EXHIBIT 3.3
CERTIFICATE OF DETERMINATION FOR THE
SERIES A 2% CONVERTIBLE PREFERRED STOCK
EXHIBIT A
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
INCOMNET INC.
The undersigned, Melvyn Reznick and Stephen Caswell, hereby certify
that:
I. They are the duly elected and acting President and Secretary,
respectively, of Incomnet Inc., a California corporation (the "Company").
II. The Certificate of Incorporation of the Company authorizes
100,000 shares of preferred stock, no par value per share, of which the
following have been authorized and are issued and outstanding: Series A
Cumulative Convertible Preferred Stock, 4,000 authorized and none outstanding.
III. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors at a meeting duly held Tuesday, September 3,
1996, which constituted all requisite action on the part of the Company for
adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law of
the State of California, to establish from time to time the number of shares to
be included in each such series, and to fix the designations, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series, and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
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 shall be 4,000. The par value
of each share of Preferred Stock shall be $0.00. Each share of Preferred Stock
shall have a stated value of $1,000.00 per share (the "Stated Value").
Section 2. DIVIDENDS.
(a) Holders of Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors out of funds legally available therefor,
and the Company shall pay, cumulative dividends at the rate per share (as a
percentage of the Stated Value per share) equal to 2% per annum, payable, in
cash or shares of Common Stock, in arrears on the Conversion Date (as
hereinafter defined). Dividends on the Preferred Stock shall accrue daily
commencing the Original Issue Date (as defined in Section 6) and shall be deemed
to accrue on such date whether or not earned or declared and whether or not
there are profits, surplus or other funds of the Company legally available for
the payment of dividends. The party that holds the Preferred Stock on an
applicable record date for any dividend payment will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such dividend payment date, without regard to any sale or disposition of such
Preferred Stock subsequent to the applicable record date but prior to the
applicable dividend payment date. Except as otherwise provided herein, if at
any time the Company pays less than the total amount of dividends then accrued
to any class of Preferred Stock, such payment shall be distributed ratably among
the holders of such class based upon the number of shares held by each holder.
(b) So long as any Preferred shall remain outstanding, neither the
Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 6), except
the redemption of shares in payment of short swing profits payable to the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended, nor shall the Company directly or indirectly pay or declare any cash
dividend or make any cash distribution (other than a dividend or distribution
described in Section 5) upon, nor shall any cash distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities, except as described above, unless all dividends on the Preferred
Stock for all past dividend periods shall have been paid.
Section 3. VOTING RIGHTS. Except as otherwise provided herein and
as otherwise provided 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, without the affirmative vote of the holders of a majority of the
shares of the Preferred Stock then outstanding, (i) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or (ii) authorize
or create any class of stock ranking as to dividends or distribution of assets
upon a Liquidation (as defined below) senior to, prior to or PARI PASSU with the
Preferred Stock.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of shares of 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 an amount
equal to accrued but unpaid dividends per share, whether declared or not, but
without interest, before any distribution or payment shall be made to the
holders of any Junior Securities, and if the
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assets of the Company shall be insufficient to pay in full such amounts, then
the entire assets to be distributed 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. A
sale, conveyance or disposition of all or substantially all of the assets of the
Company or the effectuation by the Company of a transaction or series of related
transactions in which more than 50% of the voting power of the Company is
disposed of shall be deemed a Liquidation; PROVIDED that, a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such liquidation, not
less than 60 days prior to the payment date stated therein, to each record
holder of Preferred Stock.
Section 5. CONVERSION.
(a) Each share of Preferred Stock shall be convertible into shares of
Common Stock at the Conversion Ratio at the option of the holder in whole or in
part at any time after the expiration of the earlier to occur of (i) 120 days
after the Original Issue Date or (ii) 60 days after the date that the Commission
declares effective under the Securities Act the registration statement
contemplated by the Registration Rights Agreement, dated the Original Issue Date
(the "Registration Rights Agreement"), by and between the Company and the
original holder of Preferred Stock relating to the Preferred Stock and the
shares of Common Stock into which the Preferred Stock is convertible in
accordance with the terms hereof. Any conversion under this Section 5(a) shall
be of a minimum amount of at least 50 shares of Preferred Stock. The holder
shall effect conversions by surrendering the certificate or certificates
representing the shares of Preferred Stock to be converted to the Company,
together with the form of conversion notice attached hereto as EXHIBIT A (the
"Holder Conversion Notice") in the manner set forth in Section 5(j). Each
Holder Conversion Notice shall specify the number of shares of Preferred Stock
to be converted and the date on which such conversion is to be effected, which
date may not be prior to the date the Holder delivers such Notice by facsimile
(the "Holder Conversion Date"). Subject to Section 5(c) and, as to the original
Holder (or its sole designee), subject to Section 4.13 of the Purchase Agreement
(as defined in Section 6), each Holder Conversion Notice, once given, shall be
irrevocable. If the holder is converting less than all shares of Preferred
Stock represented by the certificate or certificates tendered by the holder with
the Holder Conversion Notice, the Company shall promptly deliver to the holder a
certificate for such number of shares as have not been converted.
(b) Provided that ten (10) Trading Days shall have elapsed from the
date the Securities and Exchange Commission (the "Commission") declared the
registration statement contemplated by the Registration Rights Agreement
effective under the Securities Act, each share of the Preferred Stock shall be
convertible into shares of Common Stock at the Conversion Ratio at the option of
the Company in whole or in part at any time on or after the expiration of one
year after the Original Issue Date; provided, however, that the Company is not
permitted to deliver a Company Conversion Notice (as defined below) within 10
days of issuing any press release or other public statement relating to such
conversion. The Company shall effect such conversion by
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delivering to the holders of such shares of Preferred Stock to be converted a
written notice in the form attached hereto as EXHIBIT B (the "Company Conversion
Notice"), which Company Conversion Notice, once given, shall be irrevocable.
Each Company Conversion Notice shall specify the number of shares of Preferred
Stock to be converted and the date on which such conversion is to be effected,
which date will be at least one Trading Day after the date the Company delivers
such Notice by facsimile to the holder (the "Company Conversion Date"). The
Company shall give such Company Conversion Notice in accordance with Section
5(j) below at least one Trading Day before the Company Conversion Date. Any
such conversion shall be effected on a pro rata basis among the holders of
Preferred Stock. Upon the conversion of shares of Preferred Stock pursuant to a
Company Conversion Notice, the holders of the Preferred Stock shall surrender
the certificates representing such shares at the office of the Company or of any
transfer agent for the Preferred Stock or Common Stock. If the Company is
converting less than all shares of the Preferred, the Company shall, upon
conversion of such shares subject to such Company Conversion Notice and receipt
of the certificate or certificates representing such shares of Preferred Stock
deliver to the holder or holders a certificate for such number of shares of
Preferred Stock as have not been converted. Each of a Holder Conversion Notice
and a Company Conversion Notice is sometimes referred to herein as a "Conversion
Notice," and each of a "Holder Conversion Date" and a "Company Conversion Date"
is sometimes referred to herein as a "Conversion Date."
(c) (i) If the average of the Per Share Market Value for the five
(5) Trading Days immediately preceding the date that the Company receives any
Holder Conversion Notice is less than $2.00, then the Company shall have the
right, exercisable by notice to the tendering Holder by the close of business on
the Business Day following the Company's receipt of such Conversion Notice, to
redeem the Preferred Stock tendered for conversion pursuant to such Holder
Conversion Notice at a price equal to the product of (i) the average of the Per
Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date, (ii) the number of shares of Preferred Stock which would then
be converted but for this section, and (iii) the Conversion Ratio, which
redemption price will be paid by the Company within ten (10) Business Days of
its receipt of such Holder Conversion Notice. If the Company fails for any
reason to pay such redemption price within such period, the Company shall effect
the conversion of Preferred Shares subject to such Holder Conversion Notice at
the lesser of the Conversion Price measured on the Conversion Date indicated in
the Holder Conversion Notice and the Conversion Price measured at the end of
such ten (10) Business Day period. The Holder shall have the right, exercisable
at any time when the Per Share Market Value is such that the Company would have
the right of redemption contemplated in this section were it to receive a Holder
Conversion Notice, to deliver to the Company (by facsimile) a letter inquiring
whether the Company would exercise such redemption right if it received a Holder
Conversion Notice within five (5) calendar days of its receipt of such letter,
which such inquiry letter shall set forth the number of shares that would be
subject to such Holder Conversion Notice. The Company shall respond to the
inquiry letter (by facsimile) by the close of business on the Business Day after
which it is received, which response shall be binding upon it with respect to
the Conversion Notice that is subject to such inquiry letter. The Company shall
be deemed to have waived its
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redemption right if it fails for any reason to respond by facsimile to the
Holder delivering such inquiry letter by the close of business on the Business
Day after its receipt of the inquiry letter.
(ii) Not later than three Trading Days after the Conversion Date,
the Company will deliver to the holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
then required by law and as set forth in the Purchase Agreement), representing
the number of shares of Common Stock being acquired upon the conversion of
shares of Preferred Stock and (ii) one or more certificates representing the
number of shares of Preferred Stock not converted; provided, however that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are either delivered for
conversion to the Company or any transfer agent for the Preferred Stock or
Common Stock, or the holder notifies the Company that such certificates have
been lost, stolen or destroyed and provides a bond (or other adequate security
reasonably acceptable to the Company) satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section 5(c) electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. In the case of a
conversion pursuant to a Holder Conversion Notice, if such certificate or
certificates are not delivered by the date required under this Section 5(c), the
holder shall be entitled by written notice to the Company at any time on or
before such holder's receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
(d) (i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the LESSER of X OR
Y; where X is the GREATER of (a) [$(BID PRICE AT FUNDING) ] or (b) [ C ] / [ ( {
C / F } + 1.50 ) / 2 ] where C = the average Per Share Market Value for the five
(5) Trading Days immediately preceding the Conversion Date and F = the Per Share
Market Value on the Trading Day immediately preceding the Original Issue Date;
and Y = 80% of the average Per Share Market Value for the five (5) Trading Days
immediately preceding the Conversion Date; provided, however, if the
registration statement to be filed by the Company in accordance with the
Registration Rights Agreement is not declared effective by the Commission for
any reason by the Effective Date (as defined in the Registration Rights
Agreement), then for each of the first three months after such Effective Date
that such registration statement shall not have been so declared effective,
clause (a) and (b) above shall be decreased by 3% (i.e., a reduction of 3% at
the end of the first such month and 6% at the end of the second such month).
(ii) If the Company, at any time while any shares of Preferred
Stock are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities payable in
shares of its capital stock (whether payable in shares of its Common Stock or of
capital stock of any class), (b) subdivide outstanding shares of Common
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Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, the
Conversion Price designated in Section 5(d)(i) shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 5(d)(ii) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the Conversion Price designated in Section
5(d)(i) shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Conversion Price designated in Section
5(d)(i) pursuant to this Section 5(d)(iii), if any such right or warrant shall
expire and shall not have been exercised, the Conversion Price designated in
Section 5(d)(i) shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section 5 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and not to
holders of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Section 5(d)(iii) above) then in each such case the Conversion Price at which
each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value
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of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of the shares of Preferred
Stock; and provided, further that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in which case the fair market value shall be equal to the average of
the determinations by each such Appraiser. In either case the adjustments shall
be described in a statement provided to all holders of Preferred Stock of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
Section 5(d)(ii),(iii), (iv) or (v), the Company shall promptly mail to each
holder of Preferred Stock, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vii) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into the
shares of stock and other securities and property receivable upon or deemed to
be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue to
give to the holder of Preferred Stock the right to receive the securities or
property set forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
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(viii) If:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(b) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(c) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(d) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company (other than a subdivision or combination
of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a
party, any sale or transfer of all or
substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
(e) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
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(e) If at any time conditions shall arise by reason of action taken
by the Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the holders of Preferred Stock (different than or
distinguished from the effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, the Company shall
mail a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the holders of
Preferred Stock at least 30 calendar days prior to the effective date of such
action, and an Appraiser selected by the holders of majority in interest of the
Preferred Stock shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Preferred Stock; PROVIDED, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case the adjustment shall be
equal to the average of the adjustments recommended by each such Appraiser. The
Board of Directors shall make the adjustment recommended forthwith upon the
receipt of such opinion or opinions or the taking of any such action
contemplated, as the case may be; PROVIDED, however, that no such adjustment of
the Conversion Price shall be made which in the opinion of the Appraiser(s)
giving the aforesaid opinion or opinions would result in an increase of the
Conversion Price to more than the Conversion Price then in effect.
(f) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Preferred Stock, such number of shares of Common Stock
as shall be issuable (taking into account the adjustments and restrictions of
Section 5(b) and Section 5(d) hereof) upon the conversion of all outstanding
shares of Preferred Stock. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid and nonassessable.
(g) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(h) 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
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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.
(i) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
preferred stock.
(j) Each Holder Conversion Notice shall be given by facsimile and by
mail, postage prepaid, addressed to the attention of the Chief Financial Officer
of the Company at the facsimile telephone number and address of the principal
place of business of the Company. Each Company Conversion Notice shall be given
by facsimile and by mail, postage prepaid, addressed to each holder of Preferred
Stock at the facsimile telephone number and address of such holder appearing on
the books of the Company or provided to the Company by such holder for the
purpose of such Company Conversion Notice, or if no such facsimile telephone
number or address appears or is so provided, at the principal place of business
of the holder. Any such notice shall be deemed given and effective upon the
earliest to occur of (i)(a) if such Conversion Notice is delivered via facsimile
at the facsimile telephone number specified in this Section 5(j) prior to 4:30
p.m. (Eastern Standard Time) on any date, such date (or, in the case of a
Company Conversion Notice, the next Trading Day) or such later date as is
specified in the Conversion Notice, and (b) if such Conversion Notice is
delivered via facsimile at the facsimile telephone number specified in this
Section 5(j) after 4:30 p.m. (Eastern Standard Time) on any date, the next date
(or, in the case of a Company Conversion Notice, the next Trading Day after such
next day) or such later date as is specified in the Conversion Notice, (ii) five
days after deposit in the United States mails or (iii) 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:
"Common Stock" means shares now or hereafter authorized of the class
of Common Stock, no par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends, and of which the
denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company, except the Company's Series A Cumulative Convertible
Preferred Stock.
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"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq Stock Market
or other stock exchange on which the Common Stock has been listed or if there is
no such price on such date, then the closing bid price on such exchange on the
date nearest preceding such date, or (b) if the Common Stock is not listed on
The Nasdaq Stock Market or any stock exchange, the closing bid for a share of
Common Stock in the over-the-counter market, as reported by the NASD at the
close of business on such date, or (c) if the Common Stock is not quoted on the
NASD, the closing bid price for a share of Common Stock in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), or (d)
if the Common Stock is no longer publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser (as defined in Section
5(d)(iv) above) selected in good faith by the holders of a majority in interest
of the shares of the Preferred Stock; PROVIDED, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original holder of the Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded on
NASDAQ or principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on NASDAQ or any stock exchange, a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the NASD, or (c) if the Common Stock is not quoted on the NASD, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices).
RESOLVED FURTHER, that the President and Secretary of the Company be,
and they hereby are, authorized and directed to prepare, execute, verify, and
file in California, a Certificate of Designation in accordance with these
resolutions and as required by law.
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series A Convertible Preferred Stock indicated below, into shares of Common
Stock, no par value per share (the "Common Stock"), of Incomnet Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are 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:
---------------------------------------------
Date to Effect Conversion
---------------------------------------------
Number of shares of Preferred Stock
to be Converted
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
Signature
---------------------------------------------
Name:
---------------------------------------------
Address:
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Incomnet Inc. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to exercise
its right to convert
[ ] shares of its Series A Convertible Preferred Stock held by the
Holder into shares of Common Stock, no par value per share (the "Common Stock")
of the Company according to the terms hereof, as of the date written below. No
fee will be charged to the Holder for any conversion hereunder, except for such
transfer taxes, if any which may be incurred by the Company if shares are to be
issued in the name of a person other than the person to whom this notice is
addressed.
Conversion calculations:
---------------------------------------------
Date to Effect Conversion
---------------------------------------------
Number of Shares of Preferred Stock
to be Converted
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
Signature
---------------------------------------------
Name:
---------------------------------------------
Address:
IN WITNESS WHEREOF, Incomnet Inc. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by Melvyn Reznick, its
President, and attested by Stephen Caswell, its Secretary, this 27th day of
September 1996.
Incomnet Inc.
By: /s/Melvyn Reznick
-----------------------------
Melvyn Reznick
President
Attest:
By: /s/Stephen Caswell
--------------------------
Stephen Caswell
Secretary
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