUNDER.
The
obligations of each Investor hereunder is subject to the satisfaction of each of
the following conditions, provided that these conditions are for each Investor’s
sole benefit and may be waived by such Investor at any time in its sole
discretion by providing the Company with prior written notice thereof:
(a) The
Company shall have executed this Agreement and delivered the same to such
Investor.
(b) Such
Investor shall have received the opinion of Kramer Levin Naftalis & Frankel
LLP, the Company’s outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit B attached hereto.
(c) The
Company shall have executed and delivered to the Debt Investor the Amended Note
being issued to the Debt Investor at the Closing.
(d) The
Company shall have delivered to such Investor a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (x) the
resolutions as adopted by the Company’s board of directors in a form reasonably
acceptable to the Investors, (y) the Certificate of Incorporation and
(z) the Bylaws, each as in effect at the Closing, in the form attached
hereto as Exhibit C.
(e) The
Company shall have delivered to such Investor a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(f) The
Company shall have delivered to such Investor a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in each
such entity’s jurisdiction of formation issued by the Secretary of State (or
equivalent) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.
- 5 -
(g) The
Company shall have delivered to such Investor a certified copy of the
Certificate of Incorporation of the Company as certified by the Secretary of
State of the State of Delaware within ten (10) days of the Closing Date.
(h) The
representations and warranties of the Company in Section 3(b) shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except (x) for representations and warranties
that shall not be true and correct as of the date when made and/or as of the
Closing Date as though made at that time, in each case solely by virtue of the
Stockholder Approval not being obtained as of the date when made and/or as of
the Closing Date and the amendments to the certificate of incorporation of the
Company not having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 7(b)(ii) below as of the date when made and/or as of the Closing
Date and (y) for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date (except for any breach of any such covenants or
agreements solely by virtue of the Stockholder Approval not being obtained at or
prior to the Closing Date and the amendments to the certificate of incorporation
of the Company not having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 7(b)(ii) below at or prior to the Closing Date). Such Investor
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Investor in the form
attached hereto as Exhibit E-2.
(i) The
Company and its Subsidiaries party thereto shall have delivered to such Buyer
the amendment, ratification and affirmation of the Existing Security Agreement
in the form attached hereto as Exhibit F (the “Security
Ratification Agreement”) and the Existing Pledge Agreement in the form
attached hereto as Exhibit G (the “Pledge Ratification
Agreement”).
(j) The
Initial Guarantors shall have delivered to such Buyer the amendment,
ratification and affirmation of the Existing Guaranty in the form attached
hereto as Exhibit H (the "Guaranty Ratification Agreement”)
(k) The
Additional Guarantors shall have delivered to such Buyer the amendment,
ratification and affirmation of the Existing Additional Guaranty in the form
attached hereto as Exhibit I (the “Additional Guaranty
Ratification Agreement”, and together with the Security Ratification
Agreement, the Pledge Ratification Agreement and the Guaranty Ratification
Agreement, the “Ratification Agreements”).
(l) The
Amended Note and Transaction Documents shall be secured pursuant to the terms of
the Security Documents in the same manner and to the same extent as the Existing
Notes.
(m) Other
than the Stockholder Approval, the Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the
issuance of the Amended Note.
- 6 -
(n) The
Company shall have delivered to such Investor duly executed Voting Agreements
from the holders of a majority of the outstanding voting securities of the
Company, in the form attached hereto as Exhibit J (the “Voting
Agreements”), whereby the Stockholders shall agree to vote in favor of the
Resolutions (as defined below).
(o) The
Company shall have delivered to such Investor the Transaction Stockholder
Consent (as defined below).
(p) The
Exchange shall have been consummated.
7.
MISCELLANEOUS.
(a) Disclosure
of Transactions and Other Material Information. On or before 5:30 p.m., New
York time, on the fourth Business Day following the date of this Agreement, the
Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by this Agreement in the
form required by the 1934 Act and attaching the material Transaction Documents
not previously filed (including, without limitation, the form of this Agreement
and the form of the Amended Note) as exhibits to such filing (including all
attachments, the “8-K Filing”). From and after the earlier to occur of
(i) the fourth Business Day following the consummation of the Acquisition
and (ii) sixty (60) calendar days after the Closing Date (the
“Disclosure Deadline”), no Investor shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing or other public filings by the Company
with the SEC prior to the Disclosure Deadline. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Investor with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing with the SEC without the express written
consent of such Investor. If an Investor has, or believes it has, received any
such material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Trading Days of receipt of such notice, make
public disclosure of such material, nonpublic information. In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, an
Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. No Investor
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or agents for any
such disclosure. The Company and the Investors shall work together to adopt
procedures designed to ensure that material non-public information is not
disclosed to the Investors without its consent. Subject to the foregoing,
neither the Company, its Subsidiaries nor any Investor shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Investor, to make any press release or other
public disclosure with respect to such transactions (x) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (y) as
is required by applicable law and regulations (provided
- 7 -
that in the case of
clause (y) each Investor shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Without the prior written consent of any applicable Investor, neither the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Investor in any filing, announcement, release or otherwise. Notwithstanding
the foregoing, (I) in the event that the Equity Investor is deemed a
director by deputization by virtue of the rights set forth in Section 4(t) of
the Amended Securities Purchase Agreement, the restrictions set forth in this
Section 7(a) shall not apply to the provision of information in the ordinary
course to such director and the rights of the Equity Investor and its affiliates
to disclose any material non-public information received by such director as set
forth in this Section 7(a) shall not apply and (II) in the event any
Investor receives material non-public information it solicited from any
employee, officer or director of the Company or any of its Subsidiaries the
rights of such Investor and its affiliates to disclose any material non-public
information received by such director as set forth in this Section 7(a) shall
not apply.
(b)
Stockholder Approval.
(i)
Transaction Stockholder Approval. The Company shall prepare and file with
the SEC, as promptly as practicable after the Closing Date, but in no event
later than January 24, 2007, an information statement (the “Transaction
Information Statement”), substantially in the form which has been previously
reviewed by the Investors and Schulte Roth & Zabel LLP, at the expense of
the Company, not to exceed $5,000, informing the stockholders of the Company of
the receipt of the consents of the holders of a majority of the outstanding
voting securities of the Company in the form attached hereto as Exhibit
K-1 (the “Transaction Stockholder Consent” and the date such
Transaction Stockholder Consent is effective pursuant to applicable law and
regulation, the “Transaction Stockholder Consent Effective Date”)
approving the Transaction Resolutions (the “Transaction Resolutions”)
that approve the transactions contemplated hereby and pursuant to the Common
Exchange Agreement, including, without limitation, the issuance and terms of the
Amended Note, the exchange of the Common Shares (as defined in the Common
Exchange Agreement) for the Preferred Shares (as defined in the Common Exchange
Agreement) and the issuance and the terms of the Preferred Shares, in accordance
with the Company’s Certificate of Incorporation and other certificate of
designations and applicable law and the rules and regulations of the Principal
Market. In addition to the foregoing, if otherwise required by applicable law,
rule or regulation, the Company shall prepare and file with the SEC a
preliminary proxy statement with respect to a special or annual meeting of the
stockholders of the Company (the “Transaction Stockholder Meeting”),
which shall be called as promptly as practicable after the date hereof, but in
no event later than April 30, 2007 (the “Transaction Stockholder Meeting
Deadline”) soliciting each such stockholder’s affirmative vote for approval
of, to the extent not previously adopted, the Transaction Resolutions (such
affirmative approval being referred to herein as the “Transaction Stockholder
Approval” and the date such approval is obtained, the “Transaction
Stockholder Approval Date”), and the Company shall use its reasonable best
efforts to solicit its stockholders’ approval of such Transaction Resolutions
and to cause the Board of Directors of the Company to recommend to the
stockholders that they approve the Transaction Resolutions. The Company shall be
obligated to seek to obtain the Transaction Stockholder Approval by the
Transaction Stockholder Meeting Deadline. If,
- 8 -
despite the Company’s reasonable best efforts, the Transaction
Stockholder Approval is not obtained on or prior to the Transaction Stockholder
Meeting Deadline, the Company shall cause an additional Transaction Stockholder
Meeting to be held every six (6) month period thereafter until the second
anniversary of the Closing Date, whereafter such Transaction Stockholder Meeting
shall only be required to occur at the annual meeting of the Company held that
year and each year thereafter until Transaction Stockholder Approval is
obtained, provided that if the Board does not recommend to the stockholders that
they approve the Transaction Resolutions at any such Transaction Stockholder
Meeting and the Transaction Stockholder Approval is not obtained, the Company
shall cause an additional Transaction Stockholder Meeting to be held each
calendar quarter thereafter until such Transaction Stockholder Approval is
obtained.
(ii)
Authorized Share Stockholder Approval. The Company shall prepare and file
with the SEC, as promptly as practicable after the date of the conversion of the
Series A Preferred Stock of the Company into Common Stock, but in no event
later than February 23, 2007, an information statement (the “Authorized
Share Information Statement”), substantially in the form which has been
previously reviewed by the Investors and Schulte Roth & Zabel LLP, at the
expense of the Company, not to exceed $5,000, informing the stockholders of the
Company of the receipt of the consents of the holders of a majority of the
outstanding voting securities of the Company in the form attached hereto as
Exhibit K-2 (the “Authorized Share Stockholder Consent” and the
date such Authorized Share Stockholder Consent is effective pursuant to
applicable law and regulation, the “Authorized Share Stockholder Consent
Effective Date”) approving the Authorized Share Resolutions (the
“Authorized Share Resolutions” and collectively with the Transaction
Resolutions, the “Resolutions”) that approve (x) the increase in the
authorized Common Stock of the Company from 225,000,000 shares to a number of
shares of Common Stock that is no less than such number of shares of Common
Stock that would permit the Company to reserve as of the date hereof from the
authorized Common Stock of the Company the Required Registration Amount (as
defined in the Amended Registration Rights Agreement) of Common Stock of the
Company and (y) the amendment of the Certificate of Incorporation of the Company
to provide that the number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares of Common Stock then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Company, in accordance with applicable law
and the rules and regulations of the Principal Market. In addition to the
foregoing, if otherwise required by applicable law, rule or regulation, the
Company shall prepare and file with the SEC a preliminary proxy statement with
respect to a special or annual meeting of the stockholders of the Company (the
“Authorized Share Stockholder Meeting”), which shall be called as
promptly as practicable after the date of the conversion of the Series A
Preferred Stock of the Company into Common Stock, but in no event later than
April 30, 2007 (the “Authorized Share Stockholder Meeting Deadline”)
soliciting each such stockholder’s affirmative vote for approval of, to the
extent not previously adopted, the Authorized Share Resolutions (such
affirmative approval being referred to herein as the “Authorized Share
Stockholder Approval” and the date such approval is obtained, the
“Authorized Share Stockholder Approval Date” and the Authorized Share
Stockholder Approval and the Transaction Stockholder Approval are collectively
referred to as the
- 9 -
“Stockholder Approval”), and the Company shall use its
reasonable best efforts to solicit its stockholders’ approval of such Authorized
Share Resolutions and to cause the Board of Directors of the Company to
recommend to the stockholders that they approve the Authorized Share
Resolutions. The Company shall be obligated to seek to obtain the Authorized
Share Stockholder Approval by the Authorized Share Stockholder Meeting Deadline.
If, despite the Company’s reasonable best efforts, the Authorized Share
Stockholder Approval is not obtained on or prior to the Authorized Share
Stockholder Meeting Deadline, the Company shall cause an additional Authorized
Share Stockholder Meeting to be held every six (6) month period thereafter
until the second anniversary of the Closing Date, whereafter such Authorized
Share Stockholder Meeting shall only be required to occur at the annual meeting
of the Company held that year and each year thereafter until Authorized Share
Stockholder Approval is obtained, provided that if the Board does not recommend
to the stockholders that they approve the Authorized Share Resolutions at any
such Authorized Share Stockholder Meeting and the Authorized Share Stockholder
Approval is not obtained, the Company shall cause an additional Authorized Share
Stockholder Meeting to be held each calendar quarter thereafter until such
Authorized Share Stockholder Approval is obtained.
(c) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(d) Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original, not a facsimile signature.
- 10 -
(e) Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
(f) Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(g) No
Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
(h) Further
Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(i) No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(j) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (as defined in the Notes) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes). Each Investor may assign some or all of its rights
hereunder without the consent of the Company in connection with a transfer by
such Investor of any of the Securities, in which event such assignee shall be
deemed to be an Investor hereunder with respect to such assigned rights.
(k) Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
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If to the Company: |
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Ascendia Brands, Inc.
100 American
Metro Boulevard
Suite 108
Hamilton, NJ 08619 |
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Telephone: |
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(609)
219-0930 |
- 11 -
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Facsimile: |
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(609) 219-1238 |
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Attention: |
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General Counsel |
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With a copy (for informational
purposes only) to: |
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Kramer Levin Naftalis & Frankel
LLP
1177 Avenue of the Americas
New York, NY 10036 |
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Telephone: |
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(212) 715-9100 |
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Facsimile: |
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(212) 715-8000 |
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Attention: |
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Thomas D. Balliett, Esq. |
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If to the Investors: |
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c/o Prentice Capital Management,
LP
623 Fifth Avenue
32nd Floor
New York, NY 10022 |
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Telephone: |
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(212)-756-8045 |
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Facsimile: |
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(212) 756-1480 |
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Attention: |
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Michael Weiss |
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Mathew Hoffman |
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with a copy (for informational
purposes only) to: |
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Schulte Roth & Zabel LLP
919
Third Avenue
New York, New York 10022 |
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Telephone: |
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(212) 756-2000 |
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Facsimile: |
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(212) 593-5955 |
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Attention: |
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Eleazer N. Klein, Esq. |
or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service in
accordance with clause (i), (ii) or (iii) above, respectively.
(l) Remedies.
Each Investor and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company recognizes
- 12 -
that in the event that
it fails to perform, observe, or discharge any or all of its obligations under
this Agreement, any remedy at law may prove to be inadequate relief to the
Investors. The Company therefore agrees that the Investors shall be entitled to
seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages and without posting a bond or other
security.
[Signature Page
Follows]
- 13 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment Agreement to be duly executed as of the date
first written above.
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COMPANY: |
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ASCENDIA BRANDS, INC.
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/s/
Joseph A. Falsetti |
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Name: |
Joseph A. Falsetti |
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Title: |
President and Chief Executive Officer |
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- 14 -
IN
WITNESS WHEREOF, the Investors and the Company have caused their respective
signature page to this Amendment Agreement to be duly executed as of the date
first written above.
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INVESTORS: |
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PRENCEN LLC
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By: |
/s/
Mathew B. Hoffman |
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Name: |
Mathew B. Hoffman |
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General Counsel |
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PRENCEN LENDING LLC
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By: |
/s/
Mathew B. Hoffman |
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Name: |
Mathew B. Hoffman |
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Title: |
General Counsel |
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- 15 -
Schedule I
Existing Events of
Default
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For Covenant Events of Default: |
| Section of |
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Fiscal Period |
| Amended Note |
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Section of |
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applicable to |
| for Event of |
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Description of |
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Amended Note |
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such Event of |
| Default |
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Event of
Default |
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for
Covenant |
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Title of
Covenant |
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Default
(if any) |
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- 16 -
EXHIBIT G
AMENDED NOTE
NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a)
HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
Ascendia Brands, Inc.
Amended And Restated Senior Secured
Convertible Note
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| Issuance Date: August 2, 2006 |
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Original Principal Amount: U.S.
$91,000,000 |
| Amendment Date: December 30, 2006 |
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WHEREAS,
Ascendia Brands, Inc. (f/k/a Cenuco, Inc.), a Delaware corporation (the
“Company”) and certain Buyers (the “Original Note Buyers”) entered
into that certain Securities Purchase Agreement, dated as of October 10,
2005, which was subsequently amended and restated in that certain Amended and
Restated Securities Purchase Agreement (the “Original Note Agreement”),
dated November 16, 2005 (the “Original Note Agreement Date”) with
respect to the potential acquisition by the Original Note Buyers of
(a) secured convertible notes (the “Original Notes”), which were to
be convertible into shares of the Company’s common stock, par value $0.001 (the
“Common Stock”) and (b) certain warrants (the “Original Note
Warrants”)
WHEREAS,
on the Original Note Agreement Date, the Company and certain of its subsidiaries
entered into temporary financing arrangements with certain of the Original Note
Buyers, as secured lenders (the “Bridge Lenders”), and as more fully set
forth in a Bridge Term Loan Agreement (the “Bridge Agreement”) by and
among the Company, Lander Intangibles Corporation, Hermes Acquisition Company I
LLC, and Lander Co., Inc., as borrowers (collectively, the “Bridge
Borrowers”), and their subsidiaries signatory thereto (together with the
Bridge Borrowers, the “Bridge Loan Parties”), Prencen Lending LLC, a
Delaware limited liability company (“Prencen Lending”), as agent for the
Lenders (in such capacity, the “Bridge Agent”), and the Bridge Lenders,
as lenders, and certain other security and ancillary documents
related thereto (the
“Bridge Facility”), pursuant to which the Original Note Buyers made
available to the Bridge Borrowers a $80 million secured term loan.
WHEREAS,
Prencen Lending acquired the Obligations (as defined in the Bridge Agreement)
owed by the Company to Highgate House Funds, Ltd. (a Bridge Lender) under the
Bridge Facility, such that Prencen Lending now owns all of the Obligations (as
defined in the Bridge Agreement).
WHEREAS,
on May 15, 2006, the Bridge Facility matured and the Bridge Lenders, the
Original Note Buyers and the Company agreed (a) to forgo any short-term
extensions of the Bridge Facility, (b) to extend the Company’s Obligations,
as secured by Collateral (as defined in the Security Documents), through the
Company’s issuance of Notes (as defined below) as an amendment and restatement
of the outstanding Obligations pursuant to the Bridge Facility, which provides a
longer maturity date for such Obligations and the right to convert such
Obligations into equity, (c) to the Company’s payment to Prencen Lending of
the Obligations (excluding any outstanding principal amounts, but including
accrued and unpaid interest and any other amounts payable as of August 2,
2006) pursuant to the Bridge Agreement and (d) to ratify and confirm
security interests to secure such Obligations in accordance with the Security
Documents.
WHEREAS,
the Company, Prencen Lending and certain buyers entered into that certain Second
Amended and Restated Securities Purchase Agreement dated as of June 30,
2006 (as amended, modified or supplemented, the “Securities Purchase
Agreement”) pursuant to which the Bridge Facility was amended and restated
and the Company issued to Prencen Lending a Senior Secured Convertible Note,
dated as of August 2, 2006, in the principal amount of $91,000,000 (the
“Existing Note”).
WHEREAS,
the Company, Prencen LLC and Prencen Lending have entered into (a) that
certain Amendment and Exchange Agreement, dated as of December 27, 2006 (as
amended from time to time, the “Exchange Agreement”) and (b) that
certain Amendment Agreement, dated as of December 30, 2006 (the
“Amendment Agreement”) pursuant to which, among other things, the Company
and Prencen Lending agreed to amend and restate the Existing Note in this
Amended and Restated Senior Convertible Note (the date of such Amendment
Agreement, the “Amendment Date”).
NOW
THEREFORE, in consideration of the premises and the covenants and agreements
contained herein, the Bridge Facility and all indebtedness and other obligations
thereunder and the Existing Note are hereby amended and restated by the Notes
with terms and conditions as follows:
FOR
VALUE RECEIVED, the Company hereby promises to pay to the order of PRENCEN
LENDING LLC or registered assigns (“Holder”) the amount set out above as
the Original Principal Amount (as reduced pursuant to the terms hereof pursuant
to redemption, conversion or otherwise, and including the amount of any
Capitalized Interest (as defined below), the “Principal”) when due,
whether upon the Maturity Date (as defined below), acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any outstanding Principal at a rate per annum equal to
the Interest
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Rate, from the date set
out above as the Issuance Date (the “Issuance Date”) until the same
becomes due and payable, whether upon an Interest Date (as defined below), the
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Amended and Restated Senior Secured
Convertible Note (including all Amended and Restated Senior Secured Convertible
Notes issued in exchange, transfer or replacement hereof, this “Note”
and, to the extent any principal amount of this Note is transferred, such other
Amended and Restated Senior Secured Convertible Notes issued in connection with
such transfer, the “Other Notes” and collectively with this Note, the
“Notes”) amends, supplements, modifies and completely restates and
supersedes the Existing Note issued by the Company to the Holder, but shall not,
except as specifically amended hereby or as set forth in the Amendment
Agreement, constitute a release, satisfaction or novation of any of the
obligations under the Existing Note or any other Transaction Document (as
defined in the Securities Purchase Agreement). This Note is the Amended and
Restated Senior Secured Convertible Note issued pursuant to the Amendment
Agreement. Certain capitalized terms used herein are defined in Section 29.
(1)
MATURITY. On the Maturity Date, the Company shall pay to the Holder an
amount in cash equal to all of the Obligations then due and owing hereunder. The
“Maturity Date” shall be December 30, 2016, as may be extended in
writing at the sole option of the Holder (i) in the event that, and for so
long as, an Event of Default (as defined in Section 4(a)) shall have
occurred and be continuing or any event shall have occurred and be continuing
which with the passage of time and the failure to cure would result in an Event
of Default and (ii) through the date that is ten days after the
consummation of a Change of Control in the event that a Change of Control is
publicly announced or a Change of Control Notice (as defined in Section 5)
is delivered prior to the Maturity Date.
(2)
INTEREST. Interest on this Note shall commence accruing on the Issuance
Date and shall be computed on the basis of a 365-day year and actual days
elapsed and shall be payable in arrears on the last day of each calendar month
during the period beginning on the Issuance Date and ending on, and including,
the Maturity Date (each, an “Interest Date”) with the first Interest Date
being December 31, 2006. Interest shall be payable on each Interest Date,
to the record holder of this Note on the applicable Interest Date in cash;
provided, however, that all or any portion of the Interest due on each Interest
Date prior to earlier of (a) the consummation of the Acquisition and
(b) March 31, 2007 (the “Deferral Period”) may be deferred, and
such deferred Interest shall be compounded monthly during the Deferral Period,
at the option of the Company, so long as the Company delivers written notice (an
“Interest Notice”) to the Holder, no more than five (5) or less than
two (2) Business Days prior to such Interest Date. At the end of the
Deferral Period, all Interest accrued and unpaid hereunder as of such date shall
be paid in cash to the Holder, which Interest shall include $3,392,802.50 in
accrued and unpaid interest deferred under the Existing Note (and as further
compounded monthly hereunder) between the Issuance Date and the Amendment Date.
Following the consummation of the Acquisition and incurrence of the Permitted
Acquisition Indebtedness provided by a third-party which is unaffiliated with
the Holder (the “Third-Party Permitted Acquisition Indebtedness”),
Interest due hereunder shall be capitalized on and as of each Interest Date by
adding it to the outstanding Principal on this Note (the “Capitalized
Interest”). In the event that, following the consummation of the
Acquisition, the Holder or any of its Affiliates provides all of the Permitted
Acquisition Indebtedness, Interest due hereunder shall be
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due and payable in cash
on each Interest Date until such time as all outstanding Permitted Acquisition
Indebtedness is Third-Party Permitted Acquisition Indebtedness. Upon the
occurrence and during the continuance of an Event of Default, the Interest Rate
on the Obligations shall be increased to fifteen percent (15%). In the event
that such Event of Default is subsequently cured, such increased Interest Rate
shall no longer be in effect as of the date of such cure; provided that the
Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default.
(3)
CONVERSION OF NOTES. This Note shall be convertible into shares of common
stock of the Company, $0.001 par value per share (the “Common Stock”), on
the terms and conditions set forth in this Section 3.
(a) Conversion
Right. Subject to the provisions of Section 3(d), at any time or times
on or after the Issuance Date, the Holder shall be entitled to convert any
portion of the outstanding and unpaid Conversion Amount (as defined below) into
fully paid and nonassessable shares of Common Stock in accordance with
Section 3(c), at the Conversion Rate (as defined below). The Company shall
not issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all taxes that may be payable
with respect to the issuance and delivery of Common Stock upon conversion of any
Conversion Amount.
(b) Conversion
Rate. The number of shares of Common Stock issuable upon conversion of any
Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x)
such Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).
(i)
“Conversion Amount” means the sum of (A) the portion of the
Principal (including any Capitalized Interest) to be converted, redeemed or
otherwise with respect to which this determination is being made,
(B) accrued and unpaid Interest, compounded monthly, with respect to such
Principal and (C) accrued and unpaid Late Charges with respect to such
Principal and Interest.
(ii)
“Conversion Price” means, as of any Conversion Date (as defined below) or
other date of determination, $0.42, subject to adjustment as provided herein.
(c) Mechanics
of Conversion.
(i)
Optional Conversion. To convert any Conversion Amount into shares of
Common Stock on any date (a “Conversion Date”), the Holder shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to 11:59 p.m., New York Time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the
“Conversion Notice”) to the Company and (B) if required by
Section 3(c)(iii), surrender this Note to a common carrier for delivery to
the Company as
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soon
as practicable on or following such date (or an indemnification undertaking with
respect to this Note in the case of its loss, theft or destruction). On or
before the first (1st) Trading Day following
the date of receipt of a Conversion Notice, the Company shall transmit by
facsimile a confirmation of receipt of such Conversion Notice to the Holder and
the Company’s transfer agent (the “Transfer Agent”). On or before the
third (3rd) Trading
Day following the date of receipt of a Conversion Notice (the “Share Delivery
Date”), the Company shall (1) provided that the Transfer Agent is
participating in the Fast Automated Securities Transfer Program of the
Depository Trust Company (“DTC”) credit such aggregate number of shares
of Common Stock to which the Holder shall be entitled to the Holder’s or its
designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system or (2) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, issue and deliver no later than
the Share Delivery Date, to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If this
Note is physically surrendered for conversion as required by
Section 3(c)(iii) and the outstanding Principal of this Note is greater
than the Principal portion of the Conversion Amount being converted, then the
Company shall as soon as practicable and in no event later than three Business
Days after receipt of this Note and at its own expense, issue and deliver to the
holder a new Note (in accordance with Section 19(d)) representing the
outstanding Principal not converted. The Person or Persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(ii)
Company’s Failure to Timely Convert. If the Company shall fail to issue a
certificate to the Holder or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon
conversion of any Conversion Amount on or prior to the date which is five
(5) Trading Days after the Conversion Date (a “Conversion Failure”),
then (A) the Company shall pay damages to the Holder for each day of such
Conversion Failure in an amount equal to 1.5% of the product of (I) the sum
of the number of shares of Common Stock not issued to the Holder on or prior to
the Share Delivery Date and to which the Holder is entitled, and (II) the
Closing Sale Price of the Common Stock on the Share Delivery Date and (B) the
Holder, upon written notice to the Company, may void its Conversion Notice with
respect to, and retain or have returned, as the case may be, any portion of this
Note that has not been converted pursuant to such Conversion Notice;
provided that the voiding of a Conversion Notice shall not affect the
Company’s obligations to make any payments which have accrued prior to the date
of such notice pursuant to this Section 3(c)(iii) or otherwise. In addition
to the foregoing, if within three (3) Trading Days after the Company’s
receipt of the facsimile copy of a Conversion Notice the Company shall fail to
issue and deliver a certificate to the Holder or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon such holder’s conversion of any Conversion Amount, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder anticipated receiving
from the Company (a “Buy-In”), then the Company shall, within three (3)
Trading Days after the Holder’s request and in the
- 5 -
Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate or credit such Holder’s balance account
with DTC (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock or credit such Holder’s balance account with DTC
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 Closing Bid Price on the Conversion Date.
(iii)
Book-Entry. Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender this Note to the
Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior
written notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company
shall maintain records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.
(iv)
Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion
Date and the Company can convert some, but not all, of such portions of the
Notes submitted for conversion, the Company, subject to Section 3(d), shall
convert from each holder of Notes electing to have Notes converted on such date
a pro rata amount of such holder’s portion of its Notes submitted for conversion
based on the principal amount of Notes submitted for conversion on such date by
such holder relative to the aggregate principal amount of all Notes submitted
for conversion on such date. In the event of a dispute as to the number of
shares of Common Stock issuable to the Holder in connection with a conversion of
this Note, the Company shall issue to the Holder the number of shares of Common
Stock not in dispute and resolve such dispute in accordance with
Section 24.
(d) Limitations
on Conversions.
(i)
Beneficial Ownership. The Company shall not effect any conversion of this
Note, and the Holder of this Note shall not have the right to convert any
portion of this Note pursuant to Section 3(a), to the extent that after
giving effect to such conversion, the Holder (together with the Holder’s
affiliates) would beneficially own in excess of 9.99% (the “Maximum
Percentage”) of the number of shares of Common Stock outstanding immediately
after giving effect to such conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such sentence
is being made, but shall exclude the number of shares of Common Stock which
would be
- 6 -
issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without limitation, any Other
Notes or warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or any of
its affiliates. Except as set forth in the preceding sentence, for purposes of
this Section 3(d)(i), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Section 3(d)(i), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most
recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within one (1) Business Day confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Note, by the Holder or its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. By written
notice to the Company, the Holder may from time to time increase or decrease the
Maximum Percentage to any other percentage specified in such notice not in
excess of 9.99%; provided that (i) any such increase will not be effective
until the sixty-first (61st) day after such notice
is delivered to the Company, and (ii) any such increase or decrease will
apply only to the Holder and not to any other holder of Notes.
(ii)
Principal Market Regulation. The Company shall not be obligated to issue
any shares of Common Stock upon conversion of this Note or the Preferred Shares
or exercise of the Warrants, and the Holder of this Note shall not have the
right to receive upon conversion of this Note any shares of Common Stock, if the
issuance of such shares of Common Stock would exceed the aggregate number of
shares of Common Stock which the Company may issue upon conversion or exercise,
as applicable, of the Notes, the Preferred Shares and Warrants without breaching
the Company’s obligations under the rules or regulations of the Principal Market
(the “Exchange Cap”), except that such limitation shall not apply in the
event that the Company (A) obtains the approval of its stockholders as
required by the applicable rules of the Principal Market for issuances of Common
Stock in excess of such amount or (B) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of the Notes pursuant to the
Securities Purchase Agreement (the “Purchasers”) shall be issued in the
aggregate, upon conversion or exercise, as applicable, of Notes, Preferred
Shares or Warrants, shares of Common Stock in an amount greater than the product
of the Exchange Cap multiplied by a fraction, the numerator of which is the
number of Registrable Securities of such Purchaser pursuant to the Registration
Rights Agreement on the Amendment Date and the denominator of which is the
aggregate amount of all Registrable Securities on the Amendment Date (with
respect to each Purchaser, the “Exchange Cap Allocation”). In
- 7 -
the
event that any Purchaser shall sell or otherwise transfer any of such
Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such
Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any holder of Notes
shall convert all of such holder’s Notes into a number of shares of Common Stock
which, in the aggregate, is less than such holder’s Exchange Cap Allocation,
then the difference between such holder’s Exchange Cap Allocation and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of Notes on a
pro rata basis in proportion to the aggregate principal amount of the Notes then
held by each such holder.
(e) Holder’s
Right of Exchange. If required by the Principal Market pursuant to its
listing requirements at any time following the consummation of the Acquisition,
up to $40,000,000 in outstanding Principal amount of this Note together with any
accrued and unpaid Interest thereon and Late Charges on such Principal and
Interest, if any (such amount, the “Exchange Amount”) shall be exchanged
(the “Exchange”) for a new series of convertible preferred stock (the
“New Securities”) of the Company, which New Securities shall have such
rights, designations and preferences as the Holder and the Company shall
mutually agree. Upon the consummation of the Exchange, the Company shall
(i) deliver to the Holder the New Securities and (ii) pay to the
Holder, in cash, an amount equal to 15% of the Exchange Amount by wire transfer
of immediately available funds in accordance with the Holder’s written wire
transfer instructions.
(4)
RIGHTS UPON EVENT OF DEFAULT.
(a) Event
of Default. Each of the following events shall constitute an “Event of
Default”:
(i)
(A) the failure of the applicable Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared effective by
the SEC on or prior to the date that is sixty (60) days after the
applicable Effectiveness Deadline (as defined in the Registration Rights
Agreement), or (B) while the applicable Registration Statement is required
to be maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the applicable Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop order) or is
unavailable to any holder of the Notes for sale of all of such holder’s
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten (10) consecutive days or
for more than an aggregate of thirty (30) days in any 365-day period (other than
days during an Allowable Grace Period (as defined in the Registration Rights
Agreement));
(ii)
the suspension from trading or failure of the Common Stock to be listed on an
Eligible Market for a period of five (5) consecutive Trading Days or for
more than an aggregate of ten (10) Trading Days in any 365-day period;
- 8 -
(iii)
the Company’s (A) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within ten (10) Business Days
after the applicable Conversion Date or (B) notice, written or oral, to any
holder of the Notes, including by way of public announcement or through any of
its agents, at any time, of its intention not to comply with a request for
conversion of any Notes into shares of Common Stock that is tendered in
accordance with the provisions of the Notes;
(iv)
at any time following the tenth (10th) consecutive Business
Day that the Holder’s Authorized Share Allocation is less than the number of
shares of Common Stock that the Holder would be entitled to receive upon a
conversion of the full Conversion Amount of this Note (without regard to any
limitations on conversion set forth in Section 3(d) or otherwise);
(v)
the Company’s failure to pay to the Holder any amount of Principal (including,
without limitation, the Company’s failure to pay any redemption payments),
Interest, Late Charges or other amounts (other than Registration Delay Payments)
when and as due under this Note or any other Transaction Document (as defined in
the Securities Purchase Agreement) to which the Holder is a party, except, in
the case of a failure to pay Interest and Late Charges when and as due, in which
case only if such failure continues for a period of at least three
(3) Business Days;
(vi)
the occurrence of any default under, redemption of or acceleration prior to
maturity of any Indebtedness of the Company or any of its Subsidiaries (as
defined in Section 3(a) of the Securities Purchase Agreement), other than with
respect to any Other Notes;
(vii)
the Company or any of its Subsidiaries, pursuant to or within the meaning of
Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief
of debtors (collectively, “Bankruptcy Law”), (A) commences a
voluntary case, (B) consents to the entry of an order for relief against it
in an involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a “Custodian”),
(D) makes a general assignment for the benefit of its creditors or
(E) admits in writing that it is generally unable to pay its debts as they
become due;
(viii)
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company or any of its Subsidiaries
in an involuntary case, (B) appoints a Custodian of the Company or any of
its Subsidiaries or (C) orders the liquidation of the Company or any of its
Subsidiaries;
(ix)
a final judgment or judgments for the payment of money aggregating in excess of
$100,000 are rendered against the Company or any of its Subsidiaries and which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty
(60) days after the expiration of such stay; provided, however, that any
judgment which is covered by insurance or an indemnity from a creditworthy party
shall not be included in calculating the $100,000 amount set forth above so long
as the Company provides the Holder a written statement from such insurer or
indemnity provider (which written
- 9 -
statement shall be reasonably satisfactory to the Holder) to the
effect that such judgment is covered by insurance or an indemnity and the
Company will receive the proceeds of such insurance or indemnity within thirty
(30) days of the issuance of such judgment;
(x)
the Company breaches any representation, warranty, covenant or other term or
condition of any Transaction Document that is not specifically addressed by any
other Event of Default set forth in this Section 4(a), except, subject to
clause (ii) hereof, (i) in the case of a breach of a covenant which is
curable, only if such breach continues for a period of at least ten
(10) consecutive Business Days or (ii) in the case of any breach that
arises solely by virtue of the Transaction Stockholder Approval or the
Authorized Share Stockholder Approval not being obtained at or prior to the
Closing Date specified in the Amendment Agreement and the amendments to the
certificate of incorporation of the Company not having been filed with the
Secretary of State of Delaware to effectuate the amendments specified in clauses
(x) and (y) of Section 7(b)(ii) of the Amendment Agreement at or
prior to the Closing Date specified in the Amendment Agreement; provided,
however, that the breach of any covenants set forth on Schedule I
shall not be deemed an Event of Default unless (A) other than a default
specified under clause (1) of Schedule I, such breach remains
uncured as of the termination of the Acquisition Special Cure Period or
(B) with respect to any covenant requiring satisfaction as of the end of a
fiscal period, such covenant is not satisfied as of the end of the fiscal period
immediately following the Acquisition Special Cure Period;
(xi)
any breach or failure in any respect to comply with Section 15 of this
Note;
(xii)
failure to obtain the Authorized Share Stockholder Consent or the Authorized
Share Stockholder Approval, as the case may be, by June 1, 2007;
(xiii)
the Company or any Subsidiary shall fail to perform or comply with any covenant
or agreement contained in any Security Agreement to which it is a party, any
Pledge Agreement to which it is a party or any Mortgage to which it is a party;
(xiv)
any material provision of any Security Document (as determined by the Collateral
Agent) shall at any time for any reason (other than pursuant to the express
terms thereof) cease to be valid and binding on or enforceable against the
Company or any Subsidiary intended to be a party thereto, or the validity or
enforceability thereof shall be contested by any party thereto, or a proceeding
shall be commenced by the Company or any Subsidiary or any governmental
authority having jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof, or the Company or any Subsidiary shall
deny in writing that it has any liability or obligation purported to be created
under any Security Document;
(xv)
any Security Agreement, any Pledge Agreement, any Mortgage or any other security
document, after delivery thereof pursuant hereto, shall for any reason fail or
cease to create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien in favor of the Collateral Agent
for the
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benefit of the holders of the Note on any Collateral (as defined in
the Security Documents) purported to be covered thereby;
(xvi)
any bank at which any deposit account, blocked account, or lockbox account of
the Company or any Subsidiary is maintained shall fail to comply with any
material term of any deposit account, blocked account, lockbox account or
similar agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of the Company or any
Subsidiary shall fail to comply with any of the terms of any investment property
control agreement to which such Person is a party (it being understood that only
accounts pursuant to which the Collateral Agent has requested account control
agreements should be subject to this clause (xv));
(xvii)
any material damage to, or loss, theft or destruction of, any Collateral,
whether or not insured, or any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty which causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the Company or
any Subsidiary, if any such event or circumstance could reasonably be expected
to have a Material Adverse Effect (as defined in the Securities Purchase
Agreement); or
(xviii)
any Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.
(b) Redemption
Right. Upon the occurrence of an Event of Default with respect to this Note
or any Other Note, the Company shall within one (1) Business Day deliver
written notice thereof via facsimile and overnight courier (an “Event of
Default Notice”) to the Holder. At any time after the earlier of the
Holder’s receipt of an Event of Default Notice and the Holder becoming aware of
an Event of Default, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (the “Event of
Default Redemption Notice”) to the Company, which Event of Default
Redemption Notice shall indicate the portion of this Note the Holder is electing
to redeem. Each portion of this Note subject to redemption by the Company
pursuant to this Section 4(b) shall be redeemed by the Company at a price equal
to the greater of (i) the product of (x) the Conversion Amount to be
redeemed and (y) the Redemption Premium and (ii) the product of
(A) the Conversion Rate with respect to such Conversion Amount in effect at
such time as the Holder delivers an Event of Default Redemption Notice and
(B) the greater of the Closing Sale Price of the Common Stock on the date
immediately preceding such Event of Default, the Closing Sale Price of the
Common Stock on the date immediately following such Event of Default and the
Closing Sale Price of the Common Stock on the date the Holder delivers the Event
of Default Redemption Notice (the “Event of Default Redemption Price”).
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required by this
Section 4(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this Section 4(b),
the
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Holder’s damages would
be uncertain and difficult to estimate because of the parties’ inability to
predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Holder. Accordingly, any
Redemption Premium due under this Section 4(b) is intended by the parties to be,
and shall be deemed, a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty.
(5)
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Notes in exchange for such Notes a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts and the interest rates of the
Notes held by such holder, having similar conversion rights as the Notes and
having similar ranking to the Notes, and satisfactory to the Required Holders
and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market. Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Note
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of the Fundamental Transaction, in lieu
of the shares of Common Stock (or other securities, cash, assets or other
property) issuable upon the conversion of the Notes prior to such Fundamental
Transaction, such shares of publicly traded common stock (or their equivalent)
of the Successor Entity, as adjusted in accordance with the provisions of this
Note. The provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of this Note.
(b) Redemption
Right. No sooner than fifteen (15) days nor later than ten
(10) days prior to the consummation of a Change of Control, but not prior
to the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
“Change of Control Notice”). At any time during the period beginning
after the Holder’s receipt of a Change of Control Notice and ending twenty
(20) Trading Days after the consummation of such Change of Control, the
Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (“Change of Control Redemption Notice”)
to the Company, which Change of Control Redemption Notice shall indicate the
Conversion Amount the Holder is electing to redeem. The portion of this Note
subject to redemption pursuant to this Section 5 shall be redeemed by
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the Company in cash at
a price equal to the greater of (i) the product of (x) the Conversion
Amount being redeemed and (y) the quotient determined by dividing
(A) the greater of the Closing Sale Price of the Common Stock immediately
prior to the consummation of the Change of Control, the Closing Sale Price
immediately following the public announcement of such proposed Change of Control
and the Closing Sale Price of the Common Stock immediately prior to the public
announcement of such proposed Change of Control by (B) the Conversion Price
and (ii) 120% of the Conversion Amount being redeemed (the “Change of
Control Redemption Price”). Redemptions required by this Section 5
shall be made in accordance with the provisions of Section 12 and shall
have priority to payments to stockholders in connection with a Change of
Control. To the extent redemptions required by this Section 5(b) are deemed or
determined by a court of competent jurisdiction to be prepayments of the Note by
the Company, such redemptions shall be deemed to be voluntary prepayments.
Notwithstanding anything to the contrary in this Section 5, but subject to
Section 3(d), until the Change of Control Redemption Price is paid in full,
the Conversion Amount submitted for redemption under this Section 5(c) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3. In the event of a partial redemption of this Note pursuant
hereto, the principal amount redeemed shall be deducted from the Installment
Amounts relating to the applicable Installment Dates as set forth in the Change
of Control Redemption Notice. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this Section 5(b),
the Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 5(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.
(6)
RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
“Purchase Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note (without taking
into account any limitations or restrictions on the convertibility of this Note)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(b) Other
Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder’s option, (i) in addition to the
shares of Common Stock receivable upon such conversion, such securities or other
assets to
- 13 -
which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder would have
been entitled to receive had this Note initially been issued with conversion
rights for the form of such consideration (as opposed to shares of Common Stock)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Corporate Events and shall be
applied without regard to any limitations on the conversion or redemption of
this Note.
(7)
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment
of Conversion Price upon Issuance of Common Stock. If and whenever on or
after the Subscription Date, the Company issues or sells, or in accordance with
this Section 7(a) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued or sold by the Company in connection with any Excluded
Security) for a consideration per share less than a price (the “Applicable
Price”) equal to the Conversion Price in effect immediately prior to such
issue or sale (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to an amount equal to the lowest price per share at which any share of
Common Stock were issued or sold or deemed to be issued or sold (in accordance
with this Section 7(a)) in connection with such Dilutive Issuance; provided,
however, that if the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock in a Dilutive Issuance that is a Permitted
Financing, then immediately after such Dilutive Issuance, the Conversion Price
then in effect shall be reduced to an amount equal to the product of
(A) the Conversion Price in effect immediately prior to such Dilutive
Issuance and (B) the quotient determined by dividing (1) the sum of
(I) the product derived by multiplying the Conversion Price in effect
immediately prior to such Dilutive Issuance and the number of shares of Common
Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus
(II) the consideration, if any, received by the Company upon such Dilutive
Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the
number of shares of Common Stock Deemed Outstanding immediately after such
Dilutive Issuance. For purposes of determining the adjusted Conversion Price
under this Section 7(a), the following shall be applicable:
(i)
Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then each such share of Common Stock underlying
such Option shall be deemed to be outstanding and to have been issued and sold
by the Company at
- 14 -
the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Option or upon
conversion or exchange or exercise of any Convertible Securities issuable upon
exercise of such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon granting or sale of the Option, upon exercise of
the Option and upon conversion or exchange or exercise of any Convertible
Security issuable upon exercise of such Option. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of Common
Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange or
exercise of such Convertible Securities.
(ii)
Issuance of Convertible Securities. If the Company in any manner issues
or sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise
thereof is less than the Applicable Price, then each such share of Common Stock
underlying such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
Section 7(a)(ii), the “lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange or exercise” shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
issuance or sale of the Convertible Security and upon the conversion or exchange
or exercise of such Convertible Security. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of Common
Stock upon conversion or exchange or exercise of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of the Conversion Price had been or
are to be made pursuant to other provisions of this Section 7(a), no
further adjustment of the Conversion Price shall be made by reason of such issue
or sale.
(iii)
Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exchange or exercise of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii),
if the terms of any Option or Convertible Security that was outstanding as of
the Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then
in effect.
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(iv)
Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $.01. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the net
amount received by the Company therefor. If any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration consists
of publicly traded securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on the
date of receipt. If any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or publicly traded securities will be
determined jointly by the Company and the Required Holders. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the
tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be deemed binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the Company.
(v)
Record Date. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(b) Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
- 16 -
(c) Other
Events. If any event occurs of the type contemplated by the provisions of
this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 7.
(8)
HOLDER’S RIGHT OF OPTIONAL REDEMPTION. At any time from and after the
eighth (8th)
anniversary of the Issuance Date, the Holder shall have the right, in its sole
discretion, to require that the Company redeem (each, a “Holder Optional
Redemption”) up to all of the Conversion Amount of this Note (the
“Available Holder Optional Redemption Amount”) by delivering written
notice thereof (a “Holder Optional Redemption Notice”) to the Company.
The Holder Optional Redemption Notice shall indicate the Conversion Amount of
the Available Holder Optional Redemption Amount the Holder is electing to have
redeemed (the “Holder Optional Redemption Amount”). The portion of this
Note subject to redemption pursuant to this Section 8 shall be redeemed by
the Company in cash at a price equal to 107% of the Holder Optional Redemption
Amount (the “Holder Optional Redemption Price”). Redemptions required by
this Section 8 shall be made in accordance with the provisions of
Section 12. Notwithstanding anything to the contrary in this
Section 8, but subject to Section 3(d), until the Holder receives the
Holder Optional Redemption Price, the Holder Optional Redemption Amount may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3, and any such conversion shall reduce the Holder Optional
Redemption Amount in the manner set forth by the Holder in the applicable
Conversion Notice.
(9)
OPTIONAL REDEMPTIONS AT THE COMPANY’S ELECTION.
(a) General.
At any time from and after the eighth (8th) anniversary of the
Issuance Date, so long as there has been no Equity Conditions Failure, the
Company shall have the right, to redeem all or any portion of the Conversion
Amount then remaining under this Note (the “Optional Redemption Amount”)
as designated in the Optional Redemption Notice, as of the Optional Redemption
Date (an “Optional Redemption”). The portion of this Note subject to
redemption pursuant to this Section 9(a) shall be redeemed by the Company in
cash at a price equal to the 107% of the Conversion Amount being redeemed (the
“Optional Redemption Price”). The Company may exercise its right to
require redemption under this Section 9 by delivering a written notice
thereof by facsimile and overnight courier to all, but not less than all, of the
holders of Notes (the “Optional Redemption Notice” and the date all of
the holders received such notice is referred to as the “Optional Redemption
Notice Date”) and each Optional Redemption Notice shall be irrevocable. The
Optional Redemption Notice shall state (1) the date on which the Optional
Redemption shall occur (the “Optional Redemption Date”) which date shall
be not less than five (5) Trading Days nor more than thirty (30) Trading
Days after the Optional Redemption Notice Date, and (2) the aggregate
Conversion Amount of the Notes which the Company has elected to be subject to
Optional Redemption from all of the holders of the Notes pursuant to this
Section 9(a) (and analogous provisions under the Other Notes) on the Optional
Redemption Date. The Company may not effect more than one (1) Optional
Redemption. Notwithstanding anything to the contrary in this Section 9(a),
until the Optional Redemption Price is paid, in full, the Optional Redemption
- 17 -
Amount may be
converted, in whole or in part, by the Holders into shares of Common Stock
pursuant to Section 3. All Conversion Amounts converted by the Holder after
the Optional Redemption Notice Date shall reduce the Optional Redemption Amount
of this Note required to be redeemed on the Optional Redemption Date.
Redemptions made pursuant to this Section 9 shall be made in accordance
with Section 12.
(b) Acquisition
Redemption. Contemporaneously with the consummation of the Acquisition, so
long as there has been no Acquisition Redemption Equity Conditions Failure, the
Company shall have the right to redeem up to the Acquisition Redemption Amount
as designated in the Acquisition Redemption Notice (as defined below) (the
“Acquisition Redemption”). The portion of this Note subject to redemption
pursuant to this Section 9(b) shall be redeemed by the Company in cash at the
Acquisition Redemption Price. Upon the earlier to occur of (i) the
consummation of the Acquisition and (ii) February 27, 2007, the
Series B Warrants shall become exercisable in accordance with the terms
thereof. The Company may exercise its right to require redemption under this
Section 9 by delivering a written notice thereof by facsimile and overnight
courier to all, but not less than all, of the holders of Notes (the
“Acquisition Redemption Notice” and the date all of the holders received
such notice is referred to as the “Acquisition Redemption Notice Date”).
The Acquisition Redemption right granted to the Company pursuant to this Section
9(b) may only be exercised on one (1) occasion, simultaneously with the
consummation of the Acquisition, and the Acquisition Redemption Notice shall be
irrevocable. The Acquisition Redemption Notice shall be delivered no later than
three (3) Business Days prior to the projected date of consummation of such
Acquisition and shall state (A) that the Company expects to consummate the
Acquisition, (B) the projected date of the consummation of such
Acquisition, which date shall also be the date the Acquisition Redemption Price
is due to be paid to the Holder (the “Acquisition Redemption Date”),
(C) the Conversion Amount of this Note which the Company has elected to be
subject to the Acquisition Redemption (the “Holder Acquisition Redemption
Amount”) pursuant to this Section 9(b) and (D) the number of shares of
Common Stock into which the Series B Warrants shall become exercisable.
Notwithstanding anything to the contrary in this Section 9(b), until the
Acquisition Redemption Price is paid, in full, the Holder Acquisition Redemption
Amount may be converted, in whole or in part, by the Holder into shares of
Common Stock pursuant to Section 3. All Conversion Amounts converted by the
Holder after the Acquisition Redemption Notice Date shall reduce the Holder
Acquisition Redemption Amount required to be redeemed. Redemptions made pursuant
to this Section 9 shall be made in accordance with Section 12. In the
event that the Company does not elect to redeem any portion of this Note upon
the consummation of the Acquisition, then the Company shall deliver a written
notice to the Holder in the same manner, at the same time and setting forth the
information required in clauses (A) and (B) above for an Acquisition
Redemption Notice and such notice shall also state that the number of shares of
Common Stock into which the Series B Warrants shall become exercisable in
accordance with the terms of such warrants.
(c) Pro
Rata Redemption Requirement. If the Company elects to cause an Optional
Redemption or an Acquisition Redemption pursuant to Section 9(a) or
Section 9(b), then it must simultaneously take the same action with respect
to the Other Notes. If the Company elects to cause an Optional Redemption or
Acquisition Redemption pursuant to Section 9(a) or Section 9(b) (or similar
provisions under the Other Notes) with respect to less
- 18 -
than all of the
Conversion Amounts of the Notes then outstanding, then the Company shall require
redemption of a Conversion Amount from each of the holders of the Notes equal to
the product of (i) the aggregate Conversion Amount of Notes which the
Company has elected to cause to be redeemed pursuant to Section 9(a) or
Section 9(b), as applicable, multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate initial principal amount of the
Notes purchased by such holder of outstanding Notes and the denominator of which
is the sum of the aggregate initial principal amount of the Notes purchased by
all holders holding outstanding Notes (such fraction with respect to each holder
is referred to as its “Redemption Allocation Percentage”, and such amount
with respect to each holder is referred to as its “Pro Rata Redemption
Amount”); provided, however that in the event that any holder’s Pro Rata
Redemption Amount exceeds the outstanding Principal amount of such holder’s
Note, then such excess Pro Rata Redemption Amount shall be allocated amongst the
remaining holders of Notes in accordance with the foregoing formula. In the
event that the initial holder of any Notes shall sell or otherwise transfer any
of such holder’s Notes, the transferee shall be allocated a pro rata portion of
such holder’s Redemption Allocation Percentage and Pro Rata Redemption Amount.
(10)
NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
(11)
RESERVATION OF AUTHORIZED SHARES.
(a) Reservation.
Commencing on the Amendment Date and until the Authorized Share Stockholder
Approval Date or the Authorized Share Stockholder Consent Date Effective Date,
as the case may be, the Company shall reserve in respect of the conversion of
the Notes not less than 100,000,000 shares of Common Stock. Immediately on and
after the Authorized Share Stockholder Approval Date or the Authorized Share
Stockholder Consent Date Effective Date, as the case may be, the Company shall
reserve out of its authorized and unissued Common Stock a number of shares of
Common Stock for each of the Notes equal to 130% of the Conversion Rate with
respect to the Conversion Amount of each such Note as of the Amendment Date and,
for so long thereafter as any of the Notes are outstanding, the Company shall
take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Notes, 130% of the number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of all of the Notes then outstanding;
provided that at no time shall the number of shares of Common Stock so reserved
be less than the number of shares required to be reserved by the previous
sentence (without regard to any limitations on conversions) (the “Required
Reserve Amount”). The initial number of shares of Common Stock reserved for
conversions of the Notes and each increase in the number of shares so reserved
shall be allocated pro rata among the holders of the Notes based on the
principal amount of the Notes held by each holder at the Amendment Date or on
the date of any increase in the number of reserved shares, as the case may be
(the “Authorized Share Allocation”). In the event that a holder shall
sell or
- 19 -
otherwise transfer any
of such holder’s Notes, each transferee shall be allocated a pro rata portion of
such holder’s Authorized Share Allocation. Any shares of Common Stock reserved
and allocated to any Person which ceases to hold any Notes shall be allocated to
the remaining holders of Notes, pro rata based on the principal amount of the
Notes then held by such holders.
(b) Insufficient
Authorized Shares. If at any time after the Authorized Share Stockholder
Approval Date or the Authorized Share Stockholder Consent Date Effective Date,
as the case may be, while any of the Notes remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
at least a number of shares of Common Stock equal to the Required Reserve Amount
(an “Authorized Share Failure”), then the Company shall immediately take
all action necessary to increase the Company’s authorized shares of Common Stock
to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days
after the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its shareholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each shareholder with a proxy statement and shall use its best
efforts to solicit its shareholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
shareholders that they approve such proposal.
(12)
HOLDER’S REDEMPTIONS.
(a) Mechanics.
The Company shall deliver the applicable Event of Default Redemption Price to
the Holder within five (5) Business Days after the Company’s receipt of the
Holder’s Event of Default Redemption Notice. If the Holder has submitted a
Change of Control Redemption Notice in accordance with Section 5(b), the
Company shall deliver the applicable Change of Control Redemption Price to the
Holder concurrently with the consummation of such Change of Control if such
notice is received prior to the consummation of such Change of Control and
within five (5) Business Days after the Company’s receipt of such notice
otherwise. The Company shall deliver to the Holder Optional Redemption Price to
the Holder within five (5) Business Days after the Company’s receipt of the
Holder Optional Redemption Notice. The Company shall deliver the Acquisition
Redemption Price to the Holder on the Acquisition Redemption Date. The Company
shall deliver the Optional Redemption Price on the applicable Optional
Redemption Date. In the event of a redemption of less than all of the Conversion
Amount of this Note, the Company shall promptly cause to be issued and delivered
to the Holder a new Note (in accordance with Section 19(d)) representing
the outstanding Principal which has not been redeemed. In the event that the
Company does not pay the applicable Redemption Price to the Holder within the
time period required, at any time thereafter and until the Company pays such
unpaid Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any Late
Charges thereon) has not been paid. Upon the Company’s receipt of such notice,
(x) the Redemption Notice shall be null and void with respect to such
Conversion Amount, (y) the Company shall
- 20 -
immediately return this
Note, or issue a new Note (in accordance with Section 19(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this
Note or such new Notes shall be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Redemption Notice is
voided and (B) the lowest Closing Bid Price during the period beginning on
and including the date on which the Redemption Notice is delivered to the
Company and ending on and including the date on which the Redemption Notice is
voided. The Holder’s delivery of a notice voiding a Redemption Notice and
exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments of Late Charges which have accrued prior to the
date of such notice with respect to the Conversion Amount subject to such
notice.
(b) Redemption
by Other Holders. Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event
or occurrence substantially similar to the events or occurrences described in
Section 4(b), Section 5(b) or Section 8 (each, an “Other Redemption
Notice”), the Company shall immediately, but no later than one
(1) Business Day of its receipt thereof), forward to the Holder by
facsimile a copy of such notice. If the Company receives a Redemption Notice and
one or more Other Redemption Notices, during the seven (7) Business Day
period beginning on and including the date which is three (3) Business Days
prior to the Company’s receipt of the Holder’s Redemption Notice and ending on
and including the date which is three (3) Business Days after the Company’s
receipt of the Holder’s Redemption Notice and the Company is unable to redeem
all principal, interest and other amounts designated in such Redemption Notice
and such Other Redemption Notices received during such seven (7) Business
Day period, then the Company shall redeem a pro rata amount from each holder of
the Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other
Redemption Notices received by the Company during such seven (7) Business
Day period.
(13)
SECURITY; LIEN SUBORDINATION. (a) Security. The Obligations are
secured to the extent and in the manner set forth in the Security Documents (as
defined in the Securities Purchase Agreement).
(b) Subordination
of Liens. Notwithstanding the terms (including the description of
Collateral, dating, execution, or delivery of any document, instrument, or
agreement; the time, order, method, or manner of granting, or perfection of any
security interest or lien; the time of filing or recording of any financing
statements, assignments, deeds of trust, mortgages, or any other documents,
instruments, or agreements under the UCC or any other applicable law and any
provision of the UCC or any other applicable law to the contrary, the Holder
agrees that:
(i) at
any time when the CIT Facility is the only Permitted Senior Indebtedness
outstanding, CIT, in its capacity as administrative agent, and for the benefit
of, the lenders who are from time to time party to the CIT Facility shall have a
first priority security interest in and lien upon the all Collateral consisting
of inventory located in the United States and accounts receivable (the “CIT
First Priority Collateral”);
- 21 -
(ii) at
any time when the Permitted Acquisition Indebtedness is outstanding, the lenders
who are from time to time party to such Permitted Acquisition Indebtedness shall
have a first priority security interest in and lien upon the Collateral;
(iii) the
Collateral Agent, for the benefit of the holders of Notes, shall have
(A) at any time when the CIT Facility is the only Permitted Senior
Indebtedness outstanding, a first priority security interest in and Lien upon
all Collateral other than the CIT First Priority Collateral and a second
priority security interest in and lien upon the CIT First Priority Collateral
and (B) at any time when the Permitted Acquisition Indebtedness is
outstanding, a second priority security interest in and lien upon the
Collateral, in each case subject to Permitted Liens.
(14)
VOTING RIGHTS. The Holder shall have no voting rights as the holder of
this Note, except as required by law, including but not limited to the Delaware
General Corporation Law, and as expressly provided in this Note.
(15)
COVENANTS.
(a) Rank.
All payments due under this Note (a) shall rank pari passu with all
Other Notes and (b) shall be senior to all other Indebtedness of the
Company and its Subsidiaries other than Permitted Senior Indebtedness (other
than the CIT Facility, which ranks pari passu with the Notes).
(b) Indebtedness.
So long as any Obligations are outstanding, the Company shall not, and the
Company shall not permit any of its Subsidiaries to, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness, other than
Permitted Indebtedness.
(c) Existence
of Liens. So long as any Obligations are outstanding, the Company shall not,
and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(d) Restricted
Payments. The Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or
make any payments in respect of, by the payment of cash or cash equivalents (in
whole or in part, whether by way of open market purchases, tender offers,
private transactions or otherwise), all or any portion of any Permitted
Indebtedness, whether by way of payment in respect of principal of (or premium,
if any) or interest on, such Indebtedness if at the time such payment is due or
is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would
constitute, an Event of Default has occurred and is continuing.
(e) Restriction
on Redemption and Cash Dividends. Until all of the Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the
Company shall not, directly or indirectly, redeem, repurchase or declare or pay
any cash
- 22 -
dividend or
distribution on its capital stock without the prior express written consent of
the Required Holders.
(f) Consolidated
EBITDA. So long as any Obligations are outstanding, the Company shall not
permit Consolidated EBITDA of the Company and its Subsidiaries at the end of
each Fiscal Quarter of the Company and its Subsidiaries commencing with the
third (3rd) Fiscal
Quarter of 2007 to be less than $3,000,000.
(g) Dispositions.
So long as any Obligations are outstanding, the Company shall not, and the
Company shall not permit any of its Subsidiaries to, convey, sell, lease or
sublease, transfer or otherwise dispose of, whether in one transaction or a
series of related transactions, all or any part of its business, property or
assets, whether now owned or hereafter acquired (or agree to do any of the
foregoing); provided, however, that the Company and its Subsidiaries may
(i) sell inventory in the ordinary course of business, (ii) dispose of
obsolete or worn-out equipment in the ordinary course of business and
(iii) dispose of the non-core assets set forth on
Schedule 15(g) hereto.
(h) Additional
Guaranties and Collateral Security. The Company and each Subsidiary
Guarantor (as defined in the Security Documents) shall cause each Subsidiary of
the Company or any such Subsidiary Guarantor not in existence on the Issuance
Date, to execute and deliver to the Collateral Agent promptly and in any event
within five (5) Business Days after the formation, acquisition or change in
status thereof (i) a Guarantee guaranteeing the Obligations, (ii) a
Security Agreement, (iii) if such Subsidiary has any Subsidiaries, a Pledge
Agreement together with (A) certificates evidencing all of the Capital
Stock of any Person owned by such Subsidiary, (B) undated stock powers
executed in blank, and (C) such opinion of counsel and such approving
certificate of such Subsidiary as the Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares, (iv) one or more Mortgages creating on the real
property of such Subsidiary a perfected, first priority Lien on such real
property (subject to Permitted Liens), a Title Insurance Policy covering such
real property, a current ALTA survey thereof and a surveyor’s certificate, each
in form and substance reasonably satisfactory to the Collateral Agent, together
with such other agreements, instruments and documents as the Collateral Agent
may reasonably require, and (v) such other agreements, instruments,
approvals, legal opinions or other documents reasonably requested by the
Collateral Agent in order to create, perfect, establish the first priority of
(subject to Permitted Liens) or otherwise protect any Lien purported to be
covered by any such Security Agreement, Pledge Agreement or Mortgage or
otherwise to effect the intent that such Subsidiary shall become bound by all of
the terms, covenants and agreements contained in the this Note and that all
property and assets of such Subsidiary shall become Collateral for the
Obligations.
(16)
PARTICIPATION. The Holder, as the holder of this Note, shall be entitled
to such dividends paid and distributions made to the holders of Common Stock to
the same extent as if the Holder had converted this Note into Common Stock
(without regard to any limitations on conversion herein or elsewhere) and had
held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of Common Stock.
- 23 -
(17)
AMENDMENTS.
(a) Vote
to Change the Terms of Notes. The affirmative vote at a meeting duly called
for such purpose or the written consent without a meeting of the Required
Holders shall be required for any change or amendment to this Note or the Other
Notes.
(b) Amendments
Related to Permitted Acquisition Indebtedness. The Holder hereby agrees that
upon the incurrence of any Permitted Acquisition Indebtedness, this Note, the
Other Notes and the Security Documents, in each case to the extent applicable,
shall be amended such that (i) no covenants or Events of Default provisions
herein or therein shall be more restrictive than those contained in the
documents evidencing the Permitted Acquisition Indebtedness and (ii) the
financial covenants in this Note and the Other Notes in Section 15(f) shall be
identical to any similar covenant in the Permitted Acquisition Indebtedness.
(18)
TRANSFER. This Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of
Section 2(g) of the Securities Purchase Agreement; provided, however, that any
such sale, assignment or transfer is in a minimum amount equal to the lesser of
(a) $2,000,000 (or a multiple of $1,000,000 in excess thereof) or (b) the
outstanding Principal amount, Interest and Late Charges, if any, of this Note;
provided, further, however, that such minimum amount shall not apply to any
sale, assignment or transfer to an affiliate of the Holder.
(19)
REISSUANCE OF THIS NOTE.
(a) Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Note (in accordance with Section 19(d)), registered as
the Holder may request, representing the outstanding Principal being transferred
by the Holder and, if less then the entire outstanding Principal is being
transferred, a new Note (in accordance with Section 19(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that, by reason of
the provisions of Section 3(c)(iii) and this Section 19(a), following
conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of
this Note.
(b) Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 19(d)) representing the outstanding Principal.
(c) Note
Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a
new Note or Notes (in accordance with Section 19(d) and in principal amounts of
at least $100,000) representing in the aggregate the outstanding Principal of
this Note, and each such
- 24 -
new Note will represent
such portion of such outstanding Principal as is designated by the Holder at the
time of such surrender.
(d) Issuance
of New Notes. Whenever the Company is required to issue a new Note pursuant
to the terms of this Note, such new Note (i) shall be of like tenor with
this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 19(a) or Section 19(c), the Principal designated by the
Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new
Note, which is the same as the Issuance Date of this Note, (iv) shall have
the same rights and conditions as this Note, and (v) shall represent
accrued and unpaid Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date.
(20)
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. 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 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 Holder 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 or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(21)
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, attorneys’ fees and disbursements.
(22)
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted
by the Company and all the Purchasers and shall not be construed against any
person as the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note.
- 25 -
(23)
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the
Holder 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.
(24)
DISPUTE RESOLUTION. In the case of a dispute as to the determination of
the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or
the arithmetic calculation of the Conversion Rate or any Redemption Price, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one (1) Business Day of receipt, or deemed receipt, of the
Conversion Notice or Redemption Notice or other event 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 within one
(1) Business Day of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within one (1) Business
Day submit via facsimile (a) the disputed determination of the Closing Bid
Price, the Closing Sale Price or the Weighted Average Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or any
Redemption Price to the Company’s independent, outside accountant. The Company,
at the Company’s expense, shall cause 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 five (5) Business Days
from the time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.
(25)
NOTICES; PAYMENTS.
(a) Notices.
Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f) of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least twenty (20) days prior to the date on
which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any
pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.
(b) Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant
to this Note, such payment shall be made in lawful money of the United States of
America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Purchasers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided that the
- 26 -
Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the
Holder’s wire transfer instructions. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a Business Day, the same
shall instead be due on the next succeeding day which is a Business Day and, in
the case of any Interest Date which is not the date on which this Note is paid
in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of Interest due on such date. Any amount
of Principal or other amounts due under the Transaction Documents, other than
Interest, which is not paid when due shall result in a late charge being
incurred and payable by the Company in an amount equal to interest on such
amount at the rate of fifteen percent (15%) per annum from the date such amount
was due until the same is paid in full (“Late Charge”). All payments of
any Redemption Price to be made by the Company to the Holder hereunder shall
also include payment in respect of any other Obligations then due and owing.
(26)
CANCELLATION. After all the Obligations (excluding any Obligations that
are contingent, unmatured or otherwise unknown at the time of payment) at any
time owed have been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued; provided, however, that any contingent, unmatured or unknown claims
arising under the Transaction Documents that are known as of the date of payment
or that mature or become known thereafter and which would otherwise be
considered Obligations hereunder shall survive the cancellation of this Note.
(27)
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.
(28)
GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. The Company hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address it set forth
on the signature page hereto and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute
- 27 -
or rule of law. Any
such provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to the Holder, to realize
on any collateral or any other security for such obligations, or to enforce a
judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(29)
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall
have the following meanings:
(a) “Acquisition”
means the acquisition, directly or indirectly, whether by way of stock purchase,
merger, consolidation or similar transaction of a business engaged in the
manufacture and sale of consumer products in the bath and skincare segments
which acquisition shall be in form and substance satisfactory to the Required
Holders and approved by the Required Holders prior to the consummation of such
acquisition.
(b) “Acquisition
Redemption Amount” means, on any date of determination, an aggregate
Principal amount of the Notes up to $20,000,000.
(c) “Acquisition
Redemption Equity Conditions” means that each of the following applicable
conditions is satisfied: (i) prior to the two hundred fortieth (240th) day after the
Issuance Date, (A) any applicable shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating Section 3(d) hereof and the rules or regulations of the Principal
Market; (B) there shall not have occurred an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (C) the Company otherwise shall have been in material compliance
with and shall not have materially breached any provision, covenant,
representation or warranty of any Transaction Document; and (D) the
Transaction Stockholder Consent or the Transaction Stockholder Approval, as the
case may be, shall have been obtained; and (ii) thereafter, the Equity
Conditions.
(d) “Acquisition
Redemption Equity Conditions Failure” means during any period commencing
with the Acquisition Redemption Notice Date through the date of redemption, the
Acquisition Redemption Equity Conditions have not been satisfied (or waived in
writing by the Holder).
(e) “Acquisition
Redemption Price” means in the event that the Company redeems an aggregate
Principal amount equal to up to $20,000,000 in connection with the Acquisition
Redemption pursuant to Section 9(b), (i) for up to $10,000,000 of
Principal amount redeemed that results in a permanent reduction in Principal
amount of the Note and provided that no other convertible indebtedness or other
convertible securities are being issued by the Company to any lender providing
financing for the Acquisition or any of their respective affiliates in
replacement thereof, 115% of the Conversion Amount being redeemed and
(ii) for
- 28 -
any Principal amount in
excess of amounts redeemed pursuant to clause (i) hereof, but not to exceed
$20,000,000, such price that is mutually agreed upon by the Holder and the
Company and in the event that the Holder and the Company cannot mutually agree
upon a price when such agreement is required pursuant to the foregoing (ii),
there shall be no Acquisition Redemption other than pursuant to clause
(i) hereof.
(f) “Acquisition
Special Cure Period” means the period ending as of the earlier to occur of
(i) March 1, 2007 and (ii) the date of the consummation of the
Acquisition.
(g) “Affiliate”
means, with respect to any specified Person, a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, such specified Person (it being understood that a
Person shall be deemed to “control” another Person, for purposes of this
definition, if such Person directly or indirectly has the power to direct or
cause the direction of the management and policies of such other Person, whether
through holding beneficial ownership interests in such other Person, through
contracts or otherwise).
(h) “Approved
Stock Plan” means any employee benefit plan which has been approved by the
Board of Directors of the Company, pursuant to which the Company’s securities
may be issued to any employee, officer or director for services provided to the
Company.
(i) “Authorized
Share Stockholder Approval” has the meaning ascribed to such term in the
Amendment Agreement.
(j) “Authorized
Share Stockholder Approval Date” has the meaning ascribed to such term in
the Amendment Agreement.
(k) “Authorized
Share Stockholder Consent” has the meaning ascribed to such term in the
Amendment Agreement.
(l) “Authorized
Share Stockholder Consent Effective Date” has the meaning ascribed to such
term in the Amendment Agreement.
(m) “Authorized
Share Stockholder Meeting Deadline” has the meaning ascribed to such term in
the Amendment Agreement.
(n) “Bloomberg”
means Bloomberg Financial Markets.
(o) “Business
Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
(p) “Capital
Stock” means (i) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
- 29 -
(q) “Certificate
of Designations” has the meaning ascribed to such term in the Exchange
Agreement.
(r) “Change
of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Stock in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Company.
(s) “CIT
Facility” means the Financing Agreement dated as of August 3, 2006
between The CIT Group/Commercial Services, Inc. (“CIT”) as lender and
Ascendia Brands Co., Inc., as borrower, and the documents executed in connection
therewith; provided, however, that the aggregate outstanding
amount (taking into account the maximum amounts which may be advanced under the
loan documents evidencing the CIT Facility) does not at any time exceed
$13,000,000.
(t) “Closing
Bid Price” and “Closing Sale Price” means, for any security as of any
date, the last closing bid price and last closing trade price, respectively, for
such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 24. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
(u) “Collateral
Agent” has the meaning ascribed to such term in the Securities Purchase
Agreement, and shall include all successors thereto.
- 30 -
(v) “Common
Stock Deemed Outstanding” means, at any given time, the number of shares of
Common Stock outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any Common Stock owned or held by or for
the account of the Company or issuable upon conversion or exercise, as
applicable, of the Notes, the Preferred Shares and the Warrants.
(w) “Consolidated
EBITDA” means, with respect to any Person for any period, the Consolidated
Net Income of such Person and its Subsidiaries for such period, plus (i)
without duplication, the sum of the following amounts of such Person and its
Subsidiaries for such period and to the extent deducted in determining
Consolidated Net Income of such Person for such period: (A) Consolidated
Net Interest Expense, (B) income tax expense, (C) depreciation
expense, and (D) amortization expense.
(x) “Consolidated
Net Income” means, with respect to any Person for any period, the net income
(loss) of such Person and its Subsidiaries for such period, determined on a
consolidated basis and in accordance with GAAP, but excluding from the
determination of Consolidated Net Income (without duplication) (a) any
extraordinary or non recurring gains or losses or gains or losses from the sale
or other disposition of assets (excluding any sales of inventory in the
ordinary course of business on ordinary business terms), (b) restructuring
charges, (c) any tax refunds, net operating losses or other net tax
benefits, (d) effects of discontinued operations, (e) interest income
(including interest paid-in-kind) and (f) any fees and expenses arising out
of or relating to the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents.
(y) “Consolidated
Net Interest Expense” means, with respect to any Person for any period,
gross interest expense of such Person and its Subsidiaries for such period
determined on a consolidated basis and in accordance with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person),
less (i) the sum of (A) interest income for such period and
(B) gains for such period on Hedging Agreements (to the extent not included
in interest income above and to the extent not deducted in the calculation of
gross interest expense), plus (ii) the sum of (A) losses for
such period on Hedging Agreements (to the extent not included in gross interest
expense) and (B) the upfront costs or fees for such period associated with
Hedging Agreements (to the extent not included in gross interest expense), in
each case, determined on a consolidated basis and in accordance with GAAP.
(z) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.
- 31 -
(aa) “Convertible
Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.
(bb) “Eligible
Market” means the Principal Market, The New York Stock Exchange, Inc., The
NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital
Market.
(cc) “Equity
Conditions” means that each of the following conditions is satisfied: (i) on
each day during the period beginning six months prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), either (x) the
Registration Statement filed pursuant to the Registration Rights Agreement shall
be effective and available for the resale of all remaining Registrable
Securities in accordance with the terms of the Registration Rights Agreement and
there shall not have been any Grace Periods (as defined in the Registration
Rights Agreement) or (y) all shares of Common Stock issuable upon
conversion of the Notes and Preferred Shares and exercise of the Warrants shall
be eligible for sale without restriction and without the need for registration
under any applicable federal or state securities laws; (ii) on each day
during the Equity Conditions Measuring Period, the Common Stock is designated
for quotation on the Principal Market and shall not have been suspended from
trading on such exchange or market (other than suspensions of not more than two
days and occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by such exchange
or market been threatened or pending either (A) in writing by such exchange
or market or (B) by falling below the minimum listing maintenance
requirements of such exchange or market; (iii) during the one (1) year
period ending on and including the date immediately preceding the applicable
date of determination, the Company shall have delivered shares of Common stock
issuable upon conversion of the Notes and Preferred Shares and upon exercise of
the Warrants to the holders on a timely basis as set forth in Section 3(c)(i)
hereof (and analogous provisions under the Other Notes), the Certificate of
Designations and Section 1(a) of the Warrants; (iv) any applicable shares
of Common Stock to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules or regulations of the Principal Market; (v) during the Equity
Conditions Measuring Period, the Company shall not have failed to timely make
any payments within five (5) Business Days of when such payment is due pursuant
to any Transaction Document; (vi) during the Equity Conditions Measuring
Period, there shall not have occurred either (A) the public announcement of
a pending, proposed or intended Fundamental Transaction which has not been
abandoned, terminated or consummated or (B) an Event of Default or an event
that with the passage of time or giving of notice would constitute an Event of
Default; (vii) the Company shall have no knowledge of any fact that would
cause (x) the Registration Statements required pursuant to the Registration
Rights Agreement not to be effective and available for the resale of all
remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) any shares of Common Stock issuable
upon conversion of the Notes and Preferred Shares and shares of Common Stock
issuable upon exercise of the Warrants not to be eligible for sale without
restriction pursuant to Rule 144(k) and any applicable state securities laws;
(viii) the Company otherwise shall have been in material compliance with
and shall not have materially breached any provision, covenant, representation
- 32 -
or warranty of any
Transaction Document; and (ix) the Transaction Stockholder Approval and the
Authorized Share Stockholder Approval shall have been obtained.
(dd) “Equity
Conditions Failure” means that during any period commencing with the
Optional Redemption Notice Date through the Optional Redemption Date, the Equity
Conditions have not been satisfied (or waived in writing by the Holder).
(ee) “Excluded
Security” means any Common Stock issued or issuable: (i) in connection
with any Approved Stock Plan; (ii) upon conversion of the Notes or the
Preferred Shares or the exercise of the Warrants; (iii) upon conversion,
exercise or exchange of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Subscription Date, provided
that the terms of such Options or Convertible Securities are not amended,
modified or changed on or after the Subscription Date; and (iv) in
connection with any stock split, stock dividend, recapitalization or similar
transaction by the Company for which adjustment is made pursuant to
Section 7(b).
(ff) “Fiscal
Quarter” means each of the fiscal quarters adopted by the Company for
financial reporting purposes that correspond to the Company’s fiscal year that
ends on the last day of February, or such other fiscal quarter adopted by the
Company for financial reporting purposes in accordance with GAAP.
(gg) “Fundamental
Transaction” means that the Company shall (or in the case of clause
(vi) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act)), directly or indirectly, in one
or more related transactions, (i) consolidate or merge with or into
(whether or not the Company is the surviving corporation) another Person, or
(ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person or Persons to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Person or Persons making or party to, such purchase, tender or exchange
offer), or (iv) consummate a stock 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 the 50% of either the outstanding shares of Voting Stock (not
including any shares of Voting 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 purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Common Stock, or
(vi) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the
aggregate ordinary voting power represented by issued and outstanding Common
Stock.
(hh) “GAAP”
means United States generally accepted accounting principles, consistently
applied.
(ii) “Guarantee”
means (i) the guarantee of each Subsidiary Guarantor and (ii) each
guarantee substantially in the form of Exhibit L-2 to the Securities
Purchase Agreement made by any other Subsidiary in favor of the Collateral Agent
for the
- 33 -
benefit of the
Collateral Agent and the holders of the Notes pursuant to Section 15(g), in
each case as such agreement may be amended, modified, supplemented or
reaffirmed.
(jj) “Hedging
Agreement” means any interest rate, foreign currency, commodity or equity
swap, collar, cap, floor or forward rate agreement, or other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency, commodity or equity values (including, without limitation, any option
with respect to any of the foregoing and any combination of the foregoing
agreements or arrangements), and any confirmation executed in connection with
any such agreement or arrangement.
(kk) “Indebtedness”
of any Person means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services, including (without limitation) “capital
leases” in accordance with generally accepted accounting principles (other than
trade payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (v) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (vi) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (vii) all indebtedness referred to in clauses (i) through
(vi) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.
(ll) “Interest
Rate” means, (i) initially, nine percent (9.0%) per annum, (ii) in
the event that the Company has not obtained the Authorized Share Stockholder
Approval by the Authorized Share Stockholder Meeting Deadline, eleven percent
(11.0%) and (iii) in the event that the Company has not obtained the
Authorized Share Stockholder Approval by June 30, 2007, thirteen percent
(13.0%), in each case subject to adjustment as provided herein.
(mm) “Mortgage”
means a mortgage (including, without limitation, a leasehold mortgage), deed of
trust or deed to secure debt, in form and substance satisfactory to the
Collateral Agent, made by the Company or any Subsidiary Guarantor in favor of
the Collateral Agent for the benefit of the Collateral Agent and the holders of
the Notes, securing the Obligations and delivered to the Collateral Agent
pursuant to the Security Documents, Section 15(g) hereof or otherwise.
- 34 -
(nn) “Obligations”
means all present and future indebtedness, obligations, and liabilities of the
Company and any Subsidiary Guarantor to the Collateral Agent and the holders of
the Notes under the Transaction Documents, whether or not the right of payment
in respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured,
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 4(a). Without limiting
the generality of the foregoing, the Obligations of each party under the
Transaction Documents include (a) the obligation to pay principal,
interest, charges (including Late Charges), expenses, fees, attorneys’ fees and
disbursements, indemnities and other amounts payable by such Person under the
Transaction Documents, and (b) the obligation of such Person to reimburse
any amount in respect of any of the foregoing that the Collateral Agent or any
holder of Notes (in its sole discretion) may elect to pay or advance on behalf
of such Person.
(oo) “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.
(pp) “Parent
Entity” of a Person means an entity that, directly or indirectly, controls
the applicable Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.
(qq) “Permitted
Acquisition Indebtedness” means the principal of (and premium, if any),
interest on, and all fees and other amounts (including, without limitation, any
reasonable out-of-pocket costs, enforcement expenses (including reasonable
out-of-pocket legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations relating thereto) payable by
Company and/or its Subsidiaries under or in connection with any credit facility
to be entered into by the Company and/or its Subsidiaries with one or more
financial institutions (and on terms and conditions) in connection with the
financing of, or subsequent to, the Acquisition, in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to the execution of any such facility; provided,
however, that the aggregate outstanding amount of such Indebtedness
permitted hereunder (taking into account the maximum amounts which may be
advanced under the loan documents evidencing such Permitted Acquisition
Indebtedness) does not at any time exceed $250,000,000.
(rr) “Permitted
Financing” means, in one or more transactions, any issuance or sale or in
accordance with Section 7, any deemed issuance or sale (i) which
issuance or sale does not exceed $5,000,000 in the aggregate, (ii) is at a
consideration per share greater than 90% of the arithmetic average of the
Weighted Average Price of the Common Stock for the ten (10) consecutive
Trading Days ending on the date immediately prior to the execution of the
definitive agreement for such Permitted Financing for any and all transactions
and (iii) where if warrants are issued in such Permitted Financing, such
warrants are exercisable for not more than 25% of the shares of Common Stock
issued or issuable in such transaction and such warrants have an exercise price
that is equal to or greater than the arithmetic average of the Weighted Average
Price of the Common Stock for the ten (10) consecutive
- 35 -
Trading Days ending on
the date immediately prior to the execution of the definitive agreement for such
Permitted Financing.
(ss) “Permitted
Indebtedness” means (i) Permitted Senior Indebtedness, (ii)
Indebtedness evidenced by this Note and the Other Notes, (iii) Indebtedness
evidenced by a seller note issued in connection with the Acquisition,
(iv) other unsecured Indebtedness in an aggregate amount not to exceed
$20,000,000 outstanding at any time incurred by the Company and/or any of its
Subsidiaries that is made expressly subordinate in right of payment to the
Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (1) the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until ninety-one (91) days after the Maturity Date
or later and (2) total interest and fees at a rate in excess of the
Interest Rate hereunder, (v) Indebtedness secured by Permitted Liens,
(vi) Indebtedness to trade creditors incurred in the ordinary course of
business, and (vii) extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon the Company or its
Subsidiary, as the case may be.
(tt) “Permitted
Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens,
arising in the ordinary course of business with respect to a liability that is
not yet due or delinquent or that are being contested in good faith by
appropriate proceedings, (iv) Liens securing the Obligations, (v) Liens
(A) upon or in any equipment (as defined in the Security Agreement)
acquired or held by the Company or any of its Subsidiaries to secure the
purchase price of such equipment or indebtedness incurred solely for the purpose
of financing the acquisition or lease of such equipment, or (B) existing on
such equipment at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, (vi) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (i) and (v) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the Indebtedness being extended,
renewed or refinanced does not increase, (vii) Liens securing the
obligations under Permitted Senior Indebtedness; (viii) leases or subleases
and licenses and sublicenses granted to others in the ordinary course of the
Company’s business, not interfering in any material respect with the business of
the Company and its Subsidiaries taken as a whole, (ix) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payments of
custom duties in connection with the importation of goods and (x) Liens
arising from judgments, decrees or attachments in circumstances not constituting
an Event of Default under Section 4(a)(ix).
(uu) “Permitted
Senior Indebtedness” means (i) prior to the consummation of the
Acquisition, the CIT Facility and (ii) following the consummation of the
Acquisition, the Permitted Acquisition Indebtedness.
- 36 -
(vv) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
(ww) “Pledge
Agreement” means a Pledge and Security Agreement made by the Company or any
Subsidiary in favor of the Collateral Agent for the benefit of the Collateral
Agent and the holders of the Notes, substantially in the form of Exhibit J
to the Securities Purchase Agreement, as such agreement may be amended,
modified, supplemented or reaffirmed, securing the Obligations and delivered to
the Collateral Agent.
(xx) “Preferred
Shares” has the meaning ascribed to such term in the Exchange Agreement.
(yy) “Principal
Market” means the American Stock Exchange.
(zz) “Redemption
Notices” means, collectively, the Event of Default Redemption Notices, the
Change of Control Redemption Notices, the Holder Optional Redemption Notice, the
Optional Redemption Notices and the Acquisition Redemption Notice, and each of
the foregoing, individually, a Redemption Notice.
(aaa)
“Redemption Premium” means (i) in the case of the Events of Default
described in Section 4(a)(i) — (vi) and (ix) — (xviii), 125% or
(ii) in the case of the Events of Default described in
Section 4(a)(vii) — (viii), 100%.
(bbb)
“Redemption Prices” means, collectively, the Event of Default Redemption
Price, Change of Control Redemption Price, the Holder Optional Redemption Price,
the Optional Redemption Price and the Acquisition Redemption Price and, each of
the foregoing, individually, a Redemption Price.
(ccc) “Registration
Rights Agreement” means that certain registration rights agreement dated as
of August 2, 2006 by and among the Company and the initial holders of the
Notes, as such agreement may be amended, modified or supplemented, relating to,
among other things, the registration of the resale of the Common Stock issuable
upon conversion of the Notes and the Preferred Shares and exercise of the
Warrants.
(ddd)
“Required Holders” means the holders of Notes representing at least a
majority of the aggregate principal amount of the Notes then outstanding.
(eee)
“SEC” means the United States Securities and Exchange Commission.
(fff)
“Security Agreement” means a Security Agreement made by the Company or
any Subsidiary in favor of the Collateral Agent for the benefit of the
Collateral Agent and the holders of the Notes, substantially in the form of
Exhibit K to the Securities Purchase Agreement, as such agreement may be
amended, modified, supplemented or reaffirmed, securing the Obligations and
delivered to the Collateral Agent.
- 37 -
(ggg)
“Security Documents” has the meaning ascribed to such term in the
Securities Purchase Agreement.
(hhh)
“Series B Warrants” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all successors thereto.
(iii) “Subscription
Date” means June 30, 2006.
(jjj)
“Successor Entity” means the Person, which may be the Company, formed by,
resulting from or surviving any Fundamental Transaction or the Person with which
such Fundamental Transaction shall have been made, provided that if such Person
is not a publicly traded entity whose common stock or equivalent equity security
is quoted or listed for trading on an Eligible Market, Successor Entity shall
mean such Person’s Parent Entity.
(kkk)
“Title Insurance Policy” means a mortgagee’s loan policy, in form and
substance reasonably satisfactory to the Collateral Agent, together with all
endorsements made from time to time thereto, issued by or on behalf of a title
insurance company reasonably satisfactory to the Collateral Agent, insuring the
Lien created by a Mortgage in an amount and on terms satisfactory to the
Collateral Agent, delivered to the Collateral Agent.
(lll)
“Trading Day” means any day on which the Common Stock are traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock are then traded; provided that
“Trading Day” shall not include any day on which the Common Stock are scheduled
to trade on any such exchange or market for less than 4.5 hours or any day that
the Common Stock are suspended from trading during the final hour of trading on
such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on any such exchange or market, then during
the hour ending at 4:00:00 p.m., New York Time).
(mmm)
“Transaction Documents” has the meaning ascribed to such term in the
Securities Purchase Agreement.
(nnn)
“Transaction Stockholder Approval” has the meaning ascribed to such term
in the Amendment Agreement.
(ooo)
“Transaction Stockholder Consent” has the meaning ascribed to such term
in the Amendment Agreement.
(ppp)
“Voting Stock” of a Person means capital stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power to elect, or the general power to appoint, at least a majority of the
board of directors, managers or trustees of such Person (irrespective of whether
or not at the time capital stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
- 38 -
(qqq)
“Warrants” has the meaning ascribed to such term in the Securities
Purchase Agreement, and shall include all warrants issued in exchange therefor
or replacement thereof.
(rrr)
“Weighted Average Price” means, for any security as of any date, the
dollar volume-weighted average price for such security on the Principal Market
during the period beginning at 9:30:01 a.m., New York Time (or such other
time as the Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time
(or such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as
such market publicly announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for such security on such particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Required
Holders. If the Company and the Required Holders are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 24. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
(30)
DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note (other than in connection with the
delivery of the notice requesting approval of the Acquisition or Permitted
Acquisition Indebtedness pursuant to the definitions thereof which the Holder
has elected to receive in accordance with Section 4(j)(ii) of the
Securities Purchase Agreement), unless the Company has in good faith determined
that the matters relating to such notice do not constitute material, nonpublic
information relating to the Company or its Subsidiaries, the Company shall
within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, nonpublic information, relating to the Company or its Subsidiaries,
the Company shall indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries.
[Signature Page
Follows]
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IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the
Issuance Date and amended and restated as of the Amendment Date set out above.
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ASCENDIA BRANDS, INC.
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Joseph A. Falsetti |
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Joseph A. Falsetti |
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President and Chief Executive Officer |
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SCHEDULE I
Existing Events
of Default
Any
default under this Note, the Existing Note or any other Transaction Document
relating to or arising out of the failure by the Company to (1) file the
Registration Statement as required by the Existing Registration Rights Agreement
(as defined in the Amendment Agreement) by the Filing Deadline (as defined in
the Existing Registration Rights Agreement), (2) make any payment of
accrued interest due on December 31, 2006 pursuant to Section 2 of the
Existing Note and (3) comply with the provisions of Section 15(f) of this
Note at the end of the third and fourth Fiscal Quarters of 2007.
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SCHEDULE
15(g)
The stock in and assets
of Cenuco, Inc., a Florida corporation, and all assets presently associated with
the health and beauty care business outside the United States
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EXHIBIT I
ASCENDIA BRANDS,
INC.
CONVERSION
NOTICE
Reference is made to
the Amended and Restated Senior Secured Convertible Note (the “Note”)
issued to the undersigned by Ascendia Brands, Inc. (the “Company”). In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.001 per share (the “Common
Stock”), as of the date specified below.
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Aggregate Conversion Amount to be
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Notwithstanding
anything to the contrary contained herein, this Conversion Notice shall
constitute a representation by the holder of the Note submitting this Conversion
Notice that, after giving effect to the conversion provided for in this
Conversion Notice, such holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person’s
affiliates) of a number of shares of Common Stock which exceeds the Maximum
Percentage of the total outstanding shares of Company Common Stock as determined
pursuant to the provisions of Section 3(d)(i) of the Note.
Please confirm the
following information:
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Number of shares of Common Stock to be
issued: |
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Please issue the Common
Stock into which the Note is being converted in the following name and to the
following address:
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Authorization: |
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Account Number: |
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(if electronic book entry
transfer) |
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Transaction Code Number: |
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs American
Stock Transfer & Trust Company to issue the above indicated number of shares
of Common Stock in accordance with the Transfer Agent Instructions dated
December [___], 2006 from the Company and acknowledged and agreed to by American
Stock Transfer & Trust Company.
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ASCENDIA BRANDS, INC.
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By: |
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