000-52611 | 23-1537126 | |
(Commission File Number) | (IRS Employer Identification No.) | |
7001 N. Scottsdale Rd., Suite # 2050 Scottsdale, Arizona | 85253 | |
(Address of Principal Executive Offices) | (Zip Code) | |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
▪ | Dividends. Dividends on the Series B-4 Preferred Stock are cumulative and accrue from the issue date and compound quarterly at the rate of 5.65% of the issue price per year, payable quarterly in arrears. The dividend rate is subject to increase in the event the Company is not in compliance with certain of its obligations to the holders of the Series B-4 Preferred Stock, as well as for other occurrences including, but not limited to, bankruptcy, default under indebtedness, judgments in excess of a certain amount, delinquent Securities and Exchange Commission (the “SEC”) filings, and the commencement of certain legal proceedings. Subject to certain dividend rights of holders of Class B Common Stock, par value $0.01 per share, of the Company (the “Class B Common Stock”), no dividend may be paid on any capital stock of the Company during any fiscal year unless all accrued dividends on the Series B Preferred Stock, including the Series B-4 Preferred Stock, have been paid in full, except for dividends on shares of Voting Common Stock, par value $0.01 per share, of the Company (the “Voting Common Stock”) payable in shares of Voting Common Stock; provided, however, that if the Company is in compliance with certain of its obligations to the holders |
▪ | Liquidation Preference. Upon a Liquidation Event or a Deemed Liquidation Event of the Company, before any payment or distribution shall be made to or set apart for the holders of any Junior Stock, the holders of shares of the Series B-4 Preferred Stock will be entitled to receive a liquidation preference of 145% of the sum of the Original Price per share of the Series B-4 Preferred Stock plus all accrued and unpaid dividends; provided, that, if a share of the Series B-4 Preferred Stock would be entitled to an amount greater than its liquidation preference if it had been converted into a share of Common Stock immediately prior to the Liquidation Event or Deemed Liquidation Event, that share of the Series B-4 Preferred Stock shall be entitled to the amount it would have received on an as-converted basis. |
▪ | Optional Conversion. Each share of the Series B-4 Preferred Stock is convertible at any time by any holder thereof into a number of shares of Common Stock initially equal to the sum of the Original Price per share of the Series B-4 Preferred Stock plus all accrued and unpaid dividends, divided by the conversion price then in effect. The initial conversion price is equal to the Original Price per share of the Series B-4 Preferred Stock, subject to adjustment in the event of certain dilutive issuances, stock splits, combinations, mergers or reorganizations. |
▪ | Automatic Conversion. All issued and outstanding shares of the Series B-4 Preferred Stock will automatically convert into shares of Common Stock at the Conversion Price then in effect upon the closing of a sale of shares of Common Stock at a price equal to or greater than 2.25 times the Original Price per share of the Series B-1 Preferred Stock and the Series B-2 Preferred Stock, subject to adjustment, in a firm commitment underwritten public offering and the listing of the Common Stock on a national securities exchange resulting in at least $75,000,000 of gross proceeds to the Company. |
▪ | Optional Redemption. The Company may, at any time that a holder of the Series B-4 Preferred Stock holds less than fifteen percent of the number of shares of the Series B-4 Preferred Stock issued to such holder on the original issuance date, elect to redeem, out of legally available funds, the shares of the Series B-4 Preferred Stock held by such holder at a price (the “Redemption Price”) equal to the greater of (i) 145% of the sum of the Original Price per share of the Series B-4 Preferred Stock plus all accrued and unpaid dividends or (ii) the sum of the Tangible Book Value of the Company per share of Voting Common Stock plus all accrued and unpaid dividends, calculated pursuant to the terms of the Series B-4 Certificate of Designation as of the date of redemption. |
▪ | Redemption upon Demand. At any time after September 25, 2024, each holder of the Series B-4 Preferred Stock may require the Company to redeem, out of legally available funds, the shares of the Series B-4 Preferred Stock held by such holder at the Required Redemption Price. |
▪ | Redemption upon Specified Default Events. In the event of certain default events, breaches (including of operating covenants), a bankruptcy or the occurrence of certain other adverse events, including default on debt or non-appealable judgments against the Company in excess of certain amounts, failure to comply timely with the Company’s reporting obligations under the Exchange Act, or proceedings or investigations against the Company relating to any alleged noncompliance with |
▪ | Voting Rights. Holders of the Series B-4 Preferred Stock are entitled to vote on an as-converted basis on all matters on which holders of Voting Common Stock are entitled to vote. At each election of directors, (A) upon JPM Funding transferring shares of the JPM Series B-4 Shares acquired by it on September 25, 2019 (the “Initial Issuance Date”) to a transferee (other than any Affiliates of JPM Funding or any Affiliate of JPMorgan Chase & Co. and other than in a Pre-Authorized Transfer) approved as required under the Series B-4 Certificate of Designation (the “Series B-4 Holder”), and for so long as the Series B-4 Holder owns greater than fifty percent (50%) of the number of shares of the JPM Series B-4 Shares issued on the Initial Issuance Date, or (B) for so long as JPM Funding owns at least fifty percent (50%) of the number of shares of the Series B-4 Preferred Stock acquired by it on the Initial Issuance Date and less than fifty percent (50%) of the number of shares of the Series B-3 Preferred Stock acquired by it on February 9, 2018 and less than fifty percent (50%) of the number of shares of the Series B-2 Preferred Stock acquired by it on April 11, 2017 (in the case of each of clauses (A) and (B) above, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar reorganization event affecting such shares), the holders of the Series B-4 Preferred Stock, voting as a single class, shall be entitled to elect one director (the “Series B-4 Director”). For the avoidance of doubt, JPM Funding shall not have the right to designate, vote, or fill a vacancy in respect of the Series B-4 Director if it is then entitled to designate, vote, or fill a vacancy in respect of the Series B-2 Director or the Series B-3 Director. |
▪ | At each election of directors, for so long as (A) upon JPM Funding transferring shares of the Series B-4 Preferred Stock to the Series B-4 Holder, and for so long as the Series B-4 Holder owns greater than fifty percent (50%) of the number of shares of the Series B-4 Preferred Stock issued on the Initial Issuance Date or (B) JPM Funding owns (i) at least fifty percent (50%) of the number of shares of the Series B-4 Preferred Stock acquired by it on the Initial Issuance Date, (ii) less than fifty percent (50%) of the number of shares of the Series B-2 Preferred Stock acquired by it on April 11, 2017 and (iii) less than fifty percent (50%) of the number of shares of the Series B-3 Preferred Stock acquired by it on February 9, 2018 (in the case of each of clauses (A) and (B) above, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar reorganization event affecting such shares), the holders of the Series B-4 Preferred Stock, voting as a single class, shall be entitled to designate, vote or fill a vacancy with respect to, by majority vote of the holders of each such series of the Series B Preferred Stock entitled to vote thereon, the Series B Director. The Series B Director, in order to be qualified as such, shall have been designated as a nominee for the position of the Series B Director in a writing furnished to the Corporation by the holders of the Series B Preferred Stock entitled to designate such Series B Director. |
▪ | Investment Committee. In the event JPM Funding has the right to designate, vote, or fill a vacancy in respect of the Series B-4 Director, the Investment Committee shall include the Series B-4 Director (provided such Series B-4 Director was designated as such by JPM Funding or any other Affiliate of JPMorgan Chase & Co.). |
▪ | Transfer Restrictions. Holders may not transfer or pledge their shares of the Series B-4 Preferred Stock without the consent of the Board, subject to applicable laws and the Company’s Certificate of Incorporation. |
▪ | Preemptive Rights. Any holder of the Series B-4 Preferred Stock that owns 10% or more of the outstanding shares of the Series B-4 Preferred Stock is also entitled to participate, on a pro rata basis in proportion to their as-converted Common Stock ownership, in any future equity issuances undertaken by the Company for the primary purpose of raising additional capital, subject to certain exceptions. |
▪ | Required Liquidation. Under the Series B-4 Certificate of Designation, if at any time the Company is not in compliance with certain of its obligations to the holders of the Series B Preferred Stock and fails to pay in full (i) the dividends on the Series B Preferred Stock as of the end of two consecutive fiscal quarters or (ii) the Redemption Price within 180 days following the later of (x) demand therefore resulting from such non-compliance and (y) September 25, 2020, unless the Required Holders and the Required Series B-4 Holders elect otherwise, the Company is required to use its best efforts to commence a liquidation of the Company. |
▪ | Restrictive Covenants. The Series B-4 Certificate of Designation also contains certain restrictive covenants, which require the consent of the Required Series B-4 Holders as a condition to the Company taking certain actions, including without limitation the following: |
o | make, incur or permit to exist any operating expense or capital expenditure in excess of 105% of the amount budgeted therefor in the applicable approved annual budget with respect to any particular budget line item, or 103% of the aggregate amount of such budgeted expenses or capital expenditures, and use reasonable best efforts to avoid making, incurring or permitting to exist any operating expense or capital expenditure in excess of $250,000 not set forth in the Company’s approved annual budget; |
o | enter into any agreement or arrangement that will likely involve payments by the Company or any of the Company’s subsidiaries in excess of $250,000 over the term thereof other than agreements or arrangements authorized in the Company’s approved annual budget; |
o | sell, encumber or otherwise transfer certain assets, including individual loans and real estate owned assets and interests in any of the Company’s wholly owned subsidiaries, unless approved in the Company’s annual budget subject to certain other exceptions; |
o | enter into, or be a party to, any affiliate transaction; |
o | unless approved by the Investment Committee, make any advances or loans to, guarantee for the benefit of, or make any investment in, any other person, other than the Company’s wholly-owned subsidiaries; |
o | dissolve, liquidate or consolidate the Company’s business; |
o | enter into any agreement or plan of merger or consolidation, or engage in any merger or consolidation, unless, upon consummation, the Series B Preferred Stock (x) remains outstanding and unchanged, or (y) shall be converted into equity interests of the surviving entity that have the same relative designations, rights, powers, preferences and privileges provided for in the Series B-4 Certificate of Designation; |
o | engage in any business activity not related to the ownership and operation of mortgage loans or real property or strictly incidental thereto; |
o | enter into any new line of business other than the ownership and operation of real property, mortgage loans and activities strictly incidental thereto; |
o | commence or permit any subsidiary to commence any bankruptcy or similar proceeding; |
o | make any capital contribution to or purchase, redeem, acquire or retire any securities in any other person, or cause or permit any reduction or retirement of the capital stock, partnership interests, membership interests of the Company and its subsidiaries; |
o | hire or terminate certain key personnel or consultants, subject to certain exceptions; |
o | incur additional indebtedness, subject to certain exceptions; |
o | permit the issuance by any subsidiary of any equity securities, subject to certain exceptions; |
o | create or authorize the creation of, or issue, or authorize the issuance of senior preferred stock or parity stock, or any indebtedness or any security convertible into, exchangeable for or having option rights to purchase shares of senior preferred stock or parity stock; |
o | reclassify any class or series of Voting Common Stock into shares with a preference or priority as to dividends or assets superior to or on a parity with the Series B Preferred Stock; |
o | engage any auditor that is not a nationally recognized accounting firm; or |
o | amend, alter, waive or repeal any provision of the Certificate of Incorporation or bylaws in a manner that may adversely affect the holders of the Series B Preferred Stock. |
Exhibits | Exhibit Description |
3.1 | |
4.1 | |
10.1 | |
10.2 | |
By: | /s/ Lawrence D. Bain |
Lawrence D. Bain Co-Chairman and Interim Chief Executive Officer | |
1. | NUMBER OF SHARES AND DESIGNATIONS. 1,875,000 of the 100,000,000 authorized shares of Preferred Stock are designated as shares of Series B-4 Preferred Stock. Except as otherwise expressly provided herein or required by applicable law, the rights, powers and |
2. | RANKING. Subject to the right of the holders of the Class B Common Stock to receive the Special Dividend and except to the extent that the Required Holders (as defined below) and the Required Series B-4 Holders (as defined below) consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below) in accordance with Section 1.1.16 of SCHEDULE 1 hereof and this Section 2, all shares of capital stock of the Corporation shall be junior in rank to all shares of Series B-4 Preferred Stock with respect to the preferences as to dividends, distributions and payments upon a Liquidation Event, Deemed Liquidation Event or redemption (such junior stock is referred to herein collectively as “Junior Stock”). Subject to the right of the holders of the Class B Common Stock to receive the Special Dividend, the designations, rights, powers, preferences and privileges of all shares of Junior Stock of the Corporation shall be subject to the designations, rights, powers, preferences and privileges of the shares of Series B-4 Preferred Stock. Without limiting any other provision of this Certificate of Designation, without the prior written consent of the Required Holders and the Required Series B-4 Holders, the Corporation shall not hereafter authorize or issue any additional or other shares of capital stock that rank (i) senior to the shares of Series B-4 Preferred Stock in respect of the preferences as to dividends, distributions or payments upon a Liquidation Event, Deemed Liquidation Event or redemption (collectively, the “Senior Preferred Stock”) or (ii) pari passu to the shares of Series B-4 Preferred Stock in respect of the preferences as to dividends, distributions or payments upon a Liquidation Event, Deemed Liquidation Event or redemption (collectively, the “Parity Stock”). Notwithstanding the foregoing, shares of Series B-1 Preferred Stock, shares of Series B-2 Preferred Stock, and shares of Series B-3 Preferred Stock shall be considered, individually and collectively, as “Parity Stock”. |
(a) | Each holder of a share of Series B-4 Preferred Stock (each, a “Holder” and collectively, the “Holders”) shall be entitled to receive dividends out of funds legally available therefor (“Dividends”) in an amount per share equal to the Applicable Rate. Dividends on each share of Series B-4 Preferred Stock shall (i) be payable in cash, quarterly in arrears when, as and if declared by the Board, (ii) accrue daily at the Applicable Rate, (iii) commence accruing on the Series B-4 Issue Date, compounded quarterly and (iv) be computed on the basis of the actual number of days elapsed over a three hundred sixty (360) day calendar year. |
(b) | Dividends on the Series B-4 Preferred Stock shall be cumulative and shall continue to accrue and compound whether or not declared. |
(c) | Subject to the right of the holders of the Class B Common Stock to receive the Special Dividend and to the rights of any Senior Preferred Stock or Parity Stock, the Corporation shall not declare, pay or set aside any dividends on any shares of any class or series of capital stock of the Corporation (other than dividends or shares of Voting Common Stock payable in shares of Voting Common Stock) unless and until all accrued dividends on the Series B-4 Preferred Stock have been paid in full in accordance with Section 3(a) above. Thereafter, with respect to any fiscal quarter, the Corporation may declare and pay a cash dividend, out of funds legally available therefor, with respect to the Voting Common Stock subject to the conditions and limitations set forth in Section 1.1.12 of SCHEDULE 1. The Corporation shall not declare or make any dividend or distribution upon or effect any subdivision or combination (in each case, through a stock split, reverse stock split, stock dividend, merger, recapitalization or otherwise) of one or more series of Series B Preferred Stock unless the Corporation simultaneously declares or makes an identical dividend or distribution upon or effects an identical subdivision or combination of the Series B-4 Preferred Stock. |
(d) | In the event that any dividends are declared with respect to the Voting Common Stock or any Junior Stock, the holders of the Series B-4 Preferred Stock as of the record date established by the Board for such dividends shall be entitled to receive as additional dividends (in each case, the “Additional Dividends”) an amount (whether in the form of cash, securities or other property) equal to the amount (and in the same form) of the dividends that such holder would have received had the Series B-4 Preferred Stock been converted into Common Stock as of the date immediately prior to the record date of such dividend, such Additional Dividends to be payable, out of funds legally available therefor, on the payment date of the dividend established by the Board. The record date for any such Additional Dividends shall be the record date for the applicable dividend, and any such Additional Dividends shall be payable to the persons in whose name the Series B-4 Preferred Stock is registered at the close of business on the applicable record date. |
(e) | In the event that any Special Dividend is paid, the holders of the Series B-4 Preferred Stock as of the record date established by the Board therefor shall be entitled to receive as additional dividends (the “Special Preferred Class B-4 Dividends”) for each share of Common Stock that it would hold if it had converted all of its shares of Series B-4 Preferred Stock into Common Stock the same amount that is received by holders of Class B Common Stock with respect to each share of Class B Common Stock (in each case, with respect to the Common Stock and Class B Common Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar reorganization event affecting such shares), such Special Preferred Class B-4 Dividends to be payable, out of funds legally available therefor, on the payment date for the Special Dividend (the “Special Preferred Class |
(a) | Preferential Payments to Holders. In the event of a Liquidation Event or a Deemed Liquidation Event, the Holders shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Preferred Stock upon such Liquidation Event or Deemed Liquidation Event, but before any payment shall be made to the holders of any Junior Stock, an amount per share (the “Series B-4 Liquidation Preference”) equal to the Applicable Percentage times the sum of (i) the Original Price, plus (ii) any Dividends accrued and unpaid thereon, whether or not declared; provided, that, if a share of Series B-4 Preferred Stock would be entitled to an amount greater than its Series B-4 Liquidation Preference if it had been converted into a share of Common Stock immediately prior to the Liquidation Event or Deemed Liquidation Event, the share of Series B-4 Preferred Stock shall be entitled to the amount it would have received on an as-converted basis, without having to be converted into Common Stock. If upon any such Liquidation Event or a Deemed Liquidation Event, the remaining assets of the Corporation available for distribution to its stockholders after payment in full of amounts required to be paid or distributed to holders of Senior Preferred Stock pursuant to this Certificate of Designation shall be insufficient to pay the Holders and the holders of Parity Stock the full amount to which they shall be respectively entitled, the Holders and the holders of Parity Stock shall share ratably in any distribution of the remaining assets of the Corporation in proportion to the respective amounts which would otherwise be payable with respect to the shares of Series B-4 Preferred Stock and Parity Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. To the extent necessary, the Corporation shall cause such actions to be taken by any of the Subsidiaries so as to enable, to the maximum extent permitted by law, the net proceeds of a Liquidation Event or Deemed Liquidation Event to be distributed to the Holders and the holders of Parity Stock in accordance with this Section 4(a). All of the preferential amounts to be paid to the Holders under this Section 4(a) shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any of the assets of the Corporation available for distribution to, the holders of Junior Stock in connection with a Liquidation Event or a Deemed Liquidation Event as to which this Section 4 applies. The aggregate amount which a Holder is entitled to receive under this Section 4(a) with respect to a share of Series B-4 Preferred Stock is hereinafter referred to as the “Series B-4 Liquidation Amount.” |
(b) | Distribution of Remaining Assets. Upon a Liquidation Event or Deemed Liquidation Event, after the payment in full of the Series B-4 Liquidation Preference required to be paid to the Holders as set forth in Section 4(a) above, the Holders will not be entitled to any further participation in any distribution of the remaining assets of the Corporation as Holders of shares of Series B-4 Preferred Stock. |
(c) | Additional Rights. In the event the requirements of this Section 4 are not complied with by the Corporation, the Corporation shall, to the fullest extent permitted by law, forthwith either (i) cause such Liquidation Event or Deemed Liquidation Event to be postponed until such time as the requirements of this Section 4 have been complied with; or (ii) cancel such Liquidation Event or Deemed Liquidation Event, in which event the designations, rights, powers, preferences and privileges of the Holders shall revert to and be the same as such designations, rights, powers, preferences and privileges existing in this Certificate of Designation immediately prior to the Liquidation Event or Deemed Liquidation Event. |
(d) | Deemed Liquidation Events. The effectuation of a transaction (or series of transactions), including, without limitation, each of the following events shall be considered a “Deemed Liquidation Event”, unless the Required Holders and the Required Series B-4 Holders elect otherwise by written notice to the Corporation at least two (2) Business Days prior to the effective date of such event: |
(e) | Noncompliance Event. If at any time following a Noncompliance Event, the Corporation fails to pay in full (i) the Dividends on the Series B Preferred Stock as of the end of two (2) consecutive fiscal quarters or (ii) the Noncompliance Redemption Price for all shares of Series B Preferred Stock within one hundred eighty (180) days following the later of (x) the Noncompliance Redemption Demand and (y) September 25, 2020, then the Corporation shall, unless the Required Holders and the Required Series B-4 Holders elect otherwise by written notice to the Corporation, use its best efforts to promptly commence an orderly wind down, liquidation and dissolution in a commercially reasonable manner, and during such wind down, liquidation and dissolution, the Corporation shall be prohibited from making any new Investments, incurring any Indebtedness or making any dividends or other distributions to its stockholders, other than the Special Dividend and dividends and redemption payments payable to (A) the holders of any Senior Preferred Stock ranking senior to the Series B Preferred Stock with respect to such dividend or redemption payments and (B) the holders of any Series B Preferred Stock with respect to shares of Series B Preferred Stock. |
(a) | General. Except as otherwise provided herein or as required by applicable law, the Holders shall vote together with the holders of Voting Common Stock and any other securities properly issued by the Corporation that are entitled to vote together with the Voting Common Stock with respect to the matter to be voted upon as a single class on all matters submitted to a vote of the holders of Voting Common Stock, with each share of Series B-4 Preferred Stock entitled to such number of votes as are equal to the number of whole shares of Common Stock into which such share of Series B-4 Preferred Stock would then be convertible pursuant to Section 6(a) below, regardless of whether the shares of Series B-4 Preferred Stock are then so converted. |
(b) | Series B-4 Preferred Stock Protective Provisions. Except with the prior vote or written consent of the Required Series B-4 Holders, the Corporation shall not, directly or indirectly, whether by merger, consolidation or otherwise: |
(i) | amend, alter, waive or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation to alter or change the designations, rights, powers, preferences or privileges of the Holders in a manner adverse to the Holders; or |
(ii) | enter into any agreement or plan of merger or consolidation with any other entity, or engage in any merger or consolidation with any other entity, unless, upon the consummation of such consolidation or merger, the shares of Series B-4 Preferred Stock shall (x) remain outstanding and unchanged, or (y) shall be converted into equity interests of the surviving entity that have the same relative designations, rights, powers, preferences and privileges provided for herein. |
(c) | Preferred Directors. |
(i) | At each election of directors, (A) upon JPM transferring shares of Series B-4 Preferred Stock to a transferee (other than any of its Affiliates or any other Affiliate of JPMorgan Chase & Co. and other than in a Pre-Authorized Transfer) approved as required under the terms of this Certificate of Designation (the “Series B-4 Holder”), and for so long as the Series B-4 Holder owns greater than fifty percent (50%) of the number of shares of Series B-4 Preferred Stock issued on the JPM Acquisition Date, or (B) for so long as JPM owns (i) at least fifty percent (50%) of the number of shares of Series B-4 Preferred Stock acquired by it on the JPM Acquisition Date, (ii) less than fifty percent (50%) of the number of shares of Series B-3 Preferred Stock acquired by it on the JPM Acquisition Date, and (iii) less than fifty percent (50%) of the number of shares of Series B-2 Preferred Stock acquired by it on the JPM Acquisition Date (in the case of each of clauses (A) and (B), subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar reorganization event affecting such shares), the holders of the Series B-4 Preferred Stock, voting as a single class, shall be entitled to elect one director (the “Series B-4 Director”). For the avoidance of doubt, JPM shall not have the right to designate, vote, or fill a vacancy in respect of the Series B-4 Director if it is then entitled to designate, vote, or fill a vacancy in respect of the Series B-2 Director or the Series B-3 Director. The Series B-4 Director, in order to be qualified as such, shall have been designated as a nominee for the position of Series B-4 Director in a writing furnished by the Series B-4 Holder or JPM, as applicable, to the Corporation. Any vacancy in respect of the Series B-4 Director shall be filled solely by the Series B-4 Holder or JPM, as applicable. |
(ii) | At each election of directors, in the event JPM has the right to designate, vote, or fill a vacancy in respect of the Series B-4 Director, the holders of the Series B-4 Preferred Stock (in addition to any of the other series of Series B Preferred Stock entitled to designate, vote, or fill a vacancy in respect of such Series B Director, pursuant to the Existing Preferred Stock Certificate of Designation) shall be entitled to designate, vote, or fill a vacancy with respect to, by majority vote of the holders of each such series of Series B Preferred Stock entitled to vote thereon, the Series B Director. The Series B Director, in order to be qualified as such, shall have been |
(iii) | Prior to each meeting of stockholders, the Corporation shall use its best efforts to cause the nomination of (A) subject to the terms and conditions in Section 5(c)(i) of this Certificate of Designation, a person designated in writing by JPM or the Series B-4 Holder, as applicable, as the Series B-4 Director and (B) subject to the terms and conditions in Section 5(c)(ii) of this Certificate of Designation and Section 5(c)(iv) of the Existing Preferred Stock Certificate of Designation, a person designated in writing by the holders of Series B Preferred Stock entitled to vote thereon, as the Series B Director. |
(d) | CEO Director. Subject to the provisions of this Section 5(d), one director, to be qualified as such, must be the Chief Executive Officer of the Corporation. If a vacancy shall occur in the office of the Board held by the Chief Executive Officer, the Required Holders and the Required Series B-4 Holders may appoint a person to fill such vacancy and such replacement director (the “non-CEO replacement director”) shall continue to be qualified as such until a replacement Chief Executive Officer has been duly hired by the Corporation, at which time the non-CEO replacement director shall automatically be disqualified and shall cease to serve on the Board. |
(e) | Removal of Preferred Directors. The Series B-4 Director may be removed without cause by, and only by, the affirmative vote of the holder or holder(s) of not less than a majority of the voting power of all outstanding shares of Series B-4 Preferred Stock, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of such stockholder(s). |
(f) | Investment Committee. In the event JPM has the right to designate, vote, or fill a vacancy in respect of the Series B-4 Director, the Investment Committee shall include the Series B-4 Director (provided such Series B-4 Director was designated as such by JPMorgan Chase Funding Inc. or any other Affiliate of JPMorgan Chase & Co.). |
(g) | Additional Covenants. |
(i) | At any time that the Corporation is not subject to the reporting requirements of Section 13 and Section 15 of the Exchange Act, if the Corporation is not otherwise voluntarily filing annual, quarterly and current reports required thereunder, the Corporation shall deliver to all Holders reports that the Corporation would have been required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act if the Corporation were subject to such provisions within the same timeframes such reports would |
(ii) | At any time when JPM holds at least forty percent (40%) of the number of shares of Series B-4 Preferred Stock acquired by it on the JPM Acquisition Date (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar reorganization event affecting such shares), the Corporation shall comply in all respects with each of the Operating Covenants and other terms and conditions set forth in SCHEDULE 1 hereto. SCHEDULE 1 hereto is incorporated by reference herein to this Certificate of Designation. Without limiting the foregoing and any other remedy available with respect to any breach thereof, any act or transaction that requires the prior vote or written consent of the Required Series B-4 Holders pursuant to any provision of SCHEDULE 1 shall be null and void ab initio, and of no force or effect, unless such vote or consent has duly been given or obtained. |
6. | OPTIONAL CONVERSION. At any time after the Series B Issue Date of such shares, any Holder may cause the conversion of all or a portion of its shares of Series B-4 Preferred Stock as follows: |
(a) | Conversion Ratio. At the Conversion Time (as defined below), each outstanding share of Series B-4 Preferred Stock shall, without the payment of additional consideration by the Holder thereof, convert into the number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the sum of (a) the Original Price, plus (b) all Dividends accrued and unpaid thereon, whether or not declared, by (ii) the Conversion Price (as defined below) in effect at the Conversion Time. The “Conversion Price” shall initially be equal to the Original Price. The Conversion Price, and the rate at which shares of Series B-4 Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. |
(b) | Termination of Conversion Rights. In the event a Redemption Notice is delivered pursuant to Section 8, the rights to convert shares of Series B-4 Preferred Stock designated for redemption into Common Stock (the “Conversion Rights”) shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a Liquidation Event or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable upon the occurrence of such event to the Holders; provided, that, a Holder may elect to exercise |
(c) | Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of shares of the Series B-4 Preferred Stock. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as reasonably determined by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series B-4 Preferred Stock the Holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion. |
(d) | Mechanics of Conversion. |
(i) | Notice of Conversion. In order for a Holder to convert all or a portion of the outstanding shares of Series B-4 Preferred Stock into shares of Common Stock, the Holder shall surrender a certificate or certificates representing the shares of Series B-4 Preferred Stock it desires to convert (or, if the Holder certifies under penalty of perjury that such Holder’s certificate(s) has(ve) been lost, stolen or destroyed, a completed lost certificate affidavit attached hereto as Exhibit A (“Lost Certificate”)), together with a completed and executed share exchange form attached hereto as Exhibit B (“Exchange Form”). The Exchange Form must be signed by the Holder and the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration or enlargement or any change whatsoever. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the Holder or its attorney duly authorized in writing. The close of business on the date of receipt by the Corporation of such certificate(s) (or Lost Certificate(s)) and Exchange Form(s) shall be the time of conversion (the “Conversion Time”). As soon as practicable after the Conversion Time and the surrender of the certificate or certificates (or Lost Certificate) for Series B-4 Preferred Stock, the Corporation shall issue and deliver to such Holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 6(c) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment, out of funds legally available therefor, of all declared but unpaid dividends to the Holder of such shares so converted; provided, that, such payment shall not occur until the payment date fixed by the Board for the dividend so declared and such payment shall not be made unless such Holder was the holder of record of Series B-4 Preferred Stock as of the record date fixed for such dividend. Such converted |
(ii) | Reservation of Shares. The Corporation shall at all times when the Series B-4 Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B-4 Preferred Stock into Common Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B-4 Preferred Stock into Common Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B-4 Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in the Corporation’s best efforts to seek to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series B-4 Preferred Stock into Common Stock, the Corporation will take any commercially reasonable corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price. |
(iii) | Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of the shares of Series B-4 Preferred Stock to Common Stock pursuant to this Section 6. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series B-4 Preferred Stock so converted to Common Stock were registered, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Corporation the full amount of any such tax (together with any interest or penalties thereon) or has established, to the satisfaction of the Corporation in the Corporation’s sole discretion, that such tax (together with any interest or penalties thereon) has been paid. |
(1) | If the Corporation at any time or from time to time after the Series B Original Issue Date (or, with respect to the Series B-4 Preferred Stock, after the Series B Issue Date with respect thereto) shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Voting Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date. |
(2) | If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 6(e)(ii), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Voting Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (2) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option |
(3) | If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 6(e)(ii) (either because the consideration per share (determined pursuant to Section 6(e)(iii)) of the Additional Shares of Common Stock subject thereto was equal to or greater than the greater of the Conversion Price then in effect and the Common FMV at such time, or because such Option or Convertible Security was issued before the Series B Original Issue Date (or, in the case of the Series B-4 Preferred Stock, the Series B Issue Date with respect thereto), are revised after the Series B Original Issue Date (or, in the case of the Series B-4 Preferred Stock, the Series B Issue Date with respect thereto) as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Voting Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto shall be deemed to have been issued effective upon such increase or decrease becoming effective. |
(4) | Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Section 6(e)(ii), the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued. |
(5) | If the number of shares of Voting Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in this Section 6(e)(i) shall be effected at the time of such issuance or amendment based on |
(ii) | Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall issue after the Series B Original Issue Date (or, with respect to the Series B-4 Preferred Stock, after the Series B Issue Date with respect thereto) Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(e)(i)), without consideration or for a consideration per share less than either the Conversion Price or the Common FMV in effect immediately prior to such issue (the foregoing a “Dilutive Issuance”), then the Conversion Price shall be reduced to an amount equal to “CP1” below: |
(iii) | Determination of Consideration. For purposes of this Section 6(e), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: |
a. | insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest; |
b. | insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as reasonably determined by the Board and consented to in writing by the Required Holders and the Required Series B-4 Holders; |
c. | in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both cash and property other than cash; be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as applicable, as reasonably determined by the Board and consented to in writing by the Required Holders and the Required Series B-4 Holders; and |
d. | in all cases where the Additional Shares of Common Stock issued or deemed to have been issued are not Common Stock, be adjusted to reflect the relative value of such Additional Shares of Common Stock and the Common Stock, as reasonably determined by the Board and consented to in writing by the Required Holders and the Required Series B-4 Holders. |
(2) | Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(e)(ii) relating to Options and Convertible Securities, shall be determined by dividing |
a. | the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange |
b. | the maximum number of shares of Voting Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. |
(iv) | Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Section 6(e)(iii), and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period). |
(g) | Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 4(d), if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation (other than a Deemed Liquidation Event) in which the Voting Common Stock (but not the Series B-4 Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Section 6(e)), then, following any such reorganization, recapitalization, reclassification, |
(h) | Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation at its expense shall, as promptly as reasonably practicable, but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series B Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any Holder (but in any event not later than twenty (20) days thereafter), furnish or cause to be furnished to such Holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series B-4 Preferred Stock. |
(i) | the Corporation shall take a record of the holders of its Voting Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series B-4 Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or |
(ii) | of any capital reorganization of the Corporation, any reclassification of the Voting Common Stock of the Corporation, or any Deemed Liquidation Event; or |
(iii) | of a Liquidation Event or a Deemed Liquidation Event; |
(a) | Trigger Events. Upon the closing of a sale of shares of Common Stock at a price equal to or greater than two and a quarter times (2.25x) the Original Price for the Series B-1 Preferred Stock and Series B-2 Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Voting Common Stock), in a firm commitment underwritten public offering and listing of the Common Stock on a national securities exchange, pursuant to an effective registration statement under the Securities Act, resulting in at least seventy-five million dollars ($75,000,000) of gross proceeds to the Corporation (the time of such closing is referred to herein as the “Automatic Conversion Time”), (x) all outstanding shares of Series B-4 Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price, and (y) such shares may not be reissued by the Corporation. |
(b) | Procedural Requirements. All Holders shall be sent written notice of the Automatic Conversion Time at least ten (10) days prior to the effectiveness thereof and the place designated for automatic conversion of all such shares of Series B-4 Preferred Stock pursuant to this Section 7. Upon receipt of such notice, each Holder shall surrender |
(a) | Redemption upon Noncompliance Event. The Corporation shall promptly, but in no event later than five (5) Business Days after a Noncompliance Event, notify the Holders in writing of the occurrence of a Noncompliance Event. Upon the occurrence of a Noncompliance Event, the Required Series B-4 Holders may require the Corporation to redeem, out of funds legally available therefor, all shares of Series B-4 Preferred Stock at a price (the “Noncompliance Redemption Price”) equal to the greater of (i) the Applicable Percentage times the sum of (x) the Original Price per share, plus (y) any Dividends accrued and unpaid thereon, whether or not declared, until redeemed, and (ii) the sum of (x) the Per Share Book Value per share as of the date of such redemption, plus (y) any Dividends accrued and unpaid thereon, whether or not declared, until redeemed, on the twentieth (20th) day after receipt |
(b) | Required Redemption. At any time after September 25, 2024, each Holder of Series B-4 Preferred Stock, may require the Corporation to redeem, out of funds legally available therefor, all shares of such Series B-4 Preferred Stock held by such Holder at a price (the “Required Redemption Price”) equal to the greater of (i) the Applicable Percentage times the sum of (x) the Original Price per share, plus (y) any Dividends accrued and unpaid thereon, whether or not declared, until redeemed, and (ii) the sum of (x) the Per Share Book Value per share as of the date of such redemption, plus (y) any Dividends accrued but unpaid thereon, whether or not declared, until redeemed, on the thirtieth (30th) day after receipt of a written notice from such Holder requesting such redemption (a “Required Redemption Demand”) (the date of such redemption being referred to as a “Required Redemption Date”). On such Required Redemption Date, the Corporation shall redeem all such shares of Series B-4 Preferred Stock held by such Holder. To the extent that the Corporation does not redeem any shares of Series B-4 Preferred Stock as required by the preceding sentence, (i) Dividends shall continue to accrue on such shares of the Series B-4 Preferred Stock at the Applicable Rate per annum, whether or not declared, until all such shares are redeemed, and (ii) all rights of the Series B-4 Preferred Stock shall remain in full force and effect until redeemed. If the Corporation does not have sufficient funds available to redeem all shares of Series B-4 Preferred Stock of Holders to be redeemed on the Required Redemption Date, the Corporation shall redeem each Holder’s applicable shares of Series B-4 Preferred Stock out of any available funds, each Holder being entitled to receive its pro rata share thereof based on the number of outstanding shares of Series B-4 Preferred Stock, and shall redeem the remaining shares of Series B-4 Preferred Stock to be redeemed as soon as practicable after the Corporation has available funds (which Series B-4 Preferred Stock not so redeemed shall continue to accrue Dividends). |
(c) | Optional Redemption. If at any time JPM holds less than fifteen percent (15%) of the number of shares of Series B-4 Preferred Stock issued to it on the JPM Acquisition Date (subject in |
(d) | Redemption Notice. The Corporation shall send written notice of any Noncompliance Redemption Demand, Required Redemption Demand, or Optional Redemption, as applicable (in each case, a “Redemption Notice”), to each Holder not more than ten (10) days after a Noncompliance Redemption Demand or less than thirty (30) days prior to the Required Redemption Date or Optional Redemption Date, as applicable. The Redemption Notice to each Holder shall state: |
(i) | the number of shares of Series B-4 Preferred Stock held by such Holder that the Corporation shall redeem on the Noncompliance Redemption Date or the Optional Redemption Date, as applicable, or that the Holder may require the Corporation to redeem on the Required Redemption Date (in each case, a “Redemption Date”), as applicable; the Noncompliance Redemption Date, the Required Redemption Date, or the Optional Redemption Date, as applicable, and the Noncompliance Redemption Price, the Required Redemption Price, or the Optional Redemption Price, as applicable; |
(ii) | the date upon which the Holder’s right to convert such Series B-4 Preferred Stock will terminate if tendered for redemption (as determined in accordance with Section 6(b)); and |
(iii) | that the Holder is to surrender to the Corporation, in the manner and at the place designated by the Corporation, his, her or its certificate or certificates representing the shares of Series B-4 Preferred Stock to be redeemed. |
(e) | Surrender of Certificates; Payment. On or before a Redemption Date, each Holder of shares of Series B-4 Preferred Stock to be redeemed on the Redemption Date, unless such Holder has exercised his, her or its right to convert such shares of Series B-4 Preferred Stock as provided in Section 6, shall surrender the original certificate or original certificates representing such shares of Series B-4 Preferred Stock (or, if such registered Holder certifies |
(f) | Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date, the Noncompliance Redemption Price, the Required Redemption Price, or the Optional Redemption Price, as applicable, payable upon redemption of the shares of Series B-4 Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor, then notwithstanding that the certificates evidencing any of the shares of Series B-4 Preferred Stock so called for redemption shall not have been surrendered, Dividends with respect to such shares of Series B-4 Preferred Stock shall cease to accrue after such Redemption Date, and all rights with respect to such shares of Series B-4 Preferred Stock shall forthwith after the Redemption Date terminate, except only the right of the Holders to receive the Noncompliance Redemption Price, the Required Redemption Price, or the Optional Redemption Price, as applicable, without interest upon surrender of their certificate or certificates therefor. |
9. | REDEEMED OR OTHERWISE ACQUIRED SHARES. Any shares of Series B-4 Preferred Stock that are redeemed or otherwise acquired by the Corporation shall be automatically and immediately retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of Subsidiaries may exercise any voting or other rights granted to the Holders following redemption. |
10. | PREEMPTIVE RIGHTS. Each Holder that owns 10% or more of the outstanding shares of Series B-4 Preferred Stock at the time of any future issuance of equity capital stock of the Corporation shall have the preemptive right to purchase shares of equity capital stock of the Corporation issued in connection with such issuance in proportion to its Pro Rata Share; provided, however, that such preemptive rights shall not be available to any Holder for issuances of Exempted Securities or Voting Common Stock issued as consideration in connection with any merger or acquisition involving the Corporation. |
11. | TRANSFERABILITY. No Holder shall be entitled to Transfer (as defined on SCHEDULE 1 to this Certificate of Designation) shares of Series B-4 Preferred Stock to any Person unless such Transfer has been approved by the Board, which approval shall not be unreasonably withheld or delayed by the Board; provided that, no such approval or other consent of the |
12. | WAIVER. No designations, rights, powers, preferences or privileges or other terms of the Series B-4 Preferred Stock set forth herein may be waived with respect to any shares of the Series B-4 Preferred Stock unless waived specifically in each instance by the Holder thereof, and then such waiver shall be effective only in the specific instance, and for the purpose, for which given. |
13. | CORPORATION MAY NOT REQUIRE REDEMPTION OR CONVERSION. The Corporation shall not have the right to redeem or convert (or cause the redemption or conversion of) any shares of the Series B-4 Preferred Stock, other than (i) an automatic conversion as set forth in Section 7(a), (ii) a redemption following either a Noncompliance Redemption Demand or a Required Redemption Demand, or (iii) an Optional Redemption pursuant to Section 8(c). |
14. | NOTICES. The Corporation shall provide each Holder with prompt written notice of all |
15. | SERIES B PREFERRED STOCK REGISTER. The Corporation shall maintain at its principal executive offices (or such other office or agency of the Corporation as it may designate by notice to the Holders), a register for the Series B-4 Preferred Stock, in which the Corporation shall record the name, address and facsimile number of the Persons in whose name the shares of Series B-4 Preferred Stock have been issued, as well as the name and address of each transferee pursuant to any transfer permitted under this Certificate of Designation. The Corporation may treat the Person in whose name any Series B-4 Preferred Stock 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 permitted under this Certificate of Designation. |
16. | HOLDER MATTERS. Any Holder action, approval or consent required, desired or otherwise sought by the Corporation pursuant to the DGCL may be effected by written consent of the Holders or at a duly called meeting of the Holders, all in accordance with the applicable rules and regulations of the DGCL. |
17. | DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Conversion Price, Common FMV or Per Share Book Value (as the case may be) or the Noncompliance Redemption Price, the Required Redemption Price, or the Optional Redemption Price, as applicable, the Corporation or the applicable Holder (as the case may be) shall submit to the other party the disputed determinations or arithmetic calculations (as the case may be) via facsimile or e-mail (i) within seven (7) Business Days after receipt of the applicable notice giving rise to such dispute to the Corporation or such Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after such Holder learned of the circumstances giving rise to such dispute (including, without limitation, as to whether any issuance or sale or deemed issuance or sale was an issuance or sale or deemed issuance or sale of Exempted Securities). If such Holder and the Corporation are unable to agree upon such determination or calculation within seven (7) Business Days of such disputed determination being submitted to the Corporation or such Holder (as the case may be), then the Corporation shall, within two (2) Business Days, submit via facsimile or e-mail (a) the disputed determination of the Conversion Price, Common FMV or Per Share Book Value (as the case may be) to an independent, national or regional investment bank, with demonstrated expertise in the issue at question, mutually selected by such Holder and the Corporation or (b) any redemption price to an independent, national or regional outside accountant, with demonstrated expertise in the issue at question (other than the Corporation’s or such Holder’s independent, outside accountant). If the Corporation and the Holder are unable to agree upon an investment bank or accountant (as the case may be), each party shall select one investment bank or accountant (as the case may be), and then the two investment banks or accountants (as the case may be) so selected shall select the investment bank or accountant (as the case may be) meeting the required criteria, which third investment bank or accountant (as the case may be) shall be the one who determines the issue at question. The Corporation shall pay the expense of retaining the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and the Corporation shall cause such investment bank or accountant (as the case may be) to notify the Corporation and such Holder of the results no later than twenty (20) Business Days from the time the Corporation receives such disputed determinations; provided, however, if one of the party’s determination with respect to the price or value in question is more than ten percent (10%) off of the price or value ultimately determined by the investment bank or accountant (as the case may be) to be the correct price or value (the “Non-Prevailing Party”) and the other party’s determination with respect to the price or value in question is not more than ten percent (10%) off of the price or value ultimately determined by the investment bank or accountant to be the correct price or value (the “Prevailing Party”), then |
(a) | Governing Law. This Certificate of Designation shall be interpreted in accordance with the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by such laws. |
(b) | Section References. Unless otherwise stated herein, references to sections appearing in this Certificate of Designation, including any document attached or appended hereto, shall be deemed to be references to sections of this Certificate of Designation. |
(c) | Severability of Provisions. Each provision of this Certificate of Designation shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Certificate of Designation which are valid, enforceable and legal. |
By: | /s/ Lawrence D. Bain |
Name: Lawrence D. Bain Title: Co-Chairman and Interim Chief Executive Officer | |
(i) | shares of Voting Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series B Preferred Stock; |
(ii) | shares of Voting Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Voting Common Stock that is covered by Sections 6(f) or 6(g); |
(iii) | Voting Common Stock and Options granted to employees or directors of, or consultants or advisors to, the Corporation or any Subsidiaries pursuant to the Equity Incentive Plan or the Director Compensation Plan; |
(iv) | the ITH Warrant; |
(v) | the Bain Stock Grant; |
(vi) | the Juniper Warrant; |
(vii) | the Meris Option; |
(viii) | the Other Executive Stock Grants; |
(ix) | the JPM Warrant; or |
(x) | shares of Voting Common Stock actually issued upon the exercise of Options or shares of Voting Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security. |
(i) | the failure by the Corporation (A) to pay the full Dividend to Holders for a fiscal quarter within thirty (30) days following the end of such quarter, (B) to consummate a redemption of the Series B Preferred Stock within ninety (90) days of the Noncompliance Redemption Demand, or Required Redemption Demand, as the case may be, or (C) to consummate a redemption of the Series B Preferred Stock on the thirtieth (30th) day after the applicable Holder’s receipt of written notice for an Optional Redemption; |
(ii) | the breach of any covenant or other noncompliance with any Transaction Document that remains uncured for a period of thirty (30) days following the earlier of the Corporation’s knowledge or receipt of written notice thereof; |
(iii) | the bankruptcy, receivership, liquidation, or assignment for benefit of creditors of the Corporation or any of its Subsidiaries, except for any such event or circumstance relating to a Subsidiary where (A) the event or circumstance has been approved by |
(iv) | the default by the Corporation or any of its Subsidiaries under one or more agreements for Indebtedness for borrowed money that remains uncured for a period of thirty (30) days following the Corporation’s knowledge thereof exceeding $2,000,000 in any instance, or $10,000,000 in the aggregate (if there has been more than a single default), that would entitle the holder thereof to accelerate repayment thereof, other than indebtedness to the extent that such default has been approved by unanimous action of the Board; |
(v) | judgment(s) in excess of $2,000,000 in aggregate rendered against the Corporation or any of its Subsidiaries on and after the Series B Original Issue Date, which judgment(s) are not appealable or otherwise released or cured within ninety (90) days, except for judgments approved by the Board; |
(vi) | the failure by the Corporation to cause the nomination of a Series B-1 Director, Series B-2 Director, Series B-3 Director, Series B-4 Director or Series B Director designated in accordance with Section 5(c) of this Certificate of Designation and the Existing Preferred Stock Certificate of Designation; |
(vii) | the failure to comply timely with the Corporation’s reporting obligations under the Exchange Act, provided that if the Corporation timely files with the SEC a Form 12b-25 in accordance with Rule 12b-25 under the Exchange Act, and otherwise complies with Rule 12b-25, then upon the filing of such report within the time period permitted by Rule 12b-25, the Corporation shall be deemed to have filed such report on a timely basis; or |
(viii) | the commencement of any legal proceeding or formal investigation relating to any alleged noncompliance with any Federal or State statute, rules or regulations governing the issuance of securities, the Corporation’s status as a public reporting company or the lending, marketing or foreclosure practices of the Corporation or any of its Subsidiaries. |
1. | the undersigned is the holder of the following certificate (the “Lost Certificate”) representing shares of Series B-4 Cumulative Convertible Preferred Stock (the “Series B-4 Preferred Stock”), of IMH Financial Corporation (the “Corporation”) immediately prior to the conversion of such shares into shares of Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”); |
2. | Series B-4 Preferred Stock Certificate Number: [ ] |
3. | the Lost Certificate has been lost, stolen or destroyed and cannot now be produced; |
4. | the undersigned has made, or caused to be made, a diligent search for the Lost Certificate and has been unable to find or recover such Lost Certificate; |
5. | the undersigned is the unconditional sole owner of the Lost Certificate, and the Lost Certificate and any rights of the undersigned in the Lost Certificate have not, in whole or in part, been sold, endorsed, assigned, transferred, hypothecated, pledged or otherwise disposed of, and no contract to undertake any of the foregoing has been entered, and no person, firm, corporation or other entity, other than the undersigned, has any right, title, claim, equity or interest, or power of attorney in, to, or respecting such Lost Certificate or the proceeds thereof; |
6. | the undersigned is making this affidavit for the purpose of inducing the Corporation to (i) deliver to the undersigned a new certificate (the “New Certificate”) evidencing ownership of the Common Stock to be issued to the undersigned pursuant to the conversion of the Series B-4 Preferred Stock into Common Stock or (ii) redeem the Series B-4 Preferred Stock; |
7. | the undersigned will immediately and without consideration return the Lost Certificate to the Corporation should it at any time hereafter come into the hands, custody or power of the undersigned or any other person or entity over which the undersigned has control; and |
8. | to the fullest extent permitted by law, the undersigned will indemnify, protect and hold harmless the Corporation, its successors and assigns and their respective Affiliates, and their respective, officers, agents, attorneys, directors, transfer agents, registrars, trustees and depositories and any of their respective successors or assigns (collectively, the “Indemnified |
Name(s) and Address(es) of | Series B-4 Preferred Stock | No. of Series B-4 Preferred Stock Shares Represented by the Series B-4 Preferred | ||
Registered Holder | Certificate | Stock Certificate | ||
COMPANY: | |
IMH FINANCIAL CORPORATION | |
By: /s/ Lawrence D. Bain | |
Name: Lawrence D. Bain | |
Title: Co-Chairman and Interim CEO | |
HOLDERS: | |
JCP REALTY PARTNERS, LLC | |
By: /s/ Jay Wolf | |
Name: Jay Wolf | |
Title: Managing Partner | |
JUNIPER NVM, LLC | |
By: Juniper Capital Partners, LLC | |
Its: Sole Member | |
By: /s/ Jay Wolf | |
Name: Jay Wolf | |
Title: Manager | |
JPMORGAN CHASE FUNDING INC. | |
By: /s/ Chadwick S. Parson | |
Name: Chadwick S. Parson | |
Title: Managing Director | |
TRANSFEREE: [insert name of transferee] | |
By: | |
: | |
Name: | |
Title: | |
Address: | |
Acknowledged and agreed by: | |
IMH FINANCIAL CORPORATION | |
By: | |
Name: | |
Title: President | |
• | on any national securities exchange or U.S. inter-dealer quotation system of a registered national securities association on which the securities may be listed or quoted at the time of sale; |
• | in the over-the-counter market; |
• | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
• | through the writing of options, whether such options are listed on an options exchange or otherwise; |
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
• | 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; |
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
• | an exchange distribution in accordance with the rules of the applicable exchange; |
• | public or privately negotiated transactions; |
• | short sales; |
• | sales pursuant to Rule 144; |
• | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
• | a combination of any such methods of sale; or |
• | any other method permitted pursuant to applicable law. |
IMH Financial Corporation By: /s/ Lawrence D. Bain Name: Lawrence D. Bain Title: Chairman and CEO JPM: JPMorgan Chase Funding Inc. By:_/s/ Chadwick S. Parson_______ Name: Chadwick S. Parson Title: Managing Director JCP: JCP Realty Partners, LLC By:_/s/ Jay Wolf________________ Name: Jay Wolf Title: Managing Partner JUNIPER: Juniper NVM, LLC By: Juniper Capital Partners, LLC Its: Sole Member By: _/s/ Jay Wolf________________ Name: Jay Wolf Title: Manager | |