Document:

exv10w2

EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

     THIS
REGISTRATION RIGHTS AGREEMENT dated as of the ___ day of                     , 2010 by and
among DRI CORPORATION, a North Carolina corporation (the “Company”) and                      (the
“Holder”).

     The parties agree as follows:

Section 1. Definitions. For purposes of this Agreement:

     (a) “Series K Senior Convertible Preferred Stock” means the Company’s Series K Senior
Convertible Preferred Stock with a liquidating value of $5,000 per share;

     (b) “Registrable
Securities” means                      shares of Series K Convertible Preferred Stock to
be issued to the Holder upon acceptance by the Company of that certain Subscription Agreement of
even date (the “Agreement”; certain terms not defined herein but used herein are used as defined in
the Agreement);

     (c) “register” and “registration” refer to a registration of the Registrable Securities
effected by filing a registration statement or similar document pursuant to the Securities Act of
1933, as amended (the “Act”) and the declaring or ordering of effectiveness of such registration
statement; and

     (d) The “Company” means DRI Corporation, a North Carolina corporation.

Section 2. Demand Registration.

     (a) If at any time the Company receives a written request from the Holder that the Company
file a registration statement under the Act covering the registration of Registrable Securities
held by him, then the Company shall, subject to the limitations of this Section 2, use its best
efforts to, within six (6) months of the date of such request, effect the registration under the
Act of all Registrable Securities and will keep such registration statement effective for a minimum
period of six (6) months thereafter. The Company shall be obligated to effect only one (1)
registration pursuant to this Section 2(a).

     (b) If the Holder intends to distribute the Registrable Securities covered by his request by
means of an underwriting, he shall so advise the Company as a part of his request made pursuant to
this Section 2. The Holder shall (together with the Company as provided in Section 3) enter into
an underwriting

 

 

agreement in customary form with a mutually acceptable underwriter or underwriters.

Section 3. “Piggyback” Rights. For a period of one (1) year from August ___, 2010, and if
(but without any obligation to do so) the Company proposes to register any of its securities under
the Act in connection with a public offering of such common stock for cash proceeds payable in
whole or in part to the Company (other than with respect to a Registration Statement filed on Form
S-8 or Form S-4 or such other similar form then in effect under the Securities Act), the Company
shall, at such time, subject to the provisions of Section 6 and 7 hereof and upon request of the
Holder cause to be registered under the Act all of the Registrable Securities which the Holder
requests be registered; provided, however, if the managing underwriter of the public offering of
shares proposed to be registered by the Company advises the Holder in writing that marketing
factors require a limitation of the number of shares to be underwritten, then the number of shares
of Registrable Securities of the Holder that may be included in the underwriting shall be so
limited on a prorate basis. Such “piggyback rights” shall expire on the registration and sale of
the Registrable Securities pursuant to Section 2 above or upon the sale of the Registrable
Securities hereunder.

Section 4. Registration Procedure. Whenever required under this Agreement to effect the
registration of any Registrable Securities, the Company shall, as expeditiously as is reasonably
possible:

     (a) Furnish to the Holder of the Registrable Securities covered by such registration
statement such number of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as he may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by him.

     (b) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter of such
offering. The Holder participating in such underwriting shall also enter into and perform his
obligations under such agreement.

     (c) Notify the Holder of Registrable Securities covered by such registration statement, at
any time when a prospectus relating thereto covered by such registration statement is required to
be delivered under the Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary to make
the

 

 

statements therein not misleading in the light of the circumstances then existing.

Section 5. Furnish Information. The Holder shall promptly furnish to the Company in
writing such reasonable information regarding the Holder, the Registrable Securities held by the
Holder, and the intended method of disposition of such securities as shall be required to effect
the registration of his Registrable Securities.

Section 6. Expenses of Registration. All of the foregoing expenses relating to the
Registrable Securities incurred in connection with registration, filing or qualification pursuant
to this Agreement, including (without limitation) all registration, filing and qualification fees,
printers’ bills, mailing and delivery expenses, accounting fees, and the fees and disbursements of
counsel for the Company, but excluding underwriting discounts or fees, shall be borne by the
Company.

Section 7. Indemnification and Contribution. In the event any Registrable Securities are
included in a registration statement under this Agreement:

     (a) To the extent permitted by law, the Company will indemnify and hold harmless the Holder,
the officers and directors of each Holder, any underwriter (as defined in the Act) for such holder,
and each person, if any, who controls such Holder or underwriter within the meaning of the Act or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject under the Act, the
Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements
thereto, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse each such Holder, officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action; provided however,
that the indemnity agreement contained in this Section 7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon an untrue statement or alleged untrue statement
or omission or

 

 

alleged omission made in such registration statement, preliminary prospectus or
final prospectus or any amendment or supplement thereto in reliance upon and in conformity with
written information furnished expressly for use in connection with such registration by any such
Holder, underwriter or controlling person; provided, further, however, that if any losses, claims,
damages or liabilities arise out of or are based upon any untrue statement, alleged untrue
statement, omission or alleged omission contained in any preliminary prospectus, and made in
reliance upon and in conformity with written information furnished by such Holder expressly for use
therein, which did not appear in the final prospectus, the Company shall not have any such
liability with respect thereto to such Holder, any person who controls such Holder within the
meaning of the Act, or any director of such Holder, if such Holder delivered a copy of the
preliminary prospectus to the person alleging such losses, claims, damages or liabilities and
failed to deliver a copy of the final prospectus, as amended or supplemented if it has been amended
or supplemented, to such person at or prior to the written confirmation of the sale to such person,
provided that such Holder had an obligation to deliver a copy of the final prospectus to such
person.

     (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act, any underwriter and
any other Holder selling securities in such registration statement or any of its directors or
officers or any person who controls such Holder or underwriter against any losses, claims, damages
or liabilities, joint or several) to which the Company or any such director, officers, controlling
person, or underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the untrue statement or omission or
alleged untrue statement or omission in respect of which such loss, claim, damage or liability is
asserted was made in reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or controlling person, or other Holder, officer, director, or
controlling person in

 

 

connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in this Section 7(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action, if such settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld); provided, further that the maximum liability of
any selling Holder under this Section 7(b) in regard to any registration statement shall in no
event exceed the amount of the proceeds received by such selling Holder from the sale of securities
under such registration statement; provided, further however, that if any losses, claims, damages
or liabilities arise out of or are based upon an untrue statement, alleged untrue statement,
omission or alleged omission contained in any preliminary prospectus which did not appear in the
final prospectus, such seller shall not have any such liability with respect thereto to the
Company, any person who controls the Company within the meaning of the Act, any officer of the
Company who signed the registration statement or any director of the Company, if the Company
delivered a copy of the preliminary prospectus to the person alleging such losses, claims, damages
or liabilities and failed to deliver a copy of the final prospectus, as amended or supplemented if
it has been amended or supplemented, to such person at or prior to the written confirmation of the
sale to such person, provided that the Company had an obligation to deliver a copy of the final
prospectus to such person.

     (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section 7, 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 notified, to assume the defense thereof with
counsel mutually satisfactory to the parties. An indemnified party shall have the right to retain
its own counsel, however, the fees and expenses of such counsel shall be at the expense of the
indemnified party, unless (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, (ii) the indemnifying party has failed to assume the defense and
employ counsel, or (iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the indemnified party shall have
been advised by such counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action on behalf of such
indemnified parry, it being understood, however, that the indemnifying party shall not, in
connection with any

 

 

one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all indemnified
parties). The failure to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to any indemnified
party under this Agreement.

     (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages or liabilities or
actions in respect thereof referred to therein, then each indemnifying party shall in lieu of;
indemnifying such indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and selling Holder, on
the other, in connection with the statements or omissions which resulted in such losses, claims,
damages, liabilities or actions as well as any other relevant equitable considerations, including
the failure to give any required notice. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information supplied by the
Company, on the one hand, or by such selling Holder on the other, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
The parties hereto acknowledge and agree that it would not be just and equitable if contribution
pursuant to this subparagraph (d) were determined by pro rata allocation (even if all of the
selling Holder were treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in this subparagraph
(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages,
liabilities or actions in respect thereof referred to above in this subparagraph (d) shall be
deemed to include any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. Notwithstanding the provisions
of this subparagraph (d), the amount the selling Holder shall be required to contribute shall not
exceed the amount, if any, by which the total price at which the securities sold by each of them
were offered to the public exceeds the amount of any damages which they would have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission, or other violation of law. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of fraudulent misrepresentation.

 

 

Section 8. Miscellaneous.

     (a) Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the Company and to the Holder and their respective heirs, personal representatives,
successors and assigns.

     (b) Notices. Except as otherwise provided herein, any notice, consent or request to
be given in connection with any term or provision of this Agreement shall be deemed to have been
given sufficiently if sent by hand, registered or certified mail, postage prepaid, facsimile
transmission or courier (next day delivery), to the Company or to the Holder at their respective
addresses as provided on or about the date hereof.

     (c) Integration. This Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereby and no party shall be bound by, nor shall any
party be deemed to have made, any covenants, representations, warranties undertakings or agreements
except those contained in such entire Agreement. The section and paragraph headings contained in
this Agreement are for the reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     (d) Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall constitute one and the
same agreement.

     (e) Amendment. This Agreement may be amended, changed, waived or terminated only in
writing signed by each of the parties.

     IN WITNESS WHEREOF, this Agreement has been executed effective as of the date first above
written.

	 	 	 	 	 
	 	DRI CORPORATION

 	 
	 	By  	 	 
	 	 	President 	 
	 

	 	 	 	 	 
	 	HOLDER:

 	 
	 	
 	 (SEAL)exv10w3

EXHIBIT 10.3

CERTIFICATE OF DESIGNATION

OF

SERIES K SENIOR CONVERTIBLE PREFERRED STOCK

OF

DRI CORPORATION

DRI Corporation (hereinafter called the “Corporation”), a corporation organized and existing under
the Business Corporation Act of the State of North Carolina, hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation as required by Section 55-6-02
of the Business Corporation Act by a unanimous written consent in lieu of a meeting, dated August
12, 2010.

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this
Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the
provisions of the Articles of Incorporation of the Corporation (“Articles of Incorporation”), the
Board of Directors hereby certifies in their entirety the terms and provisions of the Series K
Senior Convertible Preferred Stock, par value $.10 per share, shall have the designation and number
of shares, and the relative rights, preferences, and limitations thereof as follows:

			
	Section 1.	 	Designation and Amount. The shares of this series shall be
designated as “Series K Senior Convertible Preferred Stock”
(the “Series K Preferred Stock”) and the number of shares
constituting the Series K Preferred Stock shall be 475 shares.
Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series K
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance
upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the
Corporation convertible into Series K Preferred Stock.

			
	Section 2.	 	Dividends and Distributions.

     (a) The holders of shares of Series K Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, consistent with
applicable law and out of funds legally available therefor, dividends during the
period commencing on October 7, 2009 (the “Commencement Date”) and continuing for as
long as any of the shares of Series K Preferred Stock remain outstanding. Dividends
shall accrue quarterly at the rate of nine and one-half percent (9-1/2%) per annum
on the Liquidation Preference (as hereinafter defined), shall compound quarterly,
and shall be paid on December 15, March 15, June 15 and September 15 of each year
(each, a “Payment Date”) (except that if any such date is a Saturday, Sunday or
legal holiday, then such dividend shall be payable on the next day that is not a
Saturday, Sunday or legal holiday); provided,

 

 

however, that the first payment of
dividends following the Commencement Date
shall be made on December 15, 2009. Each such dividend shall be payable in
arrears to the holders of record of shares of Series K Preferred Stock, as they
appear on the stock records of the Corporation, at the close of business on the date
that is fifteen (15) days preceding the Payment Date thereof, provided, however,
that the Board of Directors may fix a different record date for any dividend
payment, which date shall be not less than ten (10) days nor more than sixty (60)
days preceding the Payment Date thereof. Dividends on shares of Series K Preferred
Stock shall accrue (whether or not declared) on a daily basis from and including the
Commencement Date. Accrued dividends for each Dividend Period (as hereinafter
defined) shall be cumulative (whether or not such dividends are declared) and shall
compound on each Payment Date. Such dividends shall accumulate to the extent not
paid on the Payment Date occurring on the last day of the Dividend Period for which
they accrue, and any such accrued and unpaid dividends for any past Dividend Period
may be declared and paid at any time, without reference to any regular Payment Date,
to holders of record on such date, not more than forty-five (45) days preceding the
Payment Date thereof, as may be fixed by the Board of Directors. For purposes of
this Section 2, a “Dividend Period” shall mean a quarterly dividend period
commencing on the calendar day immediately following the Commencement Date and
immediately following each subsequent Payment Date and ending on and including the
next following Payment Date. The Series K Preferred Stock shall rank prior and
superior to the Series AAA Preferred Stock (“Series AAA Preferred Stock”), the
Series E Redeemable Nonvoting Convertible Preferred Stock (“Series E Preferred
Stock” and together with the Series AAA Preferred Stock, the “Tier 3 Preferred
Stock”) and prior and superior to the shares of preferred stock of the Corporation
that are senior to the Tier 3 Preferred Stock, comprising the Series G Preferred
Stock (“Series G Preferred Stock”), the Series H Preferred Stock (“Series H
Preferred Stock”) and the Series J Preferred Stock (“Series J Preferred Stock”, and
together with the Series G Preferred Stock, Series H Preferred Stock and Series J
Preferred Stock, the “Tier 2 Preferred Stock” and together with the Tier 3 Preferred
Stock, the “Existing Preferred Stock”) and the common stock, par value $0.10 per
share (the “Common Stock” and together with the Existing Preferred Stock and any
other class or series of stock ranking junior to the Existing Preferred Stock with
respect to dividends and payments upon liquidation, dissolution and winding up are
referred to, collectively, as the “Junior Stock”), of the Corporation with respect
to the payment of dividends. In the event any new shares of Series K Preferred
Stock are issued during any Dividend Period or any shares of Series K Preferred
Stock are redeemed by the Corporation or converted during any Dividend Period, the
accrued dividends shall be prorated in proportion to the number of days during that
Dividend Period during which such shares were outstanding. All accrued but unpaid
dividends shall be paid upon redemption or conversion of the shares of Series K
Preferred Stock.

 

 

     (b) Such dividends shall be payable in cash or additional shares of Series K
Preferred Stock, at the Series K Preferred Stock holder’s option, which shall be
designated in writing on an annual basis before December 1st of each year
and, in any event, if not otherwise designated, shall be payable in cash. In
the event that any payment of dividends would require shareholder approval under the
NASDAQ listing requirements, the Corporation agrees to seek such approval, together
with approval of all future issuances of Series K Preferred Stock payable as
dividends on the outstanding shares of Series K Preferred Stock (if legally
permissible), at the next regularly scheduled meeting of shareholders after it has
been determined that shareholder approval would be required for the
issuance of any shares as dividends on the next scheduled Payment Date, if such shareholder approval
shall not have previously been sought. Dividends, if in cash, shall be paid out of
funds legally available therefor on any Payment Date(s) that may arise between the
date of such determination and the meeting of shareholders at which the shareholders
vote on such authorization, the Series K Preferred Stock holder agreeing to recuse
itself from this vote. In the event the shareholders reject such authorization,
such dividends will be paid in shares of Series K Preferred Stock to the maximum
extent that they may be so paid without violating the limitations set forth in the
second sentence of this paragraph (b), and thereafter, such dividends shall be paid
in cash out of funds legally available therefor, commencing on the next Payment
Date.

     (c) The number of shares of Series K Preferred Stock (or fraction thereof)
issuable on each whole or fractional share of Series K Preferred Stock on each
Payment Date shall be equal to the quotient (rounded to four decimal places)
obtained by dividing (i) the dollar value of the dividend to be paid thereon by
(ii) the Liquidation Preference thereof.

			
	Section 3.	 	Voting Rights. In addition to any voting rights provided by
law, the holders of Series K Preferred Stock shall be entitled
to vote with the holders of Common Stock, voting together as a
single class, on any matters on which holders of Common Stock
are entitled to vote, and the holder of each outstanding whole
or fractional share of Series K Preferred Stock shall be
entitled to a number of votes equal to the quotient obtained by
dividing the Liquidation Preference thereof by the then
applicable Conversion Price as determined by Section 6.
Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula
(after aggregating all whole and fractional shares of Series K
Preferred Stock held by each holder) shall be adjusted downward
to the nearest whole number.

			
	Section 4.	 	Liquidation.

     (a) The liquidation preference for the Series K Preferred Stock (the
“Liquidation Preference”) shall equal Five Thousand Dollars ($5,000.00) per share.
The Series K Preferred Stock shall rank prior and superior to the Junior Stock.

 

 

     (b) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary (collectively, a “Liquidating Event”),
the Corporation shall pay or make adequate provision for the payment of all
indebtedness and other obligations of the Corporation. Thereafter, the
remaining assets of the Corporation shall be used to pay, prior to any distribution
of any of the assets of the Corporation to the holders of Junior Stock by reason of
the ownership thereof, an amount equal to the Liquidation Preference per share of
the Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends
on such shares, if any.

     (c) After all such Liquidation Preferences shall have been paid in full to each
holder of Series K Preferred Stock (including accrued but unpaid dividends), each
holder of Junior Stock other than Common Stock shall be entitled to be paid from the
remaining assets of the Corporation such amounts, if any, and in such order of
priority to which such holder may be entitled under any other provision of these
Articles of Incorporation prior to any distribution of any of the assets of the
Corporation to the holders of Common Stock.

     (d) Any assets of the Corporation remaining after the payments specified in
paragraphs (b) and (c) above shall be distributed pro rata with respect to the
outstanding shares of Common Stock.

     (e) If upon any Liquidating Event, the assets of the Corporation shall be
insufficient to pay all the holders of any class or series of capital stock the full
amount to which they are entitled pursuant to this Section 4, then the following
rules shall apply: (i) each holder of shares of the class or series shall be paid
his pro rata share, which shall equal the product determined by multiplying the
aggregate amount to be paid to all holders of that class or series by a fraction (x)
whose numerator equals the number of shares of that class or series owned by the
shareholder, and (y) whose denominator equals the number of
issued and outstanding shares of that class or series, and (ii) in any case in which the owner of two or
more series or classes of capital stock shall have equal priority to any
distribution, each holder shall be paid his pro rata share, which shall equal the
product determined by multiplying the aggregate amount available for payment to all
holders of the series or classes with equal priority, by a fraction (x) whose
numerator equals the amount such shareholder would receive if the Corporation had
adequate funds to pay the Liquidation Preferences of the shares of the series or
classes having equal priorities owned by the shareholder, and (y) whose denominator
equals the aggregate Liquidation Preferences of all issued and outstanding shares of
the series or classes having equal priorities.

     (f) For the purposes of this Section 4, any merger or consolidation of the
Corporation into or with any other corporation or entity, or a sale, conveyance,
mortgage, transfer, license, pledge, lease or other disposition of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation unless (i) the

 

 

shareholders of the Corporation immediately prior to the consummation of such event
shall, immediately thereafter, hold as a group the right to cast at least a majority
of the votes of all holders of voting securities of the resulting or
surviving corporation or entity on any matter on which any such holders of
voting securities shall be entitled to vote; or (ii) the holders of Series K
Preferred Stock shall determine, by vote of the holders of a majority of the
outstanding shares of such series, voting as a separate class, that it shall not be
so deemed.

     (g) For purposes of this Section 4, if any asset distributed to shareholders
upon liquidation of the Corporation consists of property other than cash, the amount
of such distribution shall be deemed to be the fair market value thereof at the time
of such distribution, as determined in good faith by the Board of Directors of the
Corporation.

     (h) Written notice of any Liquidating Event stating a payment date, the place
where such payment shall be made, the amount of each payment in liquidation and the
amount of accrued dividends to be paid, shall be given by first class mail, postage
prepaid, not less than ten (10) days prior to the payment date stated therein, to
each shareholder of record (whether or not the shareholder is to receive any
payment) at such shareholder’s address as shown in the records of the Corporation.

			
	Section 5.	 	Redemption.

     (a) The holders of the Series K Preferred Stock shall not have the right to
cause the Corporation to redeem shares of their Series K Preferred Stock at any
time.

     (b) The Corporation shall have the right, but not the obligation, exercisable
at any time and from time to time, to redeem all or any portion of
the outstanding shares of Series K Preferred Stock. All redemptions of fewer than all outstanding
            shares of Series K Preferred Stock shall be affected on a pro rata basis.

     (c) The redemption price to be paid by the Corporation for any shares of Series
K Preferred Stock shall equal the Liquidation Preference for those shares, plus an
amount equal to the cash value of all accrued but unpaid dividends thereon. Upon
payment of such redemption price, the Corporation shall have no further obligation
with respect to payment of accrued and unpaid dividends with respect to the shares
so redeemed.

     (d) At least thirty (30) days prior to any redemption, the Corporation will
provide to the holders of shares to be redeemed written notice (the “Redemption
Notice”) of the number of shares to be redeemed (the “Redemption Shares”), the
redemption price and the redemption date (the “Redemption Date”). Such notice shall
be sent to the address for each holder of Series K Preferred Stock on the records of
the Corporation. Upon receipt of any Redemption Notice, holders of Series K
Preferred

 

 

Stock shall send to the Corporation stock certificate(s) duly endorsed for
transfer representing the Redemption Shares as provided in the Redemption Notice for
receipt by the Corporation on or before the Redemption Date. Upon receipt of stock certificate(s)
representing the
Redemption Shares endorsed as provided above (but not prior to the Redemption Date),
the Corporation will send to the holders of the Redemption Shares payment of the
redemption price as stated in the Redemption Notice, and if not all the shares
represented by the stock certificate(s) provided to the Corporation are to be
redeemed, stock certificate(s) representing the shares that have not been redeemed.

     The Corporation shall have no obligation to make any payment for Redemption
Shares until the owner of the Redemption Shares complies in full with the procedures
set forth above. Notwithstanding failure by any shareholder to comply with the
procedures set forth in the preceding paragraph and the consequent failure by the
Corporation to pay the redemption price for the Redemption Shares, the Redemption
Shares shall, from and after the Redemption Date stated in the Redemption Notice,
cease to be issued and outstanding shares of capital stock of the Corporation and
the former owner shall not be entitled to vote, receive dividends or exercise any
other rights of a shareholder on account of the Redemption Shares. From and after
the Redemption Date the sole obligation of the Corporation on account of the
Redemption Shares shall be to pay the redemption price stated in the Redemption
Notice, together with interest at the rate equal to the dividend rate in effect on
the Redemption Date in the event of late payment.

     (e) Holders of outstanding shares of Series K Preferred Stock shall have the
right to convert such shares into shares of Common Stock in accordance with Section
6 hereof at any time before the close of business on the fifth Business Day
preceding the Redemption Date specified for such shares. Without limiting any
rights of the Corporation, the Corporation may reduce the number of shares that it
has elected to redeem as specified in a Redemption Notice by a number equivalent to
the number of shares of Series K Preferred Stock converted into Common Stock during
the period beginning on the date of the Redemption Notice and ending on the
Redemption Date.

     (f) All shares of the Series K Preferred Stock that shall have been redeemed as
herein provided shall no longer be deemed to be outstanding. Any shares of Series K
Preferred Stock so redeemed shall be retired and canceled and shall not be reissued,
and the Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series K Preferred Stock accordingly.

			
	Section 6.	 	Conversion of Series K Preferred Stock. Each holder of shares of Series K
Preferred Stock shall have the right to convert all or any portion of such shares as

 

 

such holder desires to convert, and in certain circumstances such shares shall be automatically
converted, into shares of the Common Stock of the Corporation, as follows:

     (a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 6, any or all shares of Series K Preferred Stock, at the
option of the holder, may be converted at any time or from time to time prior to the
fifth Business Day preceding any Redemption Date established for such shares, if
any, into a number of fully paid and nonassessable shares (calculated as to each
conversion to the largest whole share) of Common Stock determined by multiplying the
number of whole and fractional shares of Series K Preferred Stock to be converted by
a fraction, the numerator of which is the Liquidation Preference of a share of
Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on
such shares, if any, and the denominator of which is the conversion price then in
effect for the Series K Preferred Stock (the “Conversion Price”). The Conversion
Price shall increase periodically as follows: (i) during the period from the
Commencement Date through October 6, 2011, the Conversion Price shall equal $1.75
per share; (ii) during the period from October 7, 2011 through October 6, 2013, the
Conversion Price shall equal $2.25 per share; and (iii) on or after October 7, 2013,
the Conversion Price shall equal $3.00 per share. The Conversion Price shall be
subject to adjustment in accordance with the provisions in Section 6(d) below.

     (b) Automatic Conversion. The outstanding shares of Series K Preferred
Stock shall automatically convert to shares of Common Stock in the circumstances
described in the following subparagraph, as follows:

If the closing bid price for the Common Stock on The Nasdaq Stock Market (or
other exchange or market on which the Common Stock may from time to time be
traded) for any period of twenty (20) consecutive trading days exceeds the
following, then all outstanding shares of Series K Preferred Stock shall
automatically convert: (i) during the period from the Commencement Date
through October 6, 2011, $4.00 per share; (ii) during the period from
October 7, 2011 through October 6, 2013, $4.75 per share; and (iii) on or
after October 7, 2013, $5.50 per share. Upon the occurrence of the above,
the outstanding shares of Series K Preferred Stock, at the close of the
market on the last trading day in such period, shall convert into a number
of fully paid and nonassessable shares (calculated to the largest whole
share) of Common Stock determined by multiplying the number of shares of
Series K Preferred Stock then outstanding by a fraction, the numerator of
which is the Liquidation Preference of a share of Series K Preferred Stock,
plus an amount equal to accrued and unpaid dividends on such shares, if any,
and the denominator of which is the then applicable Conversion Price,
provided that the resale of the shares issuable upon conversion shall have
been registered or shall be subject to available exemption under applicable
securities laws.

 

 

     (c) Mechanics of Conversion. Before any holder of Series K Preferred
Stock shall be entitled to convert the same into full shares of Common Stock, unless
the conversion is an automatic conversion, the holder shall surrender the
certificate or certificates therefor, duly endorsed for transfer, at the office
of the Corporation or any transfer agent of the Corporation and shall give written
notice to the Corporation at such office that he elects to convert the same, such
notice to state the name or names and addresses to which certificates for Common
Stock will be issued. No fractional shares of Common Stock shall be issued upon
conversion of Series K 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 then-effective Conversion Price. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such holder
of Series K Preferred Stock, or to a third party such holder may designate in
writing, a certificate or certificates for the number of whole shares of Common
Stock to which he shall be entitled and a check payable to the holder in the amount
of any cash amounts payable in lieu of fractional shares as aforesaid, and if less
than all the shares of Series K Preferred Stock represented by such certificates are
converted, a certificate representing the shares of Series K Preferred Stock not
converted. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series K
Preferred Stock to be converted, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.

     (d) Adjustments to Conversion Price.

     (i) Adjustments for Subdivisions, Common Stock Dividends,
Combinations or Consolidations of Common Stock. In the event the
outstanding shares of Common Stock shall be subdivided or increased by stock
split or stock dividend, into a greater number of shares of Common Stock,
the Conversion Price then in effect shall concurrently with the
effectiveness of such subdivision or payment of such stock dividend, be
proportionately decreased. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise,
into a lesser number of shares of Common Stock, the Conversion Price then in
effect shall concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.

     (ii) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the
Series K Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the Series K Preferred Stock
shall thereafter be convertible into, in lieu of the shares of Common Stock

 

 

which
the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock that would have been
obtainable in exchange for the shares of Common Stock that were issuable
upon conversion of the Series K Preferred Stock immediately before that
change.

     (e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to Section 6(d), the
Corporation at its expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and furnish to each holder of Series K Preferred
Stock a certificate setting forth such adjustment or readjustment in accordance with
the terms hereof and furnish to each holder of Series K Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Series K Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series K
Preferred Stock.

     (f) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution or issuance or sale of securities or any other
voluntary action (other than actions taken in good faith), avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in carrying out all the
provisions of this Section 6 and in taking all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the Series K
Preferred Stock against impairment.

     (g)
Reservation of Stock. The Corporation shall, at all times when any shares of the Series K Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, (i) for the purpose of effecting
the conversion of the Series K Preferred Stock pursuant to Section 6, 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 K Preferred Stock and (ii) for
the purpose of paying accrued dividends in the form of shares of Series K Preferred
Stock, such number of its duly authorized shares of Series K Preferred Stock as
shall from time to time be sufficient to pay such dividends.

     (h) Cancellation of Series K Preferred Stock. All shares of the Series
K Preferred Stock that shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding. Any shares of the Series K Preferred
Stock so converted shall be retired and canceled and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be necessary
to reduce the authorized shares of Series K Preferred Stock accordingly.

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