4/28/03
CERTIFICATE OF DESIGNATIONS
OF
CNE GROUP, INC.
ADOPTED PURSUANT TO SECTION 151(g)
OF THE
DELAWARE GENERAL CORPORATION LAW
RESOLVED, that pursuant to the authority expressly granted to the Board of
Directors (the "Board of Directors") of CNE Group, Inc., a Delaware Corporation
(the "Company"), by the provisions of the Amended and Restated Certificate of
Incorporation of the Company and the provisions of Section 151(g) of the
Delaware General Corporation Law, the Board of Directors hereby creates a series
of preferred stock, par value $0.00001 per share, and determines the designation
and number of shares of Series C Preferred Stock which constitute such series
and the relative rights, preferences and limitations of such series as follows:
1. Designation and Number of Series C Preferred Stock. The series of
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Preferred Stock shall be designated as "Series C Preferred Stock" (hereinafter
called the "Series C Preferred Stock") and shall consist of a total of 9,735,875
shares of Series C Preferred Stock, with a par value $0.00001 per share and a
stated value (the "Stated Value") of $1.00 per share.
2. Dividends. The holders of Series C Preferred Stock shall not be entitled
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to receive any dividends except as provided in Section 4, below.
3. Liquidation Preference.
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(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of the Series C Preferred
Stock will share in any assets remaining after payment to the holders of any
other then outstanding preferred stock on a pari passu basis with the holders of
the Company's Common Stock as if the C Preferred Stock had been redeemed for
Common Stock as provided in Section 4, below.
(b) In the event of a liquidation as described above, all non-cash
assets of the Company shall be valued as follows:
(i) Securities not subject to legend, investment letter or other
similar restrictions on free marketability:
(A) If traded on a recognized securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the thirty day period ending three days prior to the closing;
(B) If actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid or sale prices (whichever is applicable)
over the thirty day period ending three days prior to the closing; and
(C) If there is no active public market, the value shall be the fair
market value thereof, as determined by the Company's Board of Directors, which
determination shall be final absent fraud or manifest error.
(ii) Securities subject to legend, investment letter or other
similar restrictions shall be valued by an appropriate discount from the market
value as determined in accordance with subsection (i) (C) above.
4. Redemption. The holders of the Series C Preferred Stock shall have no
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right of redemption. The Company shall have the right, but not the obligation,
to redeem all or any portion of the Series C Preferred Stock commencing 60
months after the issuance thereof for a period of six months thereafter (the
"Redemption Period"). The date on which the redemption may be effected shall be
30 days after the Company shall give notice of such redemption to the holders
who shares are to be redeemed (the "Redemption Date"). Each share of Series C
Preferred Stock shall be redeemed, at the Company's option, for (i) cash, in an
amount equal to the Stated Value plus a 17.5% compounded annual return (the
"Rate of Return") from the date of issuance such share to the Redemption Date
reduced by any dividend paid plus the Rate of Return on such payment from the
date of such payment to the Redemption Date; (ii) one share of the Company's
Common Stock (which, together with the Company's Series E 8% Cumulative
Preferred Stock, hereinafter referred to as the "Redeeming Stock"); or (iii)
1.469328 shares of the Company's Series E 8% Cumulative Preferred Stock (the "E
Preferred Stock") having a par value of $0.00001 per share and stated value of
$1.00 per share. To the extent that the Company shall determine not to redeem
shares of Series C Preferred Stock during the C Redemption Period, the Series C
Preferred Stock then remaining outstanding shall thereafter bear a 12%
cumulative dividend, payable quarterly in cash. In the event that the Company
shall fail to pay two consecutive quarterly dividends (a "Dividend Payment
Failure"), the holders of a majority of the then outstanding shares of Series C
Preferred Stock shall have the right to elect the majority of the Company's
directors until the Dividend Payment Failure shall have been cured. If, during
the period prior to the Company curing a Dividend Payment Failure, the holders
of the Company's Series A Preferred Stock (the "A Preferred Stock") and/or the E
Preferred Stock shall obtain the right to elect the majority of the Company's
directors as the result of a Dividend Payment Failure as defined in the
Certificates of Designations for the A and/or E Preferred Stock, as the case may
be, then the holders of a majority of the shares of the Series C Preferred Stock
and the A and/or E Preferred Stock, as the case may be, shall have the right,
voting as a single class, to elect the majority of the Company's directors until
the Dividend Payment Failure of the applicable Series of Preferred Stock shall
have been paid. By way of example, if the holders of the Series C, A and E
Preferred Stock shall have obtained the right to vote as provided herein
pursuant to a Dividend Payment Failure and the Dividend Payment Failure of one
Series is subsequently cured but the Dividend Payment Failure of
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the other Series shall not have been cured, only the Classes whose Dividend
Payment Failure have not been cured shall retain the right to elect the majority
of the Company's directors. If the Company redeems less than all of the
outstanding shares of Series C Preferred Stock as provided in this Section 4,
then such redemption shall be made on a pro rata basis. The Company shall remit
the appropriate amount of cash or issue the appropriate number of shares of the
Redeeming Stock, as the case may be, to each holder of the Series C Preferred
Stock upon receipt of such holder's certificate representing the shares of the
Series C Preferred Stock to be redeemed. After the Redemption Date, all shares
of Series C Preferred Stock redeemed as provided herein shall cease to exist and
the holders thereof shall have only the right to receive the cash or the shares
of Redeeming Stock payable or issuable to them, as the case may be, for the
redemption of their Series C Preferred Stock.
5. Voting Rights. The holders of outstanding shares of Series C Preferred
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Stock shall have no voting rights except as provided in Section 4 above or as
may be required by Delaware law.
6. Protective Provisions. So long as any shares of Series C Preferred Stock
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are outstanding, the Company shall not, without first obtaining the approval (by
vote or by written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences of privileges of the
Series C Preferred Stock so as to affect adversely such Series C Preferred
Stock;
(b) increase or decrease (other than by redemption) the total number
of authorized shares of Series C Preferred Stock; or
(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security (i) having a preference over, or being on a parity with,
the Series C Preferred Stock upon liquidation, or (ii) having rights similar to
any of the rights of the Series C Preferred Stock under this Section 7.
7. Issuance with Warrants; Detachability of Warrants. The Series C
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Preferred Stock shall be issued together with the Company's Class C Warrants,
each Warrant to purchase one share of Common Stock, initially, at $1.00 per
share, at the rate of one Warrant for each share of Series C Preferred Stock.
The Series C Preferred Stock and the Class C Warrants attached thereto shall not
detachable from each other or separately transferable for 66 months after the
issuance thereof (the "Non-detachable Period") and the certificates representing
the shares of Series C Preferred Stock issued to the holder thereof shall bear
an appropriate legend reflecting this restriction. In the event that any shares
of Series C Preferred Stock shall be redeemed by the Company prior to the
expiration of the
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Non-detachable Period, the Class C Warrants attached thereto shall expire on the
redemption date.
8. Notices. Any notice required by the provisions hereof to be given to the
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holders of the Series C Preferred Stock shall be deemed given if deposited by
mail, postage prepaid, and addressed to each holder of record at his or her
address appearing on the books of the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to
be signed by Anthony S. Conigliaro, its Secretary, as of the 28th day of April
2003.
/S/ANTHONY S. CONIGLIARO
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Anthony S. Conigliaro
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