SERIES A TERMS

SERIES A TERMS

Section 1.                      Designation, Amount and Par Value.  The series of preferred stock shall be designated as the Series A Convertible Preferred Stock (the "Preferred Stock"), and the number of shares so designated and authorized shall be Four Million (4,000,000).  Each share of Preferred Stock shall have a par value of $0.0001 per share and a stated value of $10.00 per share (the "Stated Value").

Section 2.                      Dividends.  Holders of Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, either out of funds legally available therefor or through the issuance of shares of the Company’s common stock (the “Common Stock”), and the Company shall accrue, quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing on the first anniversary of the Original Issue Date (the “Dividend Commencement Date”) cumulative dividends on the Preferred Stock at the rate per share (as a percentage of the Stated Value per share) equa l to eight percent (8%) per annum, payable in shares of Common Stock of the Company at a rate of $1.00 per share of common stock.  (In other words, if the amount of accrued interest is $5,000, the Company shall issue 5,000 shares of common stock.)  Dividends shall not accrue during the twelve months following the purchase of the Preferred Stock (the “Initial Conversion Period”), and shall begin to accrue on the Dividend Commencement Date and shall accrue until such time as the Preferred Stock has been converted into debt (as described immediately below) (the “Subsequent Conversion Period”), unless such Preferred Stock has been converted into shares of the Company’s common stock, as set forth below.

Section 3.                      Voting Rights; Protective Provisions.  Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights.  However, so long as any shares of Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of each of the holders of the Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock, or (b) alter or amend this Certificate of Designation.

Section 4.                      Liquidation.  Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the holders of the Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid dividends per share, whether declared or not, and all other amounts in respect thereof (including liquidated damages, if any) then due and payable before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Preferred Stock shall be distributed among the holders of Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.  The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record holder of Preferred Stock.

 

Section 5.                      Conversion.

(a)(i)  Automatic Conversion into Common Stock.  If, at any time during the twelve months following the purchase of the Preferred Stock (the “Initial Conversion Period”), the Company’s common stock begins trading on a stock exchange, market, or other trading facility, the issued and outstanding Preferred Stock will immediately convert, on a one (1) share of Preferred Stock for ten (10) shares of common stock basis, into shares of common stock.

(ii)  Following the Initial Conversion Period and until such time as the Preferred Stock has been converted into debt (as described immediately below) (the “Subsequent Conversion Period”), if the Company’s common stock begins trading on a stock exchange, market, or other trading facility, the issued and outstanding Preferred Stock will immediately convert, on a one (1) share of Preferred Stock for ten (10) one shares of common stock basis, into shares of common stock.

(b)(i)  Optional Conversion into Debt Instrument.  At any time following the Initial Conversion Period, provided that Company’s common stock is not trading on a stock exchange, market, or other trading facility resulting in the automatic conversion as described above, the Holder of the Preferred Stock shall have the right, but not the obligation, to convert all, but not less than all, of the shares of Preferred Stock into a debt obligation (the “Debt Amount”) of the Company (the “Debt Conversion”).  If the Holder of the Preferred Stock chooses to take advantage of the Debt Conversion, the Company will pay interest on the principal amount of the debt at a rate of 8%, payable quarterly in arrears, by issuing shares of the Company’s common stock at a conve rsion/purchase rate of $1.00 per common share.

(ii)  If the Investor chooses to take advantage of the Debt Conversion, the Investor shall have the right to receive from the Company twenty five percent (25%) of the Company’s Net Income After Taxes (as defined in the Company’s annual audited financial statements) until the full amount of the Debt Amount has been repaid or until the Company’s common stock begins trading on a stock exchange, market, or other trading facility, at which time the remaining outstanding Debt Amount shall automatically convert into shares of the Company’s common stock at a conversion price of $1.00 per common share.

(c)

Certain Conversion Restrictions and Terms.

(i)

Not later than ten (10) Trading Days after an Automatic Conversion as set forth above, the Company will deliver or cause to be delivered to the holder (i) a certificate or certificates representing the number of shares of Common Stock being issued upon the conversion of shares of Preferred Stock,  and (ii) if applicable, one or more certificates representing such number of shares of Common Stock as are issuable on account of accrued dividends in such number as determined in accordance with Section 2.

(ii)

The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(iii)

Shares of Preferred Stock converted into Common Stock shall be canceled and shall have the status of authorized but unissued shares of undesignated preferred stock.

(iv)

Any and all notices or other communications or deliveries to be provided by the holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the attention of the President of the Company at the facsimile telephone number or address of the principal place of business of the Company.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to each holder of Preferred Stock at the facsimile telephone number or address of such holder appearing on the books of the Co mpany, or if no such facsimile telephone number or address appears, at the principal place of business of the holder.

(v)

Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:00 p.m. (Las Vegas, Nevada, time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:00 p.m. (Las Vegas, Nevada, time) on any date and earlier than 11:59 p.m. (Las Vegas, Nevada, time) on such date, (iii) four days after deposit in the United States mails, (iv) the Business Day following the date of mailing, if send by nationally recognized overnight courier service, or (v) upon actual receipt by the party to whom such notice is required to be given.

 

Section 6.  Definitions.  For the purposes hereof, the following terms shall have the following meanings:

"Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Delaware are authorized or required by law or other government action to close.

"Common Stock" means the common stock, $0.0001 par value per share, of the Company, and stock of any other class into which such shares may hereafter have been reclassified or changed.

"Original Issue Date" means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

"Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

"Purchase Agreement" means the Series A Convertible Preferred Stock Purchase Agreement, dated as of the Original Issue Date, between the Company and the original holders of the Preferred Stock.

 

EXHIBIT A

NOTICE OF CONVERSION INTO DEBT

(To be executed by the registered holder

in order to convert shares of Preferred Stock into Debt)

The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, into a debt obligation of Renewable Fuel Corp (the "Company"), according to the conditions hereof, as of the date written below.  If the debt obligation is to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:

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Date to effect conversion

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Number of shares of Preferred Stock to be converted

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Dollar Amount of Debt Obligation

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Name of Holder

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Address of Holder

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Authorized Signature