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EXHIBIT 3.7
CERTIFICATE OF DESIGNATION
PREFERENCES, RELATIVE, PARTICIPATING, OPTIONAL, AND OTHER SPECIAL
RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS
OF
SERIES A PREFERRED STOCK
OF
MODTECH HOLDINGS, INC.
The undersigned, Evan M. Gruber and Michael Rhodes, certify that:
ONE. They are the duly elected Chief Executive Officer and Secretary,
respectively, of the above-named corporation.
TWO. Pursuant to and in accordance with the provisions of Section 151
of the Delaware General Corporation Law and the Certificate of Incorporation of
this corporation, the Board of Directors of this corporation has duly adopted
the following recitals and resolutions.
WHEREAS, the Certificate of Incorporation of this corporation provides
for a class of its authorized shares known as Preferred Stock comprised of
5,000,000 shares issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of this corporation is authorized to
fix the number of shares of any series of Preferred Stock and to determine the
designation of any such series and the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock; and
WHEREAS, the Board of Directors of this corporation desires to
establish a class of Preferred Stock to be designated as the "Series A Preferred
Stock", and to fix the number of shares thereof and the rights, preferences,
privileges, restrictions and other matters relating thereto;
NOW, THEREFORE, BE IT RESOLVED, that a series consisting of 585,000
shares of Preferred Stock is hereby established and designated as the "Series A
Preferred Stock" of this corporation (the "Series A Preferred Stock"), and that
the Series A Preferred Stock shall have the rights, preferences and privileges,
and shall be subject to the restrictions, as are hereinafter set forth:
1. Dividend Provisions. The holders of outstanding Series A Preferred
Stock shall be entitled to receive when, as and if declared by the Board of
Directors, out of any assets at the time legally available therefor, dividends
in cash at the rate of $0.40 per share of Series A Preferred Stock per annum.
Such dividends shall accrue on each share of Series A Preferred Stock from the
date of its original issuance and shall accrue from day to day, whether or not
earned or declared. Such dividends shall be cumulative so that if such dividends
in respect of any previous year at said rate per share per annum shall not have
been paid or declared and set apart for all shares of Series A Preferred Stock
at the time outstanding, the deficiency shall be fully paid on or declared and
set apart for such shares before the corporation pays any dividend (except a
dividend in shares of the corporation) on Common Stock. Undeclared or unpaid
dividends shall not bear or accrue interest.
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Unless full dividends on the Series A Preferred Stock for all past dividend
periods and the then current dividend period shall have been paid or declared
and a sum sufficient for the payment thereof set apart, no shares of Common
Stock shall be purchased, redeemed, or acquired by the corporation and no funds
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption, or acquisition thereof; provided, however, that this
restriction shall not apply to the repurchase of shares of Common Stock held by
employees, officers, directors, consultants or other persons performing services
for the corporation or any wholly-owned subsidiary (including, but not by way of
limitation, distributors and sales representatives) that are approved by the
corporation's Board of Directors.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation, dissolution
or winding up of this corporation, either voluntary or involuntary, subject to
the rights of series of Preferred Stock that may from time to time come into
existence, the holders of Series A Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets of this
corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of (i) Five Dollars ($5.00) for each
outstanding share of Series A Preferred Stock and (ii) an amount equal to
accrued but unpaid dividends on such share. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the amount of such stock owned by each such holder. If the
consideration received to be received in any liquidation, dissolution or winding
up of the corporation is other than cash, its value will be deemed its fair
market value as reasonably determined by the this corporation's board of
directors.
(b) Remaining Assets. Upon the completion of the distribution
required by subparagraph (a) of this Section 2 and any other distribution that
may be required with respect to series of Preferred Stock that may from time to
time come into existence, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
3. No Redemption.
The Series A Preferred Stock shall NOT be subject to
redemption at the option, election or request of the corporation or any holder
or holders of Series A Preferred Stock.
4. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Except as provided in Section 4(b)
below, no share of Series A Preferred Stock may be converted into Common Stock
until two years after the date of its
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original issuance. Thereafter, each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any at the office of this
corporation or any transfer agent for such stock, into one share of fully paid
and nonassessable shares of Common Stock (the "Conversion Ratio"). The
Conversion Ratio for the Series A Preferred Stock shall be subject to adjustment
as set forth in subsection 4(d).
(b) Automatic Conversion. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Ratio at the time in effect for such Series A Preferred Stock upon
the earlier of (i) the fourth anniversary date of its original issuance, or (ii)
immediately upon a "Change in Control", regardless of when such Change of
Control occurs. For purposes of this Section 4, a Change in Control means (i)
the acquisition of the corporation by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation but, excluding any merger effected
exclusively for the purpose of changing the domicile of the corporation); (ii) a
sale of all or substantially all of the assets of the corporation; (iii) the
sale of capital stock constituting 50% or more of the Company's outstanding
capital stock at the time of sale or, (iv) any transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
corporation is disposed of.
(c) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to this corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. This corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. 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 A 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 as of such date. If the conversion is in
connection with a Change in Control the conversion shall be deemed to have
occurred immediately prior to the closing of the transaction which resulted in
the Change of Control.
(d) Adjustment in Conversion Price.
(i) Stock Splits. If the corporation at any time or
from time to time after the date of the first issuance of
shares of the Series A Preferred Stock ( the "Original Issue
Date") declares or pays any dividend on its Common Stock
payable in Common Stock or in any right to acquire Common
Stock, or effects a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock
(by stock split, reclassification or otherwise), or if the
outstanding shares of Common Stock is combined or
consolidated, by reclassification or otherwise, into
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a lesser number of shares of Common Stock, then the Conversion
Ratio in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate.
(ii) Recapitalization. If at any time or from time to
time there shall be a recapitalization of the Common Stock
(other than a subdivision, combination or merger or sale of
assets transaction provided for elsewhere in this Section 4 or
Section 2) provision shall be made so that the holders of the
Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock the
number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this
Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end
that the provisions of this Section 4 (including adjustment of
the Conversion Ratio then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock)
shall be applicable after that event as nearly equivalent as
may be practicable.
(iii) Issuance of Additional Securities. Except as
otherwise provided in this Section 4(d), the Conversion Ratio
will not be adjusted upward or downward because of the
issuance of additional securities after Original Issue Date
without consideration or for a consideration per share less
than the price at which the Series A Preferred Stock was
originally issued.
(e) No Impairment. This corporation will not, by amendment of
its Certificate of Incorporation, reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Ratio of the holders of the
Series A Preferred Stock against impairment.
(f) No Fractional Shares. No fractional shares shall be issued
upon the conversion of any share or shares of the Series A Preferred Stock, and
the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A Preferred Stock the holder is at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Ratio of Series A Preferred Stock
pursuant to this Section 4, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such
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adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (a) such
adjustment and readjustment, (b) the Conversion Ratio for such series of
Preferred Stock at the time in effect, and (c) 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 a share of Series A Preferred Stock.
(h) Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion.
This corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the
shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock, in addition to such
other remedies as shall be available to the holder of such
Series A Preferred Stock, this corporation will take such
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 purposes, including, without limitation, engaging in
best efforts to obtain the requisite shareholder approval of
any necessary amendment to these articles.
(j) Notices. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series
A Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this
corporation.
5. No Voting Rights. The holder of each share of Series A Preferred
Stock shall NOT have the right to vote their shares of Series A Preferred Stock
on any matters on which holders of any other class of stock, including Common
Stock, have the right to vote. However, holders of Series A Preferred Stock
shall be entitled to notice of any shareholders' meeting in accordance with the
bylaws of this corporation.
6. Protective Provisions. Subject to the rights of other series of
Preferred Stock which may from time to time come into existence, so long as any
shares of Series A Preferred Stock are outstanding, this corporation shall not
alter or change the rights, preferences or privileges of the shares of Series A
Preferred Stock without the consent of the holders of a majority of the shares
of Series A Preferred Stock then outstanding.
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7. Status of Converted or Redeemed Stock. In the event any shares of
Series A Preferred Stock shall be converted pursuant to Section 4 hereof, the
shares so converted shall be canceled and shall not be issuable by the
corporation.
THREE. The authorized number of shares of Preferred Stock is 5,000,000
and no shares of such class have been issued. The authorized number of shares of
Series A Preferred Stock is 585,000, and no shares of such series have been
issued.
IN WITNESS WHEREOF, the undersigned has executed this certificate. The
undersigned declares under penalty of perjury that the matters set forth in the
foregoing certificate are true of his own knowledge.
Executed at Newport Beach, California on _____________1998.
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Evan M. Gruber, Chief Executive Officer
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_____________ Secretary