Exhibit 3.4
CERTIFICATE OF DESIGNATIONS, VOTING POWERS,
PREFERENCES AND RIGHTS
OF
THE SERIES OF PREFERRED STOCK
OF
CFI MORTGAGE INC.
TO BE DESIGNATED
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law, I,
Christopher C. Castoro, Chief Executive Officer of CFI Mortgage Inc., a Delaware
corporation (the "Corporation"), hereby certify that the following is a true and
correct copy of a resolution duly adopted by the Corporation's Board of
Directors on November 28, 1997, at which a quorum was present and acting
throughout, and that said resolution has not been amended or rescinded and is in
full force and effect at the date hereof:
RESOLVED, that pursuant to the authority expressly granted and vested in
the Board of Directors of the Corporation by the Corporation's Certificate of
Incorporation, as amended to date, the Board of Directors hereby creates a
series of preferred stock of the Corporation, par value $.01 per share, to be
designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock") and to consist of two thousand four hundred (2,400) shares, and hereby
fixes the voting powers, designations, preferences and relative, participating,
optional or other rights and the qualifications, limitations or restrictions
thereon, of the Series A Preferred Stock, as follows:
1. VOTING RIGHTS. The holders of Series A Preferred Stock shall have the right
to vote, together with the holders of all the outstanding shares of Common
Stock and not by classes, except as otherwise required by Delaware law, on
all matters on which holders of Common Stock are entitled to vote. Each
holder of shares of Series A Preferred Stock shall have the right to cast
one vote for each whole share of Common Stock which would be issued to such
holder upon conversion of such holder's shares of Series A Preferred Stock
assuming that such conversion were to occur on the date immediately prior
to the record date for the determination of stockholders entitled to vote.
2. LIQUIDATION OR DISSOLUTION. Subject to the prior rights of the
Corporation's creditors and holders of securities senior to the Series A
Preferred Stock in respect of distributions upon liquidation, dissolution
or winding-up of the Corporation, in the event of the voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, the
holders of Series A Preferred Stock shall be entitled to receive $1,000 per
share (the "Liquidation Preference"), together with accrued and unpaid
dividends payable thereon to the date fixed for payment of such
distribution, if any, which shall be payable on a pro rata basis among
holders of Preferred Stock, all of which shall be paid in cash. If, upon
any such liquidation, dissolution or winding-up of the Corporation, the
assets distributable among the holders of Series A Preferred Stock (and any
series of preferred stock ranking in parity with the Series A Preferred
Stock in respect of distributions upon liquidation, dissolution or
winding-up of the Corporation) shall be insufficient to permit the payment
in full to such holders of the preferential amount payable to such holders
determined as aforesaid, then the holders of Series A Preferred Stock will
share ratably in any distribution of the Corporation's assets in proportion
to the respective preferential amounts that would have been payable if such
assets were sufficient to permit payment in full of all such amounts. After
payment of the full amount of the liquidating distribution to which they
are entitled, the holders of Series A Preferred Stock will not be entitled
to any further participation in any distribution of assets by the
Corporation. Under this Section 2, a distribution of assets in any
dissolution, winding-up, liquidation or reorganization shall include (a)
any consolidation or merger of the Corporation with or into any other
corporation in which the Corporation is not the surviving corporation, (b)
a sale or other disposition of all or substantially all of the
Corporation's assets in consideration for cash and/or the issuance of
equity securities of another corporation, or (c) a Change of Control of the
Corporation. Under this Section 2, a distribution of assets in any
dissolution, winding-up, liquidation or reorganization shall not include
any dissolution, liquidation, winding-up or reorganization of the
Corporation immediately followed by reincorporation of a successor
corporation, provided that the dissolution, liquidation, winding-up or
reorganization does not amend, alter, or change the preferences or rights
of the Series A Preferred Stock or the qualifications, limitations or
restrictions thereof in a manner that adversely affects the Series A
Preferred Stock.
3. CONVERSION RIGHTS.
(a) CONVERSION OF SERIES A PREFERRED STOCK. Each share of Series A
Preferred Stock shall be convertible at the option of the holder
thereof into one fully paid and non-assessable share of common stock,
$.01 par value (the "Common Stock"), of the Corporation subject to the
provisions set forth herein, as soon as the registration statement
filed with respect to the underlying Common Stock into which the
Series A Preferred Stock is convertible is declared effective (the
"Effective Date") but no later than sixty (60) days from the closing
date of the transactions contemplated by the Purchase Agreement (as
defined below) (the "Closing Date"). Each share of Series A Preferred
Stock shall be converted pursuant to the preceding sentence at a
conversion price (the "Conversion Price") equal to the lower of (i)
(x) the average closing bid price of the underlying Common Stock as
quoted by Bloomberg, L.P. for the five-day trading period (the
"Average Price") ending on the day prior to the date of conversion
times (y) 85%, or (ii) the Average Price on the Closing Date (the
"Maximum Price").
(b) MECHANICS OF CONVERSION. The holder of any shares of Series A
Preferred Stock may exercise the conversion right as to any part
thereof by delivering to the Corporation during regular business
hours, at the office of the Corporation at 580 Village Boulevard,
Suite 360, West Palm Beach, Florida 33409, a conversion notice in the
form attached to the purchase agreement (the "Purchase Agreement")
pursuant to which the Series A Preferred Stock is issued (the
"Conversion Notice"). The Conversion Notice shall state (i) that the
holder elects to convert its shares subject to applicable securities
laws, (ii) the name(s) in which the certificate(s) representing the
Conversion Shares to which such holder is entitled are to be issued,
and (ii) the telecopier number to which the Corporation shall telecopy
its confirmation described below. Notice given by telecopier to
telecopier number (561) 687-9801, Attention: Christopher C. Castoro,
shall be deemed notice for purposes of this paragraph and shall be
deemed given when receipt is acknowledged by transmit confirmation
report. Immediately upon receipt of any Conversion Notice, the
Corporation shall, by telecopier, confirm receipt thereof at the
telecopier number included thereon, which confirmation shall set forth
the number of Conversion Shares to be issued by the Corporation as a
result of such conversion. The Conversion Notice shall be deemed
accepted by the Corporation provided the holder surrenders, or causes
any agent for the holder to surrender, the certificate(s) for the
Series A Preferred Stock to be converted, duly endorsed or assigned in
blank or to the Corporation, at any location set forth above or the
Corporation's transfer agent, within five (5) business days after
delivery of the Conversion Notice. Provided that the certificate(s)
are delivered in accordance with the preceding sentence, the
conversion shall be deemed to have been effected on the date of
delivery of the Conversion Notice by telecopier, and such date is
referred to herein as the "Conversion Date." Within three (3) business
days of receipt by the Corporation of the certificate(s) representing
the Series A Preferred Stock, the Corporation shall issue to such
holder a certificate or certificates representing the number of full
Conversion Shares which such holder is entitled to receive. Unless (i)
such Conversion Shares have been held long enough to satisfy the
holding period set forth in Rule 144(k) (or any successor provision)
promulgated under the Securities Act, (ii) such shares become freely
tradeable pursuant to another exemption under the Securities Act, or
(iii) the converting holder purchased such shares pursuant to a
current prospectus under an effective registration statement covering
the purchase and sale of such shares, the certificate(s) representing
the Conversion Shares will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT. THESE SHARES ARE SUBJECT TO
CERTAIN REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION.
If the Registration Statement as hereinafter defined shall have been
declared effective by the Securities and Exchange Commission, the
certificate(s) evidencing the Conversion Shares will bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES MAY BE SOLD PURSUANT TO THE REGISTRATION STATEMENT
PROVIDED THAT THE HOLDER COMPLIES WITH THE PROSPECTUS DELIVERY
REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE SALE IS IN COMPLIANCE WITH THE PLAN OF DISTRIBUTION AS SET
FORTH IN THE PROSPECTUS. THESE SHARES ARE SUBJECT TO CERTAIN
REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION.
The person in whose name the certificate(s) for the Conversion Shares
are to be issued shall be deemed to have become a stockholder of
record on the applicable Conversion Date unless the transfer books of
the Corporation are closed on that date, in which event he or she
shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open, but the
Conversion Price shall be that in effect on the Conversion Date. Upon
conversion of only a portion of the number of whole shares covered by
a certificate representing shares of Series A Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to
or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so
surrendered, which new certificate shall entitle in all respects the
holder thereof to the rights of Series A Preferred Stock represented
thereby to the same extent as if the certificate theretofore covering
such unconverted shares had not been surrendered for conversion.
(c) FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Preferred Stock.
If more than one share of Series A Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series A Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional interest in
an amount determined on the basis of the then Current Market Price per
share of Common Stock. Fractional interests shall not be entitled to
dividends, and the holders thereof shall not be entitled to any rights
as stockholders of the Corporation in respect of such fractional
interests.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR CERTAIN EVENTS. The Conversion
Price shall be subject to adjustment from time to time as set forth in
this subsection (d).
(i) In case at any time, or from time to time, the
Corporation shall: (A) take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or
other distribution payable in shares of capital stock; (B)
subdivide its outstanding shares of Common Stock into a larger
number of shares; (C) combine its outstanding shares of Common
Stock into a smaller number of shares; or (D) issue by
reclassification or recapitalization of its Common Stock any
other class or series of shares of the Corporation (including any
such reclassification or recapitalization in connection with a
consolidation or merger in which the Corporation is the
continuing corporation), the Conversion Price in effect at the
time of the record date for such dividend or of the effective
date of such subdivision, combination, reclassification or
recapitalization shall be proportionately adjusted so that the
holder of any Series A Preferred Stock surrendered for conversion
after such time shall be entitled to receive the aggregate number
and kind of shares which, if such Series A Preferred Stock had
been converted immediately prior to such time, such holder would
have owned or have been entitled to receive. Such adjustment
shall be made successively whenever any event listed above shall
occur. In the event that such dividend or distribution is not so
made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record
date has not been fixed.
(ii) In case at any time, or from time to time, the
Corporation shall (except as hereinafter provided) issue or sell
any Additional Shares of Common Stock, convertible securities or
warrants exercisable for Common Stock for a consideration per
share of Common Stock less than the Current Market Price, then
the Conversion Price shall, on the date specified below for
determining the Current Market Price, be adjusted to that number
determined by multiplying the Conversion Price in effect
immediately prior to such adjustment by a fraction the numerator
of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of the Additional
Shares of Common Stock (including shares deemed to have been
issued pursuant to subsection (d)(iii) below) plus the number of
shares of Common Stock which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued
would purchase at the Current Market Price, and the denominator
of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of such Additional Shares
of Common Stock so issued (including shares deemed to have been
issued pursuant to subsection (d)(iii) below). For the purposes
of this subsection (d)(ii), the date as of which the Current
Market Price per share of Common Stock shall be computed shall be
the earlier of (x) the date on which the Corporation shall enter
into a legally binding contract for the issuance or sale of such
Additional Shares of Common Stock or (y) the date of the actual
issuance of such Additional Shares of Common Stock. The
provisions of this subsection (d)(ii) shall not apply to any
issuance of Additional Shares of Common Stock for which an
adjustment is provided under subsection (i) hereof. No adjustment
shall be made under this subsection (d)(ii) upon the issuance of
any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if any such adjustment
shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible
Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to subsection (d)(iii) hereof. Adjustments
shall be made successively whenever such an issuance of
Additional Shares of Common Stock shall occur. In the event that
such Additional Shares of Common Stock are not so issued or sold,
the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such issuance had not
occurred.
(iii) In case at any time, or from time to time, the
Corporation shall take a record of the holders of the Common
Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any warrants or other rights to
subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities and the consideration per share for
which Additional Shares of Common Stock may at any time
thereafter be issuable pursuant to such warrants or other rights
or pursuant to the terms of such Convertible Securities shall be
less than the Current Market Price, then the Conversion Price
immediately thereafter shall be adjusted as provided in
subsection (d)(ii) hereof on the basis that (a) the maximum
number of Additional Shares of Common Stock issuable pursuant to
all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall
be deemed to have been issued as of the date for the
determination of the Current Market Price per share of Common
Stock as hereinafter provided, and (b) the aggregate
consideration for such maximum number of Additional Shares of
Common Stock shall be deemed to be the minimum consideration
received and receivable by the Corporation for the issuance of
such Additional Shares of Common Stock pursuant to such warrants
or other rights or pursuant to the terms of such Convertible
Securities. For the purposes of this subsection (d)(iii), the
date as of which the Current Market Price per share of Common
Stock shall be computed shall be the earliest of (i) the date on
which the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any
such warrants or other rights, (ii) the date on which the
Corporation shall enter into a legally binding contract for the
issuance of such warrants or other rights or (iii) the date of
actual issuance of such warrants or other rights. Such reduction
shall be made successively whenever such a record date is fixed.
In the event that such rights or warrants are not so issued or
(if issued) to the extent not exercised, the Conversion Price
shall again be adjusted to be the Conversion Price, as the case
may be, which would then be in effect if such record date had not
been fixed or such unexercised rights or warrants had not been
issued.
(iv) In case at any time, or from time to time, the
Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a
distribution, by dividend or otherwise, of evidences of its
indebtedness or assets (including securities, but excluding (x)
any dividend or distribution referred to in subsection (d)(i)
hereof and (y) any dividend or distribution paid in cash out of
funds legally available therefor of the Corporation), then in
each such case the Conversion Price in effect after such record
date shall be determined by multiplying the Conversion Price, in
effect immediately prior to such record date by a fraction, of
which the numerator shall be the total number of outstanding
shares of Common Stock multiplied by the Current Market Price on
such record date, less the fair market value (as determined in
good faith by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so to be distributed, and of which
the denominator shall be the total number of outstanding shares
of Common Stock multiplied by such Current Market Price. Such
adjustment shall be made successively whenever such a record date
is fixed. In the event that such distribution is not so made, the
Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not
been fixed.
(v) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of
at least one percent (1%) in such Conversion Price; PROVIDED,
HOWEVER, that any adjustment which by reason of this paragraph
(vi) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this subsection (d) shall be made to the nearest cent or to
the nearest 1/100 of a share, as the case may be.
(e) AUTOMATIC CONVERSION. If not sooner converted, the Series A
Preferred Stock shall be subject to automatic conversion on the date
which is two years after the Closing Date (the "Maturity Date") and
such date shall be deemed the date of the Conversion Notice for all
purposes hereof.
(f) OPTIONAL CONVERSION. The Corporation shall have the option to
elect to force conversion, pro rata, of the Series A Preferred Stock
outstanding by giving the holders thereof ten (10) business days
notice:
(i) Starting 60 days from the Effective Date, if the Common
Stock trades at a price equal to or in excess of 150% of the
Maximum Price for 20 consecutive trading days, the Corporation
may elect to force conversion of up to an additional 25% of the
Series A Preferred Stock outstanding;
(ii) starting 90 days from the Effective Date, if the Common
Stock trades at a price equal to or in excess of 175% of the
Maximum Price for 20 consecutive trading days, the Corporation
may elect to force conversion of up to an additional 25% of the
Series A Preferred Stock originally issued by the Corporation;
and
(iii) starting 120 days from the Effective Date, if the
Common Stock trades at a price equal to or in excess of 200% of
the Maximum Price for 20 consecutive trading days, the
Corporation may elect to force conversion of up to all of the
remaining Series A Preferred Stock outstanding.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, 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 the Corporation, but will at all times in good
faith assist in the carrying out of all the provisions of this Section
3 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders
of the Series A Preferred Stock against impairment.
(h) NOTICE PROVISIONS.
(i) Whenever the Conversion Price shall be adjusted pursuant
to subsection (d) hereof, the Corporation shall forthwith obtain
a certificate signed by the Corporation's chief financial
officer, setting forth, in reasonable detail, the event requiring
the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the
Corporation's independent public accountants determined the fair
value of any evidences of indebtedness, shares of stock, other
securities or property or assets or warrants or other
subscription or purchase rights referred to in subsections
(d)(ii) through (d)(v) hereof) and specifying the new Conversion
Price and (if applicable) describing the amount and kind of
common stock, securities, property or assets or cash which may be
received upon conversion of the Series A Preferred Stock, after
giving effect to such adjustment. The Corporation shall promptly
cause a signed copy of such certificate to be delivered to each
holder of Series A Preferred Stock.
(ii) In case the Corporation shall propose (a) to pay any
dividend payable in stock of any class to the holders of its
Common Stock or to make any other distribution to the holders of
its Common Stock, (b) to offer to the holders of its Common Stock
rights to subscribe for or to purchase any Convertible Securities
or Additional Shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) to effect
any reclassification of its Common Stock (other than a
reclassification involving only the subdivision or combination of
outstanding shares of Common Stock), (d) to effect any capital
reorganization, (e) to effect any consolidation, merger or sale,
transfer or other distribution of all or substantially all its
property, assets or business, or (f) to effect the liquidation,
dissolution or winding-up of the Corporation, then in each such
case, the Corporation shall give to each holder of Series A
Preferred Stock a notice of such proposed action, which shall
specify the date on which a record is to be taken for the
purposes of such stock dividend, distribution or rights, or the
date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, disposition, liquidation,
dissolution or winding-up is to take place and the date of
participation therein by the holders of Common Stock, if any such
date is to be fixed, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Common Stock and the Conversion
Price after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be so
given in the case of any action covered by (a) or (b) above at
least 20 days prior to the record date for determining holders of
the Common Stock for purposes of such action and, in the case of
any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the
earlier.
(i) TREASURY STOCK. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Corporation
shall be deemed an issuance thereof for purposes of subsection (d)
hereof, but until so issued such shares shall not be deemed to be
outstanding.
(j) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities shall be issued for a cash
consideration, the consideration received by the Corporation therefor
shall be deemed to be the amount of the cash received by the
Corporation therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Corporation for
subscription, the subscription price, or, if such Additional Shares of
Common Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the
initial public offering price, in any such case excluding any amounts
paid or receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses paid or
incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issue thereof. To the extent that
such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith
by the Board of Directors of the Corporation. The consideration for
any Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall
be the consideration received by the Corporation for issuing such
warrants or other rights, plus the additional consideration payable to
the Corporation upon the exercise of such warrants or other rights.
The consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received by the Corporation for issuing any warrants or
other rights to subscribe for or purchase such Convertible Securities,
plus the consideration paid or payable to the Corporation in respect
of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the Corporation
upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities in payment
or satisfaction of any dividend upon any class of stock other than
Common Stock or in payment of any debt, the Corporation shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such
dividend or debt so paid or satisfied.
(k) FRACTIONAL INTERESTS. In computing adjustments under this Section
3, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share.
(l) ANTIDILUTION PROVISIONS. No adjustment shall be made as a result
of any increase in the number of Additional Shares of Common Stock
issuable or any decrease in the consideration payable upon any
issuance of Additional Shares of Common Stock, pursuant to any
provisions intended solely to avoid dilution contained in any
warrants, rights or Convertible Securities.
(m) WHEN ADJUSTMENT NOT REQUIRED.
(i) 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
stockholders 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.
(ii) If the Corporation declares or makes any dividend or
distribution with respect to Common Stock, other than
regular cash dividends or dividends payable solely in shares
of Common Stock, and each holder of Series A Preferred Stock
concurrently receives dividends or distributions equal in
amount and in the same kind of property (whether cash,
securities or other property) as such holder would be
entitled to receive if all of the outstanding Series A
Preferred Stock were converted into Common Stock as of the
record date of such dividend or distribution with respect to
Common Stock, then thereafter no adjustment shall be
required with respect to such dividend or distribution.
(n) OTHER ACTION AFFECTING COMMON STOCK. If a state of facts shall
occur which, without being specifically controlled by the other
provisions of this Section 3, would not fairly protect the conversion
rights of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors of the Corporation shall in good faith make an adjustment in
the application of such provisions, in accordance with such essential
intent and principles, so as to protect such conversion rights.
(o) NECESSARY CORPORATE ACTION. Before taking any action which would
result in an adjustment in the Conversion Ratio, the Corporation shall
obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.
(p) TAXES UPON CONVERSION. The Corporation shall pay all documentary,
stamp or other transaction taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Series A Preferred Stock.
(q) RESERVATION OF COMMON STOCK. The 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
shares of Series A Preferred Stock, 150% of the number of whole shares
of Common Stock then deliverable upon the conversion of all shares of
Series A Preferred Stock at the time outstanding. All shares of Common
Stock which shall be so issuable shall, when issued upon conversion of
all or any portion of the Series A Preferred Stock, be duly and
validly issued and fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof. Upon
conversion of Series A Preferred Stock, the shares of Series A
Preferred Stock so converted shall have the status of authorized and
unissued Preferred Stock, and the number of shares of Series A
Preferred Stock which the Corporation shall have authority to issue
shall be decreased by any such conversion.
(r) DIVIDENDS CONSTITUTE CORPORATE DEBT. All dividends accrued and
unpaid on Series A Preferred Stock to and including the date of
conversion, whether or not declared by the Board of Directors, shall
constitute a debt of the Corporation payable without interest to the
converting holders and shall be paid by the Corporation on the
Conversion Date in cash.
4. DIVIDENDS.
(a) DIVIDENDS. Each holder of shares of Series A Preferred Stock shall be
entitled to receive, in preference to the holders of Common Stock, an
8% cumulative annual dividend payment for each share of Series A
Preferred Stock held. Dividends are payable only upon conversion of
the shares of Series A Preferred Stock pursuant to Section 3 hereof
and are payable in cash or shares of Common Stock (at the Conversion
Price). Dividends on the shares of Series A Preferred Stock shall
accumulate from the date of issuance through the date of conversion on
the basis of a calendar year consisting of twelve (12) months each
consisting of thirty (30) days. Dividends shall be payable in cash
only out of the assets of the Corporation legally available for the
payment thereof.
(b) RESTRICTIONS ON DIVIDENDS, ETC. As long as any shares of Series A
Preferred Stock shall be outstanding, the Corporation shall not
declare, pay or set aside for payment any dividend or declare or make
any distributions upon or purchase, redeem or otherwise acquire Common
Stock or any other series or class of capital stock.
5. NO PREEMPTIVE RIGHTS. No holder of Series A Preferred Stock shall have any
preemptive or preferential right of subscription to any shares of stock of
the Corporation, or to options, warrants or other interests therein or
therefor, or to any obligations convertible into stock of the Corporation,
issued or sold, or any right of subscription to any thereof other than
such, if any, as the Board of Directors, in its discretion, from time to
time may determine and at such price or prices as the Board of Directors
from time to time may fix pursuant to the authority conferred by the
Corporation's Certificate of Incorporation.
6. CERTAIN RESTRICTIONS. So long as any Series A Preferred Stock is
outstanding, the Corporation shall not, without the consent of holders of a
majority of the outstanding shares of Series A Preferred Stock, (i)
purchase, redeem or otherwise acquire any shares of any class of the
Corporation's outstanding capital stock (except as otherwise provided in
Section 4(b) hereof), (ii) issue any class or series of any class of
capital stock which ranks prior to or PARI PASSU with the Series A
Preferred Stock with respect to dividend rights or rights on liquidation,
winding-up or dissolution of the Corporation, (iii) amend, alter or change
the preferences or rights of any series or class of capital stock of the
Corporation (including the Series A Preferred Stock) or the qualifications,
limitations or restrictions thereof if such amendment, alteration or change
adversely affects the Series A Preferred Stock, (iv) increase the
authorized number of shares of Series A Preferred Stock, (v) take any
action which results in the liquidation, acquisition, merger or sale of the
Corporation or all or substantially all of its assets, (vi) take any action
which results in an amendment of the Certificate of Incorporation or
by-laws of the Corporation, (vii) take any action which results in a change
in the principal business of the Corporation, or (viii) take any action
which results in the repurchase of equity securities, other than the
repurchase of equity securities from Corporation employees.
7. DEFINITIONS.
(a) "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Corporation after November 25, 1997, except Common
Stock which may be issued pursuant to: (i) the conversion of the
Series A Preferred Stock; (ii) the exercise by the holders thereof of
the Corporation's common stock purchase warrants (the "Warrants");
(iii) the exercise by the holders thereof of any options which may be
granted pursuant to the Corporation's Stock Option Plan; (iv) the
exercise by the holders of any currently issued options of such
options; and (v) the exercise by employees of the Corporation or any
of its subsidiaries of options granted pursuant to any stock option
plan which may hereafter be adopted by the Corporation where the
exercise price of such options is not less than the fair market value
of a share of Common Stock on the date of grant thereof.
(b) "Change in Control" shall mean a merger or consolidation of the
Corporation with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty percent
(50%) of the total of the voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation or, except as provided
under Section 2 hereof, the closing of a sale or disposition by the
Corporation of all or substantially all of the Corporation's assets
(other than to a subsidiary or subsidiaries of the Corporation).
(c) "Closing Date" shall have the meaning such term is given in Section
3(a) hereof.
(d) "Common Stock" shall mean the shares of common stock of the
Corporation, par value $.01 per share, and any stock into which such
Common Stock may hereinafter be changed.
(e) "Conversion Date" shall have the meaning such term is given in Section
3(b) hereof.
(f) "Conversion Notice" shall have the meaning such term is given in
Section 3(b) hereof.
(g) "Conversion Price" shall have the meaning such term is given in
Section 3(a) hereof.
(h) "Conversion Shares" shall have the meaning such term is given in
Section 3(a) hereof.
(i) "Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exercisable
or exchangeable for, with or without payment of additional
consideration in cash or property, for Additional Shares of Common
Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
(j) "Current Market Price" per share of Common Stock at any date herein
specified shall mean the average of the daily market prices for ten
(10) consecutive Trading Days ending on the last trading day prior to
such date, except that for purposes of Section 3(c) hereof, the
"Current Market Price" per share of Common Stock shall mean the market
prices on the Trading Day therein specified. The market price for each
such Trading Day shall be (i) if the Common Stock is quoted on the
Nasdaq National Market or Nasdaq Small Cap Market, the reported last
bid price, or (ii) if the Common Stock is listed or admitted to
trading on a national securities exchange, the last reported sales
prices regular way, or (iii) if the Common Stock is quoted on the NASD
OTC Bulletin Board, the closing bid prices, or (iv) if the Common
Stock is not so quoted, as reasonably determined by the Board of
Directors of the Corporation.
(k) "Liquidation Preference" shall have the meaning such term is given in
Section 2 hereof.
(l) "Maturity Date" shall have the meaning such term is given in Section
3(e) hereof.
(m) "Maximum Price" shall have the meaning such term is given in Section
3(a) hereof.
(n) "Person" shall mean any individual, corporation, association,
Corporation, business trust, partnership, joint venture, joint-stock
Corporation, trust, unincorporated organization or association or
government or any agency or political subdivision thereof.
(o) "Securities Act" shall mean the Securities Act of 1933, as amended.
(p) "Trading Day" shall mean any day on which trading takes place (a) in
the over-the-counter-market and prices reflecting such trading are
published by the National Association of Securities Dealers Automated
Quotation System or (b) if the Common Stock is then listed or admitted
to trading on a national securities exchange, on the principal
national securities exchange on which the Common Stock is then listed
or admitted to trading.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 2nd
day of December, 1997.
By: /S/ CHRIS CASTORO
Name: Chris Castoro
Title: Chief Executive Officer
ATTEST:
By: /S/ RODGER STUBBS
Rodger Stubbs, Secretary