Page 7 of 25 – SEC Filing
The Preferred Stock Purchase Agreement also provides that Sagard has the right to designate at least one non-voting observer (subject to increase to two if at any time two designees of the Purchased Series A Shares and the Conversion Shares are not represented on the Issuers Board of Directors (the Board)) to attend meetings of the Board, the board of directors of any subsidiary of the Issuer and each committee of any of the foregoing (a Board Observer).
Series A Preferred Stock
In conjunction with the Preferred Stock Purchase Agreement, the Issuer adopted and filed with the Secretary of State of the State of Delaware the Certificate of Designation authorizing 5,524,926 shares of Preferred Stock and providing for the rights, preferences and privileges of the Preferred Stock. Any reference to share prices in the below description of the Preferred Stock, including but not limited to the conversion price for the Purchased Stock and the amount of the liquidation preference per share, is subject to adjustment in the event of any stock dividend, stock split, reverse stock split, combination or other similar recapitalization, as further described in the Certificate of Designation.
Dividends
Holders of shares of Preferred Stock are entitled to participate equally and ratably with the holders of shares of Voting Common Stock and the Issuers Non-Voting Common Stock, par value $0.0001 per share (the Non-Voting Common Stock and, together with the Voting Common Stock, the Common Stock) in all dividends paid and distributions made to the holders of Common Stock on the shares of Common Stock on an as converted basis.
Election of Directors and Voting Rights
The holders of a majority of the outstanding shares of Preferred Stock are entitled to elect two (2) members of the Board. Notwithstanding the foregoing, the number of Series A Directors shall be reduced to the extent necessary to comply with the Issuers obligations, if any, under the rules or regulations of the Nasdaq Stock Market (including Nasdaq Listing Rule 5640).
To fill one of the two newly created vacancies, the Board appointed Jeffery C. Johnson to serve as a Class III director of the Issuer until the 2018 annual meeting of stockholders or until his successor is elected and qualified. Mr. Johnson was also appointed by the Board to serve as a member of its Compensation Committee. Mr. Johnson is a partner at Holdings and an investment manager at Manager. No decision has yet been made as to the identity of the second Series A Director.
The holders of shares of Preferred Stock have the right to vote with holders of shares of the Voting Common Stock, voting together as one class on all other matters, with each share of Preferred Stock entitling the holder thereof to cast that number of votes per share as is equal to the aggregate number of shares of Voting Common Stock into which it is then convertible, using the market value of the Voting Common Stock on the date of the Preferred Stock Agreement as the conversion price; provided that, at any time prior to the time the Issuer obtains stockholder approval, as required pursuant to Nasdaq Rule 5635(b), no holder (together with such holders attribution parties) is permitted to have a number of votes in excess of such aggregate number of votes granted to the holders of 19.99% of the shares of Voting Common Stock then outstanding (including any votes with respect to any shares of Voting Common Stock and Preferred Stock beneficially owned by the holder or such holders attribution parties).
Voluntary Conversion
Each share of Preferred Stock is initially convertible into nine shares of Voting Common Stock at an effective conversion price of $0.185 per share (based on an original price per Preferred Share of $1.665),
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