EXHIBIT 3.2
AVIC GROUP INTERNATIONAL, INC.
Certificate of Designations of Preferences of Series D
Convertible Preferred Stock of AVIC Group International, Inc.
Joseph R. Wright and Timothy P.F. Crowley hereby certify that:
(1) They are the President and Secretary, respectively of AVIC Group
International, Inc. a Delaware corporation (the "Corporation").
(2) Pursuant to the authority granted under the Corporation's Certificate
of Incorporation, the Board of Directors of said Corporation has duly adopted
the following recitals and resolutions:
WHEREAS, this Corporation is authorized by its Certificate of Incorporation
to issue Ten Million (10,000,000) shares of Preferred Stock (the "Preferred
Stock"); and
WHEREAS, the Board of Directors of this Corporation is authorized, as to
the Preferred Stock, within the limitations and restrictions stated in the
Certificate of Incorporation, to fix by resolution or resolutions the
designation of each Series of Preferred Stock and the powers, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including, without limitation, such
provisions as may be desired concerning dividends, redemption, voting,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors; and
WHEREAS, 1,524,178 shares of such Preferred Stock are issued or outstanding
and the Board of Directors of this Corporation desires, pursuant to its
authority granted under the Articles of Incorporation, to determine and fix the
rights, preferences, privileges and restrictions relating to a Series D of said
Preferred Stock, and to fix the number of shares constituting and the
designation of such Series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a Series D
of Preferred Stock on the terms and with the provisions herein set forth:
1. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"AVERAGE STOCK PRICE" shall mean the lowest trading price of the Company's
Common Stock during the thirty (30) business days immediately preceding each
Holder Conversion Date.
"BOARD" shall mean the Board of Directors of the Company.
"CLOSING DATE" shall mean the date of original issuance of the Series D
Preferred Stock.
"COMMON STOCK" shall mean the Common Stock, $0.001 par value of the
Company.
"COMPANY" shall mean this corporation.
"CONVERSION DATE MARKET PRICE" shall mean an amount that is equal to the
Average Stock Price.
"CONVERSION DEFAULT" shall have the meaning set forth in Paragraph 10(b).
"CONVERSION NOTICE" shall have the meaning set forth in Paragraph 7(c).
"CONVERSION RATE" shall have the meaning set forth in Paragraph 7(b).
"DESIGNATED PRICE" shall mean $10,000 per share plus all accrued and unpaid
dividends.
"HOLDER CONVERSION DATE" shall have the meaning set forth in Paragraph
7(c).
"JUNIOR STOCK" shall mean the Common Stock and all other shares of the
Company's capital stock, whether presently outstanding or hereafter issued,
other than the Series D Preferred Stock; PROVIDED, HOWEVER, the Company may from
time to time, without the consent of the holders of the outstanding shares of
the Series D Preferred Stock, issue additional series of its presently
authorized and unissued Preferred Stock which rank pari passu to or do not have
preference over the Series D Preferred Stock in dividends, distribution upon
liquidation or other respects.
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of one share
of Common Stock determined as follows:
(i) If the Common Stock is listed on NASDAQ, the daily low trading
price on the date of valuation;
(ii) If the Common Stock is listed on a national securities exchange,
the daily low trading price on the date of valuation;
(iii) If neither (i) or (ii) apply but the Common Stock is quoted
in the over-the-counter market on the pink sheets or bulletin board, the
lowest "bid" price thereof on the date of valuation; and
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(iv) If neither clause (i), (ii) or (iii) above applies, the market
value as determined by a nationally recognized investment banking firm or
other nationally recognized financial advisor retained by the Company for
such purpose, taking into consideration, among other factors, the earnings
history book value and prospects for the Company, and the prices at which
shares of Common Stock recently have been traded. Such determination shall
be conclusive and binding on all persons.
"PARAGRAPH 5 TRANSACTION" shall mean a merger, consolidation or other
transaction referred to in Paragraph 5.
"SERIES D PREFERRED STOCK" shall mean the Series D Convertible Preferred
Stock of the Company $0.001 par value.
2. DESIGNATION AND NUMBER. The designation of the shares of Preferred
Stock authorized by these resolutions shall be "Series D Convertible Preferred
Stock" (the "Series D Preferred Stock"). The authorized number of shares
constituting the Series D Preferred Stock shall be 150 shares and each share of
Series D Preferred Stock shall rank equally in all respects.
3. DIVIDENDS. The holders of the then outstanding Series D Preferred
Stock shall be entitled to receive cumulative dividends at the annual rate of 8%
per annum per share, payable quarterly (i) in shares of Common Stock at the time
of Conversion (as provided in Paragraph 7 hereof) or (ii) in cash in connection
with any payment pursuant to Paragraph 10(b). Dividends on the Series D
Preferred Stock shall accumulate and accrue from the date of its original issue
and shall accrue from day to day thereafter, whether or not earned or declared.
The Series D Preferred Stock shall have no right to participate in dividends
paid on Junior Stock.
4. LIQUIDATION RIGHTS OF SERIES D PREFERRED STOCK.
(a) PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or a sale or other
disposition of all or substantially all of the assets of the Company which shall
be deemed to be a liquidation, dissolution or winding up of the Company, the
holders of the Series D Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any Junior Stock, an amount equal to the Designated Price, and no
more. If upon any actual or deemed liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, the assets to be distributed to
the holders of the Series D Preferred Stock shall be insufficient to permit the
payment to such stockholders of the full preferential amounts aforesaid, then
all of the assets of the Company to be distributed shall be distributed ratably
to the holders of the Series D Preferred Stock and to any holders of any series
of Preferred Stock that ranks PARI
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PASSU with the Series D Preferred Stock (including Series C Preferred Stock), on
the basis of the number of shares of Preferred Stock held. The Company shall
promptly mail written notice of such liquidation, dissolution or winding up
(with a copy sent by facsimile), but in any event such notice shall not be given
less than thirty (30) days prior to the effective date stated therein to each
record holder of the Series D Preferred Stock. If the Company determines to
effect a liquidation, dissolution or winding up of the Company, then,
notwithstanding the limitations set forth in Paragraph 7, the Series D Preferred
Stock shall thereupon, at the option of a holder thereof, be convertible in
full.
(b) REMAINING ASSETS. After the payment or distribution to the
holders of the Series D Preferred Stock of the full preferential amounts
aforesaid, the holders of the Junior Stock then outstanding shall be entitled to
receive all remaining assets of the Company to be distributed.
5. MERGER, CONSOLIDATION. If at any time there occurs any consolidation
or merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation), or any other
corporate reorganization or transaction or series of related transactions in
which in excess of 50% of the Company's voting power is transferred (a
"Paragraph 5 Transaction"), the holders of the Series D Preferred Stock then
outstanding shall have the right in their sole discretion to participate in any
such transaction as a class with common stockholders on the same basis as if the
Preferred Stock had been converted one day prior to the record date or effective
date of such transactions, as applicable.
6. VOTING RIGHTS. The holders of the Series D Preferred Stock will not
have any voting rights except as set forth below or as otherwise from time to
time required by law.
The affirmative approval (by vote or written consent as permitted by
applicable law) of the holders of at least 66 2/3% of the outstanding shares of
the Series D Preferred Stock, voting separately as a class, will be required for
(i) any amendment, alteration or repeal of the Company's Restated Certificate of
Incorporation (including any Certificate of Designations, Rights and
Preferences) if the amendment, alteration or repeal adversely affects the
powers, preferences or rights of the Series D Preferred Stock (including,
without limitation, by creating any class or series of equity securities having
a preference over the Series D Preferred Stock with respect to dividends,
distribution upon liquidation or in any other respect, but excluding the
issuance of a series of Preferred Stock that ranks PARI PASSU with the Series D
Preferred Stock), or (ii) any amendment to or waiver of the terms of the Series
D Preferred Stock or this Certificate.
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To the extent that under Delaware law the approval of the holders of the
Series D Preferred Stock, voting separately as a class, is required to authorize
a given action of the Company, the affirmative approval (by vote or written
consent as permitted by applicable law) of the holders of a majority of the
outstanding shares of the Series D Preferred Stock shall constitute the approval
of such action by the class. To the extent that under Delaware law the holders
of the Series D Preferred Stock are entitled to vote on a matter with holders of
the Common Stock, voting together as one class, each share of Series D Preferred
Stock shall be entitled to one vote for each share thereof held. Holders of the
Series D Preferred Stock shall be entitled to notice of all shareholder meetings
or written consents (whether or not they are entitled to vote thereat), which
notice will be provided pursuant to the Company's by-laws and applicable
statutes.
7. CONVERSION AT THE OPTION OF THE HOLDER. The holders of Series D
Preferred Stock shall have the following conversion rights.
(a) HOLDER'S RIGHT TO CONVERT. Each share of Series D Preferred
Stock shall be convertible, at the option of the holder thereof, into fully paid
and nonassessable shares of Common Stock.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. Each share of the
Series D Preferred Stock, valued at the Designated Price, that is converted into
shares of Common Stock at the option of the holder shall be convertible into the
number of shares of Common Stock which may be purchased at the Average Stock
Price.
The number of shares of Common Stock into which each share of Series D
Preferred Stock may be converted pursuant to this paragraph hereof is hereafter
referred to as the "Conversion Rate" for such Series D Preferred Stock.
(c) MECHANICS OF CONVERSION. In order to convert any or all shares
of Series D Preferred Stock into full shares of Common Stock, the holder shall
surrender the certificate or certificates therefor, duly endorsed, by either
overnight courier or 2-day courier, to the principal office of the Company or of
any transfer agent for the Series D Preferred Stock, and shall give written
notice (the "Conversion Notice") together with the holder's calculation of the
Conversion Rate by facsimile (with the original of such notice forwarded with
the foregoing courier) to the Company at such office that he elects to convert
the number of shares (specified therein, which such notice and election shall be
irrevocable by the holder; PROVIDED, HOWEVER, that the Company shall not be
obligated to issue certificates evidencing the shares of the Common Stock
issuable upon such conversion unless either the certificates evidencing the
shares of Series D Preferred Stock are delivered to the Company or its transfer
agent as provided above, or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and promptly executes an
agreement reasonably satisfactory to the Company to
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indemnify the Company from any loss incurred by it in connection with the loss
of such certificates.
Immediately on receipt of the Conversion Notice and an executed
Investor Representation Certificate which may be required to be executed by the
holder pursuant to any Subscription Agreement related to the initial issuance of
the Series D Preferred Stock, the Company shall verify the holder's calculation
of the Conversion Rate as calculated by the holder or, if the Company disagrees
with the holder's calculation of the Conversion Rate deliver the Company's
calculation of the Conversion Rate to the holder. The Company shall use its
best efforts to issue and deliver within three business days after delivery to
the Company of such certificates, or after receipt of such agreement and
indemnification, to such holder of Series D Preferred Stock at the address of
the holder on the stock books of the Company, or to its designee, a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid, together with a certificate or certificates for the
number of Series D Preferred Stock not submitted for conversion. The date on
which the Conversion Notice is given (the "Holder Conversion Date") shall be
deemed to be the date the Company received by facsimile the Conversion Notice,
provided that the original shares of Series D Preferred Stock to be converted,
or the aforesaid notice of lost, stolen or destroyed certificates, are received
by the Company or any transfer agent for the Series D Preferred Stock within
five business days thereafter, 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 on such
date. If the original certificates or the aforesaid notice of lost, stolen or
destroyed certificates, are not received by the Company or any transfer agent
for the Series D Preferred Stock within five business days after the Holder
Conversion Date, the Conversion Notice shall become null and void.
(d) ADDITIONAL SHARES OF COMMON STOCK. If the Conversion Price on a
Holder Conversion Date shall be $5.00 (the "Minimum Additional Share Price"), as
the Minimum Additional Share Price may be adjusted as hereinafter provided, or
more, then, in addition to and not in lieu of the shares of Common Stock
issuable by reason of the conversion notice given on such Conversion Date, the
Company shall issue and sell to the Holder giving such conversion notice and
such Holder shall purchase from the Company, at a price per share equal to such
Conversion Price on such Conversion Date, one (1) share of Common Stock (each an
"Additional Share" and, collectively with all such other shares so purchased and
sold hereunder, "Additional Shares") for each share of Common Stock issuable to
such Holder by reason of such conversion of Series D Preferred Stock pursuant to
such conversion notice. If the Conversion Price on a Holder Conversion Date
shall be less than the Minimum Additional Share Price, upon the conversion of
shares of Series D Preferred Stock on such Holder Conversion Date, any rights to
purchase Additional Shares with respect to such shares of Series D Preferred
Stock so converted on such Holder Conversion Date shall terminate. The total
price for such Additional Shares so to be purchased and sold incident to such a
conversion notice shall be paid by such Holder upon issuance of the certificate
or certificates therefor pursuant to subparagraph 7(c)
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hereof by wire transfer of immediately available federal funds to such account
as the Company shall specify in writing to such Holder following receipt by the
Company of such conversion notice.
8. ADJUSTMENTS; REORGANIZATIONS.
(a) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Series D Preferred Stock is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or reorganization
provided for elsewhere in this Paragraph 8 or a merger or consolidation,
provided for in Paragraph 5), then and in each such event each holder of Series
D Preferred Stock shall have the right thereafter to convert such stock into the
kind of stock receivable upon such recapitalization, reclassification or other
change by holders of shares of Common Stock, all subject to further adjustment
as provided herein. In such event, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(b) ADJUSTMENTS FOR STOCK SPLITS, COMBINATIONS, DIVIDENDS,
DISTRIBUTIONS OR REORGANIZATION. If at any time or from time to time after the
Closing Date, the Company (i) effects a subdivision of the outstanding Common
Stock, (ii) combines the outstanding shares of Common Stock into a smaller
number of shares (i.e., by reverse stock split or otherwise), (iii) makes or
fixes a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock, (iv) makes or fixes a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
securities of the Company other than shares of common stock, or (v) there is a
capital reorganization of the Common Stock (other than as set forth in (i)-(iv),
above) then, as a part of such, provision shall be made so that the holders of
the Series D Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series D Preferred Stock the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such event. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Paragraph 8 with respect to the rights of the holders of the
Series D Preferred Stock after such event to the end that the provisions of this
Paragraph 8 shall be applicable after that event and be as nearly equivalent as
may be practicable, including, by way of illustration and not limitation, by
equitably adjusting the formulae set forth herein for conversion and redemption
to reflect the market price of the securities or property (applying the same
factors used in determining the Market Price for Shares of Common Stock) issued
in connection with the above described transaction.
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(c) CONVERSION DATE MARKET PRICE ADJUSTMENT. In the event that the
Company issues or sells any shares of its Common Stock or any of its securities
which are convertible into or exchangeable for its Common Stock or any
convertible security, or any warrants or other rights subscribed for or to
purchase any options for the purchase of its Common Stock or other securities
(other than shares or options issued or which may be issued pursuant to the
Company's employee or director option plan or shares issued upon exercise of
options, warrants or right of standing on the Closing Date listed in the
Exchange Act Reports) (the "Equity Securities") at an effective purchase price
per share of Common Stock which is less than $5.00, then at the time the Series
D Preferred Stock is submitted for conversion, upon such conversion, the Company
shall issue to the Holder or any assignee of Holder's rights hereunder such
number of shares of Common Stock as will cause the effective Conversion Date
Market Price of such shares of Common Stock to be equal to the lesser of (i) the
Average Stock Price and (ii) the effective issuance price at which such Equity
Securities are issued.
9. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION
(a) RESERVATION REQUIREMENT. The Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Series D Preferred Stock provided, however, that the number of
shares so reserved shall at all times be at least equal to 150% of the number of
shares necessary for the Company to satisfy any obligation to issue shares of
its Common Stock (and Additional Shares, if any) incident to the conversion of
Series D Preferred Stock. The number of shares so reserved may be reduced by
the number of shares actually delivered pursuant to conversion of Series D
Preferred Stock; provided that in no event shall the number of shares so
reserved be less than 150% of the number of shares required to satisfy remaining
conversion rights on the unconverted Series D Preferred Stock and the number of
shares so reserved shall be increased to reflect stock splits and stock
dividends and distributions.
(b) DEFAULT. If the Company does not have a sufficient number of
shares of Common Stock available to satisfy the Company's obligations to a
holder of Series D Preferred Stock upon receipt of a Conversion Notice, or
otherwise fails or refuses to perfect conversion of any Series D Preferred
Stock, with respect to the Series D Preferred Stock as to which conversion is
not perfected by the Company through the delivery of certificates representing
the shares of Common Stock issuable upon such conversion (including Additional
Shares, if any) (a "Conversion Default") the holder of the Series D Preferred
Stock shall have the right to put
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the Preferred Stock to the Company at a price which shall be equal to 125% of
the Designated Price.
11. NO REISSUANCE OF SERIES D PREFERRED STOCK. No share or shares of
Series D Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued as Series D Preferred Stock,
and all such shares shall be retired and shall return to the status of
authorized, unissued and retired and undesignated shares of Preferred Stock. No
additional shares of Series D Preferred Stock shall be authorized or issued
without the consent of at least 66 2/3% in interest of the holders of Series D
Preferred Stock outstanding immediately prior thereto.
12. NO IMPAIRMENT. The Company shall not intentionally take any action
which would impair the rights and privileges of the shares of Series D Preferred
Stock set forth herein.
13. HOLDER'S RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON STOCK
IS SUSPENDED. In the event that at any time on or after the date hereof and
prior to the third anniversary of the Closing Date, trading in the shares of the
Company's Common Stock is suspended on the principal market or exchange for such
shares (including the NASDAQ Stock Market), for a period of five consecutive
trading days, other than as a result of the suspension of trading in securities
in general, or if such Shares are delisted, then, at holder's option, the
Company shall redeem such holders shares of Series D Preferred Stock at a
redemption date designated by such holder and at the price which is the greater
of (a) the product of the Conversion Rate and the Closing Market Price of the
Company's Common Stock on the date of Redemption Notice and (b) 125% of the
Designated Price of the Preferred Stock.
14. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
Holders of Series D Preferred Stock may not convert any of the Series D
Preferred Stock within the first 60 calendar days following the date of issuance
of the Series D Preferred Stock. Thereafter, Holders of Series D Preferred
Stock may convert the Series D Preferred Stock as follows:
Calendar Days from Issuance Shares Convertible
61 30
91 60
121 90
151 120
181 150
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Notwithstanding anything to the contrary contained herein, each Conversion
Notice shall contain a representation that the number of shares of the Company's
Common Stock that the holder is then entitled to receive upon the conversion of
such number of Shares of Series D Preferred Stock as is then being submitted for
conversion, together with any other shares of Common Stock then deemed
beneficially owned by such holder, together with all shares of the Company's
Common Stock deemed beneficially owned by the holder's "affiliates" as defined
in Rule 144 of the Act will not exceed 4.9% of the total issued and outstanding
shares of the Company's Common Stock, after giving effect to the shares of
Common Stock to be issued pursuant to such conversion notice.
15. The authorized number of shares of Preferred Stock of this Corporation
is 10,000,000 shares and the number of shares constituting the Series D
Convertible Preferred Stock, none of which has been issued, is 150 shares.
IN WITNESS WHEREOF the undersigned have executed this Certificate of
Designations of Preferences at the City of New York, State of New York, on this
28th day of February, 1997.
/s/ Joseph R. Wright
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Joseph R. Wright, President
/s/ Timothy P.F. Crowley
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Timothy P.F. Crowley, Secretary
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing Certificate are true of their own knowledge. Executed at
New York, New York, on the 28th day of February, 1997.
/s/ Joseph R. Wright
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Joseph R. Wright, President
/s/ Timothy P.F. Crowley
------------------------------
Timothy P.F. Crowley, Secretary
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