EXHIBIT 4.1
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CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
SIRCO INTERNATIONAL CORP.
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Series A Preferred Stock
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A series of 700 shares of preferred stock, par value $0.10 per share,
of Sirco International Corp. (the "Company") shall be created and be designated
"Series A Preferred Stock" having the following rights and preferences:
DESIGNATION OF SERIES A PREFERRED STOCK. The rights,
preferences, powers, privileges and restrictions, qualifications and limitations
granted to or imposed upon the Series A Preferred Stock (referred to hereinafter
sometimes as the "Designations") shall be as set forth below. Subject to the
limitations set forth below, the Company may issue other additional series of
preferred stock whose rights, preferences, powers, privileges and restrictions,
qualifications and limitations regarding Distributions (as hereinafter defined)
and/or liquidation that are either subordinate to, or pari passu with, the
Designations of the Series A Preferred Stock. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Company's
Certificate of Incorporation, dated as of July 22, 1964, as amended (the
"Certificate of Incorporation"). The Certificate of Incorporation is on file at
the principal place of business of the Company and copies will be made available
on request and without cost to any shareholder of the Company so requesting.
SECTION 1. Dividends and Distributions. Commencing from the date of
initial issuance of shares of Series A Preferred Stock (the "Date of Issuance"),
the holder of each issued and outstanding share of Series A Preferred Stock
shall be entitled to receive, out of assets at the time legally available for
such purpose, dividends and distributions, whether in cash or property or in
securities of the Company, including subscription or other rights to purchase or
acquire securities of the Company ("Distributions"), when and as declared by the
Board of Directors of the Company (each such date, a "Dividend Payment Date") on
the shares of common stock, par value $0.10 per share (the "Common Stock"), of
the Company, such that when and as a Distribution is declared, paid and made on
shares of Common Stock, the Board of Directors shall also declare a Distribution
at the same rate and in like kind on the shares of Series A Preferred Stock, so
that the Series A Preferred Stock will participate equally with the Common
Stock, share for share, in such Distribution. In connection therewith, each
share of Series A Preferred Stock shall entitle the holder thereof to such
Distributions based upon the number of shares of Common Stock into which such
share of Series A Preferred Stock is then convertible, rounded to the nearest
one tenth of a share. If on any Dividend Payment Date the Company shall not be
lawfully permitted under New York law to pay all or a portion of any such
declared Distributions, the Company shall take such action as may be lawfully
permitted in order to enable the Company, to the extent permitted by New York
law, lawfully to pay such Distributions.
SECTION 2. Liquidation. (a) In the event of any liquidation,
dissolution or winding-up of the Company, either voluntary or involuntary (a
"Liquidation"), the holders of shares of Series A Preferred Stock then issued
and outstanding shall be entitled to be paid out of the assets of the Company
available for distribution to its shareholders, whether from capital, surplus or
earnings, before any payment shall be made to the holders of shares of Common
Stock or upon any other series of preferred stock of the Company with a
liquidation preference subordinate to the liquidation preference of the Series A
Preferred Stock, an amount equal to one thousand dollars ($1,000) per share. If,
upon any Liquidation of the Company, the assets of the Company available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of the Series A Preferred Stock, and the holders of any other series of
preferred stock with a liquidation preference equal to the liquidation
preference of the Series A Preferred Stock, the full amounts to which they shall
respectively be entitled, the holders of shares of Series A Preferred Stock and
the holders of any other series of preferred stock with liquidation preference
equal to the liquidation preference of the Series A Preferred Stock shall
receive all of the assets of the Company available for distribution and each
such holder of shares of Series A Preferred Stock and the holders of any other
series of preferred stock with a liquidation preference equal to the liquidation
preference of the Series A Preferred Stock shall share ratably in any
distribution in accordance with the amounts due such shareholders. After payment
shall have been made to the holders of shares of the Series A Preferred Stock of
the full amount to which they shall be entitled, as aforesaid, the holders of
shares of Series A Preferred Stock shall be entitled to no further distributions
thereon and the holders of shares of Common Stock and of shares of any other
series of stock of the Company shall be entitled to share, according to their
respective rights and preferences, in all remaining assets of the Company
available for distribution to its shareholders.
(b) A merger or consolidation of the Company with or into any
other corporation, or a sale, lease, exchange or transfer of all or any part of
the assets of the Company which shall not in fact result in the liquidation (in
whole or in part) of the Company and the distribution of its assets to its
shareholders shall not be deemed to be a voluntary or involuntary liquidation
(in whole or in part), dissolution or winding-up of the Company.
SECTION 3. Conversion of Series A Preferred Stock. The holders of
Series A Preferred Stock shall have the following conversion rights:
(a) Optional Right to Convert. Each share of Series A
Preferred Stock shall be convertible at the option of the holder (an "Optional
Conversion") into fully paid and non-assessable shares of Common Stock at any
time after the original issuance of the Series A Preferred Stock (such date
being referred to as a "Conversion Date") at the conversion price (the
"Conversion Price") set forth below.
(b) Mechanics of Conversion. Each holder of Series A Preferred
Stock who desires to convert the same into shares of Common Stock shall provide
written notice (a "Conversion Notice") via confirmed facsimile to the Company at
its principal executive offices. The original Conversion Notice and the
certificate or certificates representing the Series A Preferred Stock for which
conversion is elected, duly endorsed in blank or accompanied by proper
instruments of transfer, shall be delivered to the Company at its principal
executive offices by overnight domestic courier or by international courier. The
date upon which a Conversion Notice is properly received by the Company shall be
a "Notice Date".
(c) Conversion Price. Each share of Series A Preferred Stock
shall be convertible into a number of shares of Common Stock determined in
accordance with the following formula (the "Conversion Formula"):
1,000
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Conversion Price
where:
Conversion
Price = (A) prior to May 31, 1999, $3.33 or (B) on
or after May 31, 1999, the lesser of (i)
$3.33 or (ii) the average closing share
price of the Common Stock, as reported by
NASDAQ, for the twenty (20) trading days
immediately preceding May 31, 1999;
provided, however, that in no event shall
the Conversion Price be less than $1.66.
(d) Mandatory Conversion. At any time after May 31, 1999, the
Company may cause the conversion (a "Mandatory Conversion") of the Series A
Preferred Stock outstanding into fully paid and non-assessable shares of Common
Stock pursuant to the Conversion Formula, based upon the Conversion Price then
in effect.
To effect a Mandatory Conversion, the Company shall issue to
each holder of record of the Series A Preferred Stock a notice stating that the
Company is effecting a Mandatory Conversion with regard to the Series A
Preferred Stock. Such notice shall contain a statement indicating the number of
shares of Series A Preferred Stock subject to the Mandatory Conversion, the
number of shares of Common Stock to be received by holders upon conversion and
the effective date of such conversion (the "Conversion Date"). As soon as
practicable after the Conversion Date, each holder of Series A Preferred Stock
shall surrender certificates for all shares being converted duly endorsed in
blank or accompanied by proper instruments of transfer and the Company shall
deliver to such holder or such holder's nominee certificates representing the
number of shares of Common Stock to which such holder shall be entitled. The
Mandatory Conversion of Series A Convertible Stock shall be deemed to have
occurred on the Conversion Date without regard to the time of surrender of such
shares of Series A Preferred Stock and (i) such shares of Series A Preferred
Stock shall no longer be deemed outstanding and all rights whatsoever with
respect to such shares shall terminate (except the right of a holder to receive
certificates representing the number of shares of Common Stock to which such
holder is entitled, together with a cash payment in lieu of any fractional
shares of Common Stock) and (ii) holders entitled to receive shares of Common
Stock deliverable upon conversion of such shares of Series A Preferred Stock
shall be treated for all purposes as the holder of record of such shares of
Common Stock on the Conversion Date notwithstanding that the share register of
the Company shall then be closed or the certificates representing the shares of
Common Stock shall not then be actually delivered to such holder.
(e) Fractional Shares. No fractional share shall be issued
upon the conversion of any of the Series A Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of the Series A
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the closing price per share of
the Common Stock, as reported by NASDAQ, on the Notice Date multiplied by such
fraction.
(f) Reservation of Common Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of Common
Stock free of preemptive rights as shall be sufficient to effect the conversion
of all shares of Series A Preferred Stock then outstanding; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred Stock, the Company will take such action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(g) Adjustment of Conversion Price.
(i) If, prior to the conversion of all outstanding
shares of Series A Preferred Stock, the Company shall reclassify, subdivide or
combine its outstanding shares of Common Stock into a greater or smaller number
of shares by a stock split, stock dividend or other similar event, then in each
such case the Conversion Price shall be adjusted to that price which will permit
the number of shares of Common Stock into which Series A Preferred Stock may be
converted to be increased or reduced in the same proportion as are the number of
shares of Common Stock.
(ii) If, prior to the conversion of all of the
outstanding shares of Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity, then
the holders of shares of Series A Preferred Stock shall thereafter have the
right to purchase and receive upon conversion of the Series A Preferred Stock,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such share of stock and/or securities as may be issued or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the conversion of the Series A
Preferred Stock held by such holders had such merger, consolidation, exchange of
shares, recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Series A Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series A Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the holders of the Series A Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series A Preferred Stock may be entitled to purchase.
(iii) If any adjustment under this subsection would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion shall be the next higher
number of shares.
(h) The Company will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series A Preferred Stock pursuant hereto. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue or delivery of Common Stock in a name
other than that in which the shares of Series A Preferred Stock so converted
were registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid to the Company the amount of such tax,
or has established, to the satisfaction of the Company, that such tax has been
paid.
SECTION 4. Status of Converted Shares. In the event any shares of
Series A Preferred Stock shall be converted as contemplated by this Certificate
of Designation, the shares so converted shall be canceled, shall return to the
status of authorized but unissued preferred stock, par value $0.10 per share, of
the Company, of no designated class or series, and shall not be issuable by the
Company as Series A Preferred Stock.
SECTION 5. Voting Rights. (a) Except as otherwise specifically provided
by the Business Corporation Law of the State of New York or as otherwise
provided herein, the holders of Series A Preferred Stock shall be entitled to
vote on any matters required or permitted to be submitted to the holders of
shares of Common Stock for their approval, and such holders of shares of Series
A Preferred Stock and holders of shares of Common Stock shall vote as a single
class, with the holders of shares of Series A Preferred Stock having the number
of votes to which they would be entitled if the Series A Preferred Stock were
converted into shares of Common Stock in accordance with the Conversion Formula.
(b) So long as Series A Preferred Stock is outstanding, the
Company shall not, without the affirmative vote or consent of the holders of at
least a majority (or such higher percentage, if any, as may then be required by
applicable law) of all outstanding shares of Series A Preferred Stock, voting
separately as a class, amend any provision of the Certificate of Incorporation
of the Company so as to change the preferences, conversion or other rights,
voting powers, restrictions or limitations as to dividends or other
distributions of the Series A Preferred Stock.
SECTION 6. Rank and Limitations of Preferred Stock. All shares of
Series A Preferred Stock shall rank equally with each other share of Series A
Preferred Stock and shall be identical in all respects.
IN WITNESS WHEREOF, the undersigned hereby executes this Certificate of
Designation as of this 18th day of June, 1998.
SIRCO INTERNATIONAL CORP.
By: /s/ Joel Dupre
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Name: Joel Dupre
Title: Chairman of the Board and
Chief Executive Officer