Document:

Unassociated Document

Farm SpringS Road (CT)

 

 

RESERVE AGREEMENT

 

THIS RESERVE AGREEMENT (“Agreement”) is made as of February ___, 2013 by FARM SPRINGS ROAD LLC, a Connecticut limited liability company (“Borrower”), with the address of 444 Merrick Road, Suite 370, Lynbrook, NY  11563, AVIVA LIFE AND ANNUITY COMPANY, an Iowa corporation (“Lender”), with the address of c/o Aviva Investors North America, Inc., 215 10th Street, Suite 1000, Des Moines, Iowa  50309 and M. ROBERT GOLDMAN & CO., INC. (“Collateral Agent”), with the address of Attn:  Jon Goldman, 100 Jericho Quadrangle, Suite 336, Jericho, NY  11753-2702.

 

RECITALS:

 

A.           This Agreement is being executed in connection with the certain mortgage loan by Lender to Borrower in the original principal amount of $15,000,000.00 (the “Loan”).  The proceeds of the Loan will be used for the financing of a project locally known as 8 Farm Springs Road, Farmington, CT (the “Mortgaged Premises”).

 

B.           The Loan is evidenced by a Promissory Note (the “Note”), dated as of this same date, made by Borrower and is secured by, among other things, an Open-End First Mortgage Deed, Security Agreement and Fixture Filing (the “Security Instrument”), dated as of this same date, granting a first lien on the Mortgaged Premises (the Note, Security Instrument and other documents executed in connection with the Loan, including this Agreement, are collectively referred to as the “Loan Documents”).

 

C.           Lender requires as a condition to the making of the Loan that Borrower deposit the Reserve (as defined below), for the purposes and as provided in this Agreement.  Collateral Agent shall administer this Agreement on behalf of Lender as provided herein.

 

NOW, THEREFORE, in consideration of the above and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Lender and Collateral Agent agree as follows:

 

Section 1.                      The Reserve.  Borrower agrees to deposit the sum of Two Hundred Twenty-Five Thousand and No/100 Dollars ($225,000.00) (the “Reserve”) through the Loan closing escrow in a financial institution satisfactory to the parties (“Bank”), in a non interest-bearing account (the “Account”), in the name of “M. Robert Goldman & Co., Inc. as Collateral Agent for Aviva Life and Annuity Company for Mortgage Loan No. 19263.” Such Account has been established as described on Exhibit A attached hereto.  Any investment earnings on funds in the Reserve or the Account shall be added to and become part of the Reserve.  Neither Lender nor Collateral Agent shall be responsible for any losses resulting from the investment of the Reserve or for obtaining any specific level or percentage of earnings on such investment except arising out of gross negligence or intentional misconduct.  Without limiting the generality of the foregoing, neither Lender nor Collateral Agent shall have any liability for any loss incurred as a result of the amount of the Reserve or in the Account exceeding FDIC insurance limits.

 

[RESERVE AGREEMENT]

Loan No. 19263

 

Page 1 of 10

  

Section 2.                      Use of the Reserve.  The Reserve and the Account shall be held as additional collateral for the Loan and shall be maintained and disbursed in accordance with the terms of this Agreement.

 

Section 3.                      Lender’s and Collateral Agent’s Security Interest.  In order to secure Borrower’s obligations to Lender under the Loan Documents, Borrower has created and granted, and hereby creates and grants, to Lender, a security interest in, and a lien upon, the Reserve created by this Agreement and the Account, and any cash balances from time to time credited to the Reserve or the Account, and all funds therein whether now existing or hereafter arising, and in all proceeds thereof.  The parties hereto intend that the designation on the Account of Collateral Agent as collateral agent for Lender establishes “control” of the Reserve and the Account by Collateral Agent as collateral agent for the benefit of Lender pursuant to Section 9-104 of the Uniform Commercial Code.  Collateral Agent has no right to or interest in the Reserve or the Account except to administer the Reserve and the Account on behalf of Lender as provided for in this Agreement.  Borrower shall have no right to instruct the Bank with respect to the Account.

 

Section 4.                      Release of Reserve.  The Reserve is retained for purposes of making the monthly payments due under the Note until such time as United Technologies begins making rental payments pursuant to its lease of the Mortgaged Premises.  Beginning on the first day of April, 2013, and continuing on the first day of each month thereafter through September1, 2013, Collateral Agent shall pay to Lender the sum of Thirty-Seven Thousand Five hundred and No/100 Dollars ($37,500.00) to be applied to the monthly payments due under the Note.

 

Section 5.                      Application of Reserve and Funds in Account.  The Reserve, and the funds held in the Account, are pledged as and constitute additional security for the indebtedness evidenced by the Note and secured by the Security Instrument.  If Borrower defaults under this Agreement, or if an Event of Default (as defined in the Security Instrument) occurs, then Lender, in its sole and absolute discretion, may withdraw all funds from the Account and (a) apply the funds or any portion of such funds to payment of the indebtedness evidenced by the Note or any unpaid fees, costs or expenses that Borrower is required to pay under this Agreement or any of the other Loan Documents, provided, however, that such application of funds shall not cure or be deemed to cure any default; (b) apply the funds to reimburse Lender for any losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred by Lender as a result of such default; or (c) apply the funds in connection with exercising all rights and remedies available to Lender at law or in equity or under this Agreement or any of the other Loan Documents.

 

Section 6.                      Borrower’s Other Obligations.  Nothing con­tained in this Agreement shall in any manner whatsoever alter, impair or affect the obligations of Borrower, or relieve Borrower of any of its obligations to make payments and perform all of its other obligations required under the Loan Documents.

 

 

 

[RESERVE AGREEMENT]

Loan No. 19263

  

Page 2 of 10

  

 

Section 7.                      Remedies Cumulative.  None of the rights and reme­dies conferred upon or reserved to Collateral Agent or Lender under this Agreement are intended to be exclusive of any other rights, and each and every such right shall be cumulative and concurrent, and may be enforced separately, successively or together, and may be exercised from time to time as often as may be deemed necessary by Collateral Agent or Lender.  The exercise by Collateral Agent or Lender of any remedy hereunder shall not be deemed an election of remedies to preclude Collateral Agent or Lender from exercising any other remedy provided for herein or under applicable law.

 

Section 8.                      Indemnification.

 

(a)           Borrower agrees to indemnify and hold Lender and Collateral Agent harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs or expenses, including litigation costs and reasonable attorneys’ fees, arising hereunder.

 

(b)           Escrow fees or charges, and all other costs and expenses arising out of this Agreement, shall be paid by Borrower.

 

(c)           Borrower shall pay on demand all costs and expenses incurred by Lender in enforcing or protecting its rights and remedies hereunder, including, but not limited to, all costs of collection and litigation together with reasonable attorneys’ fees (which term as used in this Agreement shall include any and all reasonable legal fees and expenses incurred in connection with litigation, mediation, arbitration and other alternative dispute processes) and legal expenses, including, without limitation, expert witness fees, any post-judgment reasonable fees, costs or expenses incurred on any appeal, in collection of any judgment, or in appearing and/or enforcing any claim in any bankruptcy proceeding.

 

Section 9.                      Determination by Lender.  In any instance where the consent or approval of Lender may be given or is required, or where any determination, judgment or decision is to be rendered by Lender under this Agreement, the granting, withholding or denial of such consent or approval and the rendering of such determination, judgment or decision shall be made or exercised by Lender at its reasonable discretion.

 

Section 10.                      Borrower’s Records.  Borrower shall furnish such financial statements, invoices, records, papers and documents relating to the Mortgaged Premises as Lender may reasonably require from time to time to make the determinations permitted or required to be made by Lender under this Agreement.

 

Section 11.                      Successors and Assigns Bound.  This Agreement shall be binding upon Borrower, Lender and Collateral Agent and their respective succes­sors and assigns.  Borrower shall not assign any of its rights and obliga­tions under this Agreement without the prior written consent of Lender.

 

 

 

 

 

  

Page 3 of 10

 

 

Section 12.                      No Third Party Beneficiary.  This Agreement is intended solely for the benefit of Borrower, Lender and Collateral Agent and their respective successors and assigns, and no third party shall have any rights or interest in any provision of this Agreement or the other Loan Documents.

 

Section 13.                      Assumption of Loan.  If the Mortgaged Premises is transferred and the obliga­tions of Borrower under the Loan Documents are assumed by the transferee of the Mortgaged Premises, that transferee shall be required to assume Borrower’s duties and obligations under this Agreement and shall be required to execute and deliver to Lender such documents as Lender reasonably requires to effectuate such assumption of duties and obligations.

 

Section 14.                      Severability.  The invalidity, illegality, or unenforceability of any provision of this Agreement pursuant to judicial decree shall not affect the validity or enforceability of any other provision of this Agreement, all of which shall remain in full force and effect.

 

Section 15.                      Integrity of Note.  Notwithstanding anything in this Agreement to the contrary, express or implied, Lender has funded the Loan and interest shall accrue and become due thereon in accordance with the terms of the Note; and Borrower acknowledges and agrees that its obligations under the Note are not amended, modified, altered or affected by this Agreement.

 

Section 16.                      Amendment and Waiver.  No amendment to this Agree­ment will be valid unless it is made in writing and executed by the parties to this Agreement.  No specific waiver or forbearance for any breach of any of the terms of this Agreement shall be considered as a general waiver of that or any other term of this Agreement.

 

Section 17.                      No Agency or Partnership.  Nothing contained in this Agreement shall constitute Lender as a joint venturer, partner or agent of Borrower, or render Lender liable for any debts, obliga­tions, acts, omissions, representations, or contracts of Borrower.

 

Section 18.                      Entire Agreement.  This Agreement is intended by the parties hereto to be the final, complete and exclusive expression of the agreement between them with respect to the matters set forth herein.  This Agreement supersedes any and all prior oral or written agreements relating to the subject matter hereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no oral agreements between the parties.  No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made, except by a written agreement signed by the parties hereto.  If any provision of this Agreement is in conflict with any provision of the Security Instrument regarding the Reserve, the provision contained in this Agreement shall control.

 

  

Page 4 of 10

  

Section 19.                      Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut (excluding conflicts of laws rules), and applicable federal law.

 

Section 20.                      Notices.  All notices, demands, consents or requests which are either required or desired to be given or furnished hereunder (a “Notice”) shall be in writing and shall be deemed to have been properly given if either delivered personally or by overnight commercial courier or sent by United States registered or certified mail, postage prepaid, return receipt requested, to the address of the parties hereinabove set out.  Such Notice shall be effective upon receipt or refusal if by personal delivery, the first Business Day (a day other than a Saturday, Sunday or holiday on which national banks are authorized to be closed) after the deposit of such Notice with an overnight courier service by the time deadline for next Business Day delivery if by commercial courier, and upon the earliest of receipt or refusal (which shall include a failure to respond to notification of delivery by the U.S. Postal Service) or five (5) Business Days following mailing if sent by U.S. Postal Service mail to the address the parties hereinabove set out and if to Borrower, to the attention of Paul Cooper, Chief Executive Officer, with a copy to Ruskin Moscou Faltischek, P.C., Attn:  Eric C. Rubenstein, Esq., 1425 RXR Plaza, East Tower, 15th Floor, Uniondale, New York  11556.  By Notice complying with the foregoing, each party may from time to time change the address to be subsequently applicable to it for the purpose of the foregoing.

 

Section 21.                      Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute but one and the same instrument.  Executed copies of the signature pages of this Agreement sent by facsimile or transmitted electronically in either Tagged Image Format (“TIFF”) or Portable Document Format (“PDF”) shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have to object to such treatment.  Any party delivering an executed counterpart of this Agreement by facsimile, TIFF or PDF also shall deliver a manually executed counterpart of this Agreement, but the failure to deliver a manually executed counterpart should not affect the validity, enforceability, and binding effect of this Agreement.  The pages of any counterpart of this Agreement containing any party’s signature or the acknowledgement of such party’s signature hereto may be detached therefrom without impairing the effect of the signature or acknowledgement, provided such pages are attached to any other counterpart identical thereto except having additional pages containing the signatures or acknowledgements thereof of other parties.

 

Section 22.                      WAIVER OF JURY TRIAL.  THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED ON OR ARISING OUT OF THIS AGREEMENT, OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTION OF ANY PARTY HERETO.  NO PARTY SHALL SEEK TO CONSOLIDATE

  

Page 5 of 10

  

BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL PARTIES.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGES FOLLOW]

 

  

Page 6 of 10

  

IN WITNESS WHEREOF the undersigned have executed this Agreement on the date set forth in the acknowledgement below, to be effective as of the date and year first written above.

 

	
FARM SPRINGS ROAD LLC, a Connecticut limited liability company

	  
	
By: GTJ REALTY, LP, a Delaware limited partnership, the sole member

	  
	
By: GTJ GP, LLC, a Maryland limited liability company, the general partner

	  
	
By: GTJ REIT, INC., a Maryland corporation, the sole member

	  
	  
	
By:           ________________________

	
Paul Cooper, Authorized Person

 

 

 

STATE OF NEW YORK                                           )

            )ss.

COUNTY OF NASSAU                                           )

 

On the ___day of ______________, in the year 2013, before me, the undersigned, personally appeared Paul Cooper, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

 

 

	
____________________________________

	
Notary Public

	
My Commission Expires:

 

 

 

 

[SIGNATURE PAGE TO RESERVE AGREEMENT, CONTINUED ON FOLLOWING PAGES]

  

Page 7 of 10

  

 

	
AVIVA LIFE AND ANNUITY COMPANY, an Iowa corporation

	  
	
By:           Aviva Investors North America, Inc., its

	
authorized agent

	  
	  
	
By:  ________________________________

	
Dale E. Helling

	
Vice President of Commercial

	
Mortgage

 

 

 

STATE OF IOWA                                           )

)SS.

COUNTY OF POLK                                                      )

 

The foregoing instrument was acknowledged before me this ______ day of ______________________ 2013, by Dale E. Helling, Vice President of Commercial Mortgage of Aviva Investors North America, Inc., authorized agent for AVIVA LIFE AND ANNUITY COMPANY, an Iowa corporation, who is personally known to me and who did not take an oath.

 

	  	  	  	  	  	  	
____________________________________

	  	  	  	  	  	  	
Signature

	  	  	  	  	  	  	
____________________________________

	  	  	  	  	  	  	
Printed Name

	  	  	  	  	  	  	
____________________________________

	  	  	  	  	  	  	
Notary Public

 

My Commission Expires: ________________________________

 

 

[CONTINUATION OF SIGNATURE PAGES TO RESERVE AGREEMENT]

  

Page 8 of 10

  

 

M. ROBERT GOLDMAN & CO., INC.

 

 

	
By:           ______________________________

	
Name:           ______________________________

	
Title:           ______________________________

 

 

 

STATE OF _____________                                                      )

) SS:

COUNTY OF ___________                                                      )

 

This instrument was acknowledged before me on ___________________________,  2013, by, ________________________ as ____________________________ of M. ROBERT GOLDMAN & CO., INC.

 

 

	
__________________________________________

	
Notary Public in and for said State

 

(Stamp or Seal)

 

 

 

Attachments:

Schedule I – [Description of Work] [Conditions]

Exhibit A – Account

 

 

 

[CONTINUATION OF SIGNATURE PAGES TO RESERVE AGREEMENT]

 

  

Page 9 of 10

  

EXHIBIT A

Account

 

 

	
Financial Institution

	
Account No.

	  	  
	
___________________________

	
________________

	
___________________________

	
________________

	
___________________________

	
________________

 

 

 

 

  

Page 10 of 10ex41.htm

Exhibit 4.1

 

CERTIFICATE OF THE DESIGNATIONS, PREFERENCES,

RIGHTS AND LIMITATIONS OF SERIES E CONVERTIBLE PREFERRED STOCK

OF

VHGI HOLDINGS, INC.

 

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware 

 

VHGI HOLDINGS, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”),

 

DOES HEREBY CERTIFY:

 

That, pursuant to the authority expressly vested in the Board of Directors by Article Fourth of the Amended and Restated Certificate of Incorporation of the Corporation, and pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors duly adopted by unanimous consent dated as of February 14, 2013, a resolution providing for the issuance of up to 100,000 shares of Series E Convertible Preferred Stock, which resolution is as follows:

 

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation by the provisions of Article Fourth of the Amended and Restated Certificate of Incorporation of the Corporation, this Board of Directors hereby creates a series of the Preferred Stock, $0.001 par value, of the Corporation to consist of one hundred thousand (100,000) shares, and this Board of Directors hereby fixes the designation and the powers, preferences and rights, and the qualifications, limitations or restrictions thereon, of the shares of such series (in addition to the powers, preferences and rights, and the qualifications, limitations or restrictions thereon, set forth in the Certificate of Incorporation, which are applicable to all series of the Preferred Stock, $.001 par value, of the Corporation) as follows:

 

One hundred thousand (100,000) shares of Preferred Stock, par value $.001 per share, of the Corporation are hereby constituted as a series of Preferred Stock designated as “Series E Convertible Preferred Stock” (hereinafter called the “Series E Preferred Stock”) with the powers, preferences and rights hereinafter set forth.

 

1. Definitions.  As used herein:

 

“Board of Directors” means the Board of Directors of the Corporation.

 

“Certificate of Designations” means the Certificate of the Designations, Preferences, Rights and Limitations of Series E Convertible Preferred Stock of the Corporation.

 

“Common Stock” means (i) the class of stock designated as the common stock of the Corporation as of February 14, 2013, or (ii) any other class of stock resulting from successive changes or reclassification of such stock consisting solely of changes in par value, or from par value to no par value or from no par value to par value.

 

 

  

1

  

 

“Liquidation Event” shall mean any liquidation, dissolution or winding-up of the Corporation or a merger, consolidation or reorganization of the Corporation in which the holders of the Corporation’s outstanding voting securities immediately prior to such transaction will hold less than a majority of the Corporation’s outstanding voting securities after such transaction, or a sale of all or substantially all of the assets of the Corporation.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or other agency or political subdivision thereof.

 

2. Dividends.  In the event the Board of Directors shall declare a cash dividend payable upon the outstanding shares of Common Stock out of funds of the Corporation legally available therefore pursuant to the General Corporation Law (the “DGCL”) of the State of Delaware (“Legally Available Funds”), the Board of Directors shall at the same time declare a dividend payable on each share of Series E Preferred Stock equal to the amount of the dividend payable on the number of shares of Common Stock into which each such share of Series E Preferred Stock could then be converted into pursuant to the provisions of Section 5 below (regardless of whether or not such shares could legally be converted at such time), such number to be determined as of the record date for the determination of holders of Common Stock entitled to receive such dividends.

 

3. Dissolution, Liquidation or Winding Up.  In the event of the occurrence of a Liquidation Event, the holders of Series E Preferred Stock shall rank on parity with the holders of Common Stock and shall be paid at the same time as the holders of Common Stock like proportionate distributive amounts, ratably, equal to the amount of the payment payable on the number of shares of Common Stock into which each such share of Series E Preferred Stock could then be converted into pursuant to the provisions of Section 5 below (regardless of whether or not such shares could legally be converted at such time), such number to be determined as of the record date for the determination of holders of Common Stock entitled to receive such payments.

 

4. Voting Rights.

 

(a) Except as otherwise provided in this Certificate of Designations, each holder of Series E Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s shares of Series E Preferred Stock could then be converted pursuant to the provisions of Paragraph 5 below (regardless of whether or not such shares could legally be converted at such time), such number to be determined as of the record date for the determination of holders of Common Stock entitled to vote on any such matter, or, if no record date is fixed, then the record date for determination of holders of Series E Preferred Stock entitled to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which such meeting is held.  Except as otherwise required in this  Certificate of Designations or by the DGCL, the holders of the Series E Preferred Stock shall vote with the holders of outstanding Common Stock and any other preferred shares entitled to vote on any such matter, and not as a separate class or series.

 

 

  

2

  

 

(b) In addition to any vote or consent of stockholders required by law, the approval of the holders of a majority of the outstanding shares of Series E Preferred Stock, voting as a class, shall be required for the Corporation (i) to amend the Certificate of Incorporation or the Certificate of Designations to increase the authorized number of shares of Series E Preferred Stock; (ii) to amend, repeal or change any of the provisions of the Certificate of Incorporation or the Certificate of Designations in any manner that would alter or change the powers or special rights of the shares of Series E Preferred Stock so as to affect them adversely, including without limitation changing the voting percentage required for approval by the holders of Series E Preferred Stock of the foregoing matters; or (iii) otherwise to restrict the rights, of the Series E Preferred Stock.

 

5. Conversion Rights.  The shares of Series E Preferred Stock may be converted into shares of Common Stock on the terms and conditions set forth in this Section 5:

 

(a) Conversion.

 

(i) Subject to and in compliance with the provisions of this Section 5, any or all shares of the Series E Preferred Stock may, at the option of the holder thereof, be converted at any time into one hundred thousand (100,000) fully-paid and non-assessable share of Common Stock (the “Conversion Rate”), which Conversion Rate shall be subject to adjustment as provided below in this Section 5.

 

(ii) To exercise its conversion privilege, a holder of Series E Preferred Stock shall surrender the certificate or certificates representing the shares being converted to the Corporation at its principal office, and shall give written notice to the Corporation at that office that such holder elects to convert such shares.  Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock issuable upon such conversion shall be issued.  The certificate or certificates for shares of Series E Preferred Stock surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank.  The date when such written notice is received by the Corporation, together with the certificate or certificates representing the shares of Series E Preferred Stock being converted, shall be the “Conversion Date.”  As promptly as practicable after the Conversion Date, the Corporation shall issue and deliver to the holder of the shares of Series E Preferred Stock being converted such certificate or certificates as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series E Preferred Stock in accordance with the provisions of this Section 5, rounded up to the nearest whole share as provided in Section 5(a)(iii) below, in respect of any fraction of a share of Common Stock issuable upon such conversion.  Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Series E Preferred Stock shall cease and the person(s) in whose name(s) any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby.

 

 

  

3

  

 

(iii) No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of shares of Series E Preferred Stock.  Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Series E Preferred Stock, the Corporation shall round up to the next whole share of Common Stock issuable upon the conversion of shares of Series E Preferred Stock.  The determination as to whether any fractional shares of Common Stock shall be rounded up shall be made with respect to the aggregate number of shares of Series E Preferred Stock being converted at any one time by any holder thereof, not with respect to each share of Series E Preferred Stock being converted.

 

(iv) In the event some but not all of the shares of Series E Preferred Stock represented by a certificate(s) surrendered by a holder are converted, the Corporation shall execute and deliver to or on the order of the holder, at the expense of the Corporation, a new certificate representing the number of shares of Series E Preferred Stock which were not converted.

 

(b) If the Corporation shall at any time (i) pay or make a dividend or other distribution on Common Stock in Common Stock, (ii) subdivide (by means of a stock split or otherwise) its outstanding Common Stock into a larger number of shares or (iii) combine (by means of a reverse stock split or otherwise) its outstanding Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior thereto shall be adjusted so that each share of Series E Preferred Stock shall thereafter be convertible into the number of shares of Common Stock which the holder of one share of Series E Preferred Stock would have held immediately following the happening of any of the events described in (i) - (iii) above had such stock been converted into Common Stock immediately prior to the record date, if any, in the case of a dividend, distribution, subdivision or combination with respect to which the Corporation has fixed a record date for the determination of stockholders entitled to receive such dividend, distribution, subdivision or combination or, if no such record date has been fixed, the effective date of such dividend, distribution, subdivision or combination.  An adjustment made pursuant to this subsection (b) shall be effected at the time such dividend or distribution is made or paid or such subdivision or combination is effected and shall be effective retroactively with respect to conversions effected subsequent to any record date described in the immediately preceding sentence.

 

(c) In case at any time or from time to time the Corporation shall pay any dividend or make any other distribution to the holders of Common Stock of (i) any securities or property of any nature whatsoever (other than cash or as provided in Section 2 above), or (ii) any warrants or other rights to subscribe for or purchase capital stock of the Corporation, then the Conversion Rate shall be adjusted to that number determined by multiplying the Conversion Rate immediately prior to such adjustment by a fraction (A) the numerator of which shall be the fair value (as determined in good faith by the Board of Directors) per share of Common Stock at the record date for such dividend or other distribution and (B) the denominator of which shall be such fair value per share of Common Stock minus the portion applicable to one share of Common Stock of the fair value (as determined in good faith by the Board of Directors) of any and all such securities or property to be distributed.  A reclassification of the Common Stock into Common Stock and shares of any other class of securities shall be deemed a distribution by the Corporation to the holders of its Common Stock of such other Common Stock and of such other class of securities within the meaning of this subparagraph and, if the outstanding Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding Common Stock within the meaning of subsection (b) above.

 

 

  

4

  

 

(d) The following provisions of this subsection (d) shall also be applicable to the making of adjustments to the Conversion Rate:

 

(i) The adjustments required by this Section 5 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment shall be made (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in subsection (b) above) unless and until such adjustment either by itself or with other adjustments not previously made adds or subtracts at least 1/20th of a share to or from the Conversion Rate in effect immediately prior to the making of such adjustment.  Any adjustment representing a change of less than such minimum amount (except as aforesaid) shall be carried forward and made so soon as such adjustment, together with other adjustments required by this Section 5 and not previously made, would result in a minimum adjustment.  For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

 

(ii) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to shareholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

 

(e) In the case of a merger, share exchange of all issued and outstanding shares of Common Stock, consolidation or the sale or conveyance of all or substantially all of the assets of the Corporation for which approval of the holders of the Common Stock is necessary, or in the case of any capital reorganization or any reclassification or similar change of the outstanding Common Stock (other than as at forth in subsection (c) above), each share of Series E Preferred Stock, if any, outstanding following such transaction shall thereafter be convertible into the kind and amount of securities or other securities or cash or other property receivable upon such merger, sale, conveyance, reorganization, reclassification or change by a holder of the number of shares of Common Stock into which such Series E Preferred Stock might have been converted immediately prior to such merger, sale, conveyance reorganization, reclassification or change, assuming such holder of Common Stock failed to exercise his rights of election, if any, as to the kind and amount of stock or other securities or cash or other property receivable upon such merger, sale, conveyance, reorganization, reclassification or change (provided that if the kind and amount of stock or other securities or cash or other property receivable upon such merger, sale, conveyance, reorganization, reclassification or change is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“non-electing shares”) then for the purpose of this subsection the kind and amount of stock or other securities or cash or other property receivable upon such merger, sale, conveyance, reorganization, reclassification or change by each non-electing share shall be deemed to be the kind and amount so receivable by a plurality of the non-electing shares); and, in any such case, appropriate adjustments (as determined in good faith by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Series E Preferred Stock to the and that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Conversion Rate) shall thereafter be applicable, as nearly as reasonably may be, in relation to any stock or other property thereafter deliverable upon the conversion of the Series E Preferred Stock.

 

 

  

5

  

 

(f) Whenever the Conversion Rate or terms of conversion are adjusted or readjusted as herein provided, the Corporation shall prepare a notice setting forth such adjustment or readjustment and showing in detail the facts upon which each adjustment or readjustment is based, and such notice shall forthwith be mailed by first class mail to the holders of shares of Series E Preferred Stock so affected at their last known address shown on the stock books of the Corporation.

 

(g) No fractional shares of Common Stock are to be delivered upon conversion, but the Corporation shall pay a cash adjustment in respect of any fraction of a share which would otherwise be deliverable in an amount equal to the same fraction of the current market price per share of Common Stock on the date of conversion, such current market price to be determined in good faith by the Board of Directors.

 

(h) The Corporation will pay any issue and other taxes (other than income taxes) that may be payable in respect of any issue or delivery of Common Stock on conversion of Series E Preferred Stock pursuant hereto.  The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of stock in a name other than that in which the shares of Series E Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

6. Notices of Record Date.  In the event that the Corporation shall propose at any time:

 

(a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

 

(b) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

 

(c) to merge, engage in a share exchange of all issued and outstanding shares of Common Stock  or consolidate with or into any other corporation (except for a combination in which the Corporation survives), or sell, lease or convey all or substantially all of its property or business, or to liquidate, dissolve or wind up;

 

 

  

6

  

 

then, in connection with any such event, the Corporation shall send to the then holders of record of Series E Preferred Stock (the “Record Holders”): (i) in the case of the matters referred to in (a) and (b) above, at least ten (10) days prior written notice of  the earlier of the date of  record for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or the record date for determining rights to vote in respect of the matters referred to in (a) or (b) above; and  (ii)  in the case of the matters referred to in (c), at least ten (10) days prior written notice of the earlier of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event) or the record date for determining rights to vote in respect of the matters referred to in (c)  above.

 

Each such written notice shall be delivered or given by first class mail, postage prepaid, addressed to the Record Holders at the address for each such holder as shown on the books and records of the Corporation.

 

7. Reservation of Stock Issuable Upon Conversion.   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 Series E Preferred Stock, the Corporation will take all commercially reasonable corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

 

 

  

7

  

 

IN WITNESS WHEREOF, the Corporation has caused hereunto this certificate to be signed by its Chief Executive Officer as of February 14, 2013.

 

	 	
VHGI HOLDINGS, INC.

 

 

 

By: /s/ Paul R. Risinger                                                                       

Paul R. Risinger, Chief Executive Officer

  

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00213-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00213-of-00352.parquet"}]]