FILED JUL 30 1991 07-30-91 09:35
STATE OF COLORADO 911058405 $50.00
DEPARTMENT OF STATE
ARTICLES OF INCORPORATION
We the undersigned natural person(s) of the age of eighteen years or
more, acting as incorporator(s) of a corporation under the Colorado Corporation
Code adopt the following Articles of Incorporation for such corporation:
FIRST: The name of the corporation is U.S. WIRELESS DATA, INC.
SECOND: The period of duration if other than perpetual: PERPETUAL.
THIRD: The corporation is organized for Any Legal and Lawful Purpose
Pursuant to the Colorado Corporation Code. A more specific purpose may be
stated:
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is 6,000,000 and the par value of each share shall be NO
PAR VALUE.
FIFTH: Cumulative voting shares of stock is NOT authorized.
SIXTH: Provisions limiting or denying to shareholders the preemptive
right to acquire additional or treasury shares of the corporation, if any, are:
NO PREEMPTIVE RIGHTS.
SEVENTH: The address of the initial registered office of the
corporation is 4030 N. SINTON RD., STE. B, COLORADO SPRINGS, COLORADO 80907
(Address must include Building number, Street (or rural route number), Town or
City, County and ZIP CODE) and the name of its initial registered agent at such
address is ROD STAMBAUGH.
EIGHTH: Address of the place of business: SAME AS REGISTERED OFFICE.
NINTH: The number of directors constituting the initial board of
directors of the corporation is THREE, and the names and addresses of the
persons who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and shall qualify are:
The number of directors of a corporation shall be not less than three;
except that there need be only as many directors as there are, or
initially will be, shareholders in the event that the outstanding
shares are or initially will be, held of record by fewer than three
shareholders.
NAME ADDRESS (INCLUDE ZIP CODE)
Rod Stambaugh 2072 Bristlecone Dr., Colo. Spgs., CO 80919
Leonard Trout 1104 Darby St., Colo. Spgs., CO 80907
Brent Phillips 2450 Hamlet Ln. A, Colo. Spgs., CO 80918
TENTH: The name and address of each incorporator is:
NAME ADDRESS (INCLUDE ZIP CODE)
Rod Stambaugh 2072 Bristlecone Dr., Colo. Spgs., CO 80919
Leonard Trout 1104 Darby St., Colo. Spgs., CO 80907
Signed /s/ Rod Stambaugh
Signed /s/ Leonard Trout
(Incorporators)
ARTICLES OF INCORPORATION MUST BE ACCOMPANIED BY AN OCR FORM WHICH IS PROVIDED
BY THE SECRETARY OF STATE.
921097070 $25.00
SOS 10-07-92 08:30
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
U.S. WIRELESS DATA, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation.
FIRST: The name of the corporation is U.S. WIRELESS DATA, INC.
SECOND: The following amendments to the Articles of Incorporation were
adopted by the shareholders of the Corporation on September 18, 1992, in the
manner prescribed by the Colorado Corporation Code.
1. Article THIRD is amended so that Article THIRD reads as follows:
THIRD: The purposes for which this corporation is organized
are to engage in and do any lawful act concerning any and all lawful business
for which corporations may be organized under the laws of Colorado, now or
hereafter in effect.
2. New Articles ELEVENTH through EIGHTEENTH are hereby added as
follows:
ELEVENTH: The Board of Directors may cause any shares issued
by the corporation to be issued subject to such lawful restrictions,
qualifications, limitations or special rights as they deem fit, which
restrictions, qualifications, limitation or special rights shall be created by
provisions in the Bylaws of the corporation or in the duly adopted resolutions
of the Board of Directors; provided that notice of such special restrictions,
qualifications, limitations or special rights must appear on the Certificate
evidencing ownership of such shares.
TWELFTH: Meetings of shareholders may be held at such time and
place as the Bylaws shall provide. A majority of the shares entitled to vote
represented in person or by proxy shall constitute a quorum at any meeting of
the shareholders.
THIRTEENTH: The number of directors to be elected at the
annual meeting of the shareholders or at a special meeting called for the
election of directors shall not be less than three, nor more than nine, the
exact number to be fixed by the Bylaws.
FOURTEENTH: A director of this corporation shall not be
personally liable to the corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director except that this provision shall not
limit the liability of a director to the corporation or to its shareholders for
monetary damages for: (i) any breach of the director's duty of loyalty to the
corporation or to its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) acts
specified in Section 7-5-114 of the Colorado Corporation Code as the same may be
amended from time to time; or (iv) any transaction from which the director
derived an improper personal benefit. If the Colorado Corporation Code as the
same may be amended to authorize corporation
actions further limiting or eliminating the personal liability of directors,
then the liability of a director of the corporation shall be limited or
eliminated to the fullest extent permitted by the Colorado Corporation Code, as
so amended.
FIFTEENTH: The officers, directors and other members of
management of this corporation shall be subject to the doctrine of corporate
opportunities only insofar as it applies to business opportunities in which this
corporation has expressed an interest as determined from time to time by the
corporation's Board of Directors as evidenced by resolutions appearing in the
corporation's Minutes. When such areas of interest are delineated, all such
business opportunities within such areas of interest which come to the attention
of the officers, directors and other members of management of this corporation
shall be disclosed promptly to this corporation and made available to it. The
Board of Directors may reject any business opportunity presented to it and
thereafter any officer, director or other member of management may avail himself
of such opportunity. Until such time as this corporation through its Board of
Directors, has designated an area of interest, the officers, directors and other
members of management of this corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the rights of any
officer, director or other member of management of this corporation to continue
a business existing prior to the time that such area of interest is designated
by this corporation. This provision shall not be construed to release any
employee of the corporation (other than an officer, director or member of
management) from any duties which he may have to the corporation.
SIXTEENTH: Any of the directors or officers of this
corporation shall not, in the absence of fraud, be disqualified by his office
from dealing or contracting with this corporation whether as vendor, purchaser
or otherwise, nor shall any firm, association, or corporation of which he shall
be a member, or in which he may be pecuniarily interested in any manner be
disqualified. No director or officer, nor any firm, association or corporation
with which he is connected as aforesaid shall be liable to account to this
corporation or its shareholders for any profit realized by him from or through
any such transaction or contract; it being the express purpose and intent of
this Article to permit this corporation to buy from, sell to, or otherwise deal
with partnerships, firms or corporation of which the directors and officers of
this corporation, or any one or more of them, may be members, directors, or
officers, or in which they or any of them have pecuniary interests; and the
contracts of this corporation, in the absence of fraud, shall not be void or
voidable or affected in any manner by reason of any such membership. The
interested director or directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof
authorizing, approving or ratifying any such contract or transaction. Further,
the vote of any such interested director at a meeting of the Board of Directors
or committee thereof authorizing, approving or ratifying any such contract or
transaction. Further, the vote of any such interested director at a meeting of
the Board of Directors or committee thereof authorizing, approving or ratifying
any such contract or transaction may be counted if his relationship or interest
with respect to any such contract or transaction (i) is disclosed and such
transaction or contract is authorized, approved or ratified by a majority of the
directors without counting the vote or consent of such interested director, or
(ii) is disclosed to the shareholders of the Company and authorized, approved or
ratified by the shareholders by vote or written consent, or (iii) such contract
or transaction is fair and reasonable to the corporation.
SEVENTEENTH: When with respect to any action to be taken by
shareholders of this corporation, the Colorado Corporation Code requires the
vote or
-4-
concurrence of the holders of two-thirds of the outstanding shares entitled to
vote thereon, or of any class or series, such action may be taken by the vote or
concurrence of a majority of such shares or class or series thereof.
EIGHTEENTH: Subject to repeal by action of the shareholders,
the Board of Directors of this corporation is authorized to adopt, confirm,
ratify, alter, amend, rescind and repeal Bylaws or any portion thereof from time
to time.
THIRD: The number of shares voted for the above amendments was
sufficient for approval.
FOURTH: The amendments do not provide for an exchange,
reclassification or cancellation of issued shares.
FIFTH: The amendments do not effect a change in the amount of sated
[sic] capital of the corporation.
Dated: October 6, 1992.
U.S. WIRELESS DATA, INC.,
a Colorado corporation
By: /s/ Rod Stambaugh
---------------------
Rod Stambaugh, President
By: /s/ Maurice Caldwell, Jr.
-----------------------------
Maurice Caldwell, Jr., Secretary
-5-
STATE OF COLORADO ( )
ss.
CITY AND COUNTY OF DENVER ( )
I, Karin A. Tupper, a Notary Public, do hereby certify that on this 6th
day of October, personally appeared before me Rod Stambaugh, and Maurice
Caldwell, who, being by me first duly sworn, declared that they are the
President and Secretary, respectively, of U.S. Wireless Data, Inc. and that they
read the foregoing document and that the statements contained therein are true.
My commission expires: June 22, 1993.
SEAL
/s/ Karin A. Tupper
-------------------
Notary Public
-6-
941122627 $25.00
SOS 11-01-94 13:23
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
U.S. WIRELESS DATA, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is U.S. Wireless Data, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the Board of Directors of the Corporation effective August 12, 1994,
in the manner prescribed by the Colorado Business Corporation Act, and approved
by the shareholders on October 28, 1994. The number of votes which were cast for
the amendment by each voting group of shareholders entitled to vote separately
thereon was sufficient for approval.
Article FOURTH is amended so that it reads as follows:
"FOURTH: The aggregate number of shares which the corporation
shall have the authority to issue is 12,000,000 shares of no par value common
stock."
Dated: October 28, 1994.
U.S. WIRELESS DATA, INC.,
a Colorado corporation
By: /s/ Alan B. Roberts
-----------------------
Alan B. Roberts, President
19981025822 C
$25.00
Secretary of State
02-09-98 16:13:58
U.S. WIRELESS DATA, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is U.S.
Wireless Data, Inc.
SECOND: That the text of the Amendment to the Articles of
Incorporation of the Corporation increasing the number of shares of authorized
no par value common stock to 40,000,000 and authorizing 15,000,000 shares of no
par value preferred stock is as set forth on Exhibit 1 attached hereto which is
incorporated herein by reference.
THIRD: That the Amendment was adopted on February 6, 1998.
FOURTH: That the Amendment was duly adopted by the
shareholders of the Corporation.
IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused
these Articles of Amendment to be duly executed this 6th day of February, 1998.
U.S. Wireless Data, Inc.
By: /s/ Evon A. Kelly
---------------------
Evon A. Kelly,
Chief Executive Officer
ATTEST:
/s/ Robert E. Robichaud
- -----------------------
Robert E. Robichaud,
Assistant Secretary
Exhibit 1
Articles of Amendment to Articles of Incorporation
U.S. Wireless Data, Inc.
Article FOURTH of the Articles of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
A. The aggregate number of shares which the Corporation shall have
authority to issue is fifty-five million (55,000,000) shares, consisting of
forty million (40,000,000) shares of common stock without par value per
share (the "Common Stock"), and fifteen million (15,000,000) shares of
preferred stock without par value per share (the "Preferred Stock").
B. The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article FOURTH, 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 Colorado to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
1. The number of shares constituting that series and the
distinctive designation of that series;
2. The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, whether dividends shall be payable in cash or in kind, and
the relative rights of priority, if any, of payment of dividends
on shares of that series;
3. Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of
such voting rights;
4. Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conver- sion,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
5. Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
6. Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amount of such sinking fund;
7. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up,
or merger, consolidation, distribution or sale of assets of the
Corporation, and the relative rights of priority, if any, of
payment of shares of that series; and
8. Any other relative rights, preferences and limitations of
that series. Shares of Preferred Stock may be authorized and
issued, in aggregate amounts not exceeding the total number of
shares of Preferred Stock authorized by the Articles of
Incorporation, from time to time as the Board of Directors of the
Corporation shall determine and for such consideration as shall
be fixed by the Board of Directors.
[End of Articles of Amendment]
-2-
19981025822 C
$25.00
Secretary of State
02-09-98 16:13:58
U.S. WIRELESS DATA, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is U.S. Wireless Data, Inc.
SECOND: That the text of the Amendment to the Articles of
Incorporation of the Corporation determining the designations, preferences,
limitations and relative rights of the Series A Preferred Stock is set
forth on Exhibit 1 attached hereto and is incorporated herein by reference.
THIRD: That the Amendment was adopted on February 6, 1998.
FOURTH: That the Amendment was duly adopted by the Board of Directors
of the Corporation.
IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused these Articles
of Amendment to be duly executed this 6th day of February, 1998.
U.S. Wireless Data, Inc.
By: /s/ Evon A. Kelly
---------------------
Evon A. Kelly,
Chief Executive Officer
ATTEST:
/s/ Robert E. Robichaud
- -----------------------
Robert E. Robichaud,
Assistant Secretary
EXHIBIT 1
DESIGNATION OF SERIES A CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK
U.S. Wireless Data, Inc., a Colorado corporation (the
"Corporation"), hereby designates the preferences, limitations and relative
rights of its Series A Cumulative Convertible Redeemable Preferred Stock as
follows:
1. DESIGNATION
Four Million (4,000,000) shares of the Corporation's 15,000,000 total
authorized shares of no par value preferred stock are hereby designated as
Series A Cumulative Convertible Redeemable Preferred Stock (hereinafter referred
to as the "Series A Preferred").
2. STATED VALUE
The Series A Preferred shall have a stated value of one dollar ($1.00)
per share (hereafter the "Stated Value").
3. DIVIDENDS
(a) Right to Dividends and Initial Dividend Rate. The holders of
outstanding Series A Preferred shall be entitled to receive cumulative
dividends at the initial rate of eight percent (8%) per share, per annum,
based on the Stated Value of the Series A Preferred. Cumulative dividends
shall accrue and be paid quarterly to record holders of Series A Preferred
as of March 31, June 30, September 30 and December 31 of each year (the
"Dividend Record Dates"), in arrears, if, as and when declared by the Board
of Directors, out of assets at the time legally available for such
dividends.
(b) Adjustment of Dividend Rate. The dividend payable on the Series A
Preferred shall be reduced to four percent (4%) per annum upon initial
effectiveness of a registration statement with the United State Securities
and Exchange Commission (the "SEC") covering the shares of Common Stock
into which the Series A Preferred is convertible. Thereafter, interest
shall continue at such rate until all of the Series A Preferred has been
converted to Common Stock or all shares of the Series A Preferred have been
redeemed by the Corporation.
(c) Payment Dates for Dividends. Dividends shall be paid on or before
the 15th of the month following each Interest Payment Record Date, or the
next Business Day thereafter if such day is not a Business Day.
(d) Payment of Dividends. The Corporation shall pay all dividends on
the Series A Preferred in shares of its no par value common stock (the
"Common Stock") to the extent the Corporation has a sufficient number of
shares of Common Stock available to pay such dividends. Shares of Common
Stock used to pay dividends may be authorized and unissued shares or
treasury shares of the Corporation. The Corporation agrees to use its best
efforts to maintain a sufficient number of shares of Common Stock available
at all times to allow for the payment of dividends on the Series A
Preferred in shares of Common Stock. If the Corporation has an insufficient
number of shares of Common Stock available at any time to pay all dividends
then owing in shares of Common Stock, the Corporation may pay all or any
part of such dividend in cash or other property (including other securities
of the Corporation) having a value equal to the dividend then payable.
(e) Number of Shares of Common Stock Issuable as Dividends. For any
dividend being paid in shares of Common Stock, the number of shares of
Common Stock issuable per share of Series A Preferred shall be calculated
as follows: The amount of the dividend owing on the Series A Preferred at
the Dividend Record Date (in dollars) shall be divided by the average
closing bid price of the Common Stock over the last five trading days prior
to the Dividend Record Date as quoted on the OTC Electronic Bulletin Board,
or such other quotation service as is quoting bid and asked prices for the
Common Stock. If the Common Stock is then listed on the NASDAQ Stock Market
or any other national exchange which has closing bid price reporting, the
five day average of the closing bid price for the Common Stock for such
days as reported on NASDAQ or such other national securities exchange shall
be substituted for the five day average closing bid price as reported by
the OTC Electronic Bulletin Board or other quotation service. In the event
the Common Stock is not quoted on any exchange or quotation service, then
the Board of Directors, acting in good faith, shall adopt a resolution
valuing the Common Stock for purposes of determining the number of shares
of Common Stock issuable as a dividend at such Dividend Record Date. The
price of the Common Stock used for purposes of determining the number of
shares issuable as dividends on the Series A Preferred or for purposes of
conversion of Debentures into Common Stock pursuant to Section 5 of this
designation is hereafter referred to as the "Market Price." When computed
in connection with a conversion transaction, the average shall be computed
using the five trading days prior to the Conversion Date.
(f) Payment of Dividends to Holders Based on Total Shares of Series A
Preferred Registered in the Name of Such Holder. Notwithstanding the number
of certificates held by an individual holder of Series A Preferred, the
Corporation shall be entitled to cumulate the number of shares represented
by all such certificates held in the name of the same holder, and the
cumulative total shall then be multiplied by the number of Common Shares
issuable as a
-2-
dividend per share of Series A Preferred to determine the total number of
shares of Common Stock issuable to such holder at each Dividend Record
Date.
(g) No Issuance of Fractional Shares. No fractional shares of Common
Stock will be issued as a dividend on the Series A Preferred; rather, a
holder of Series A Preferred otherwise entitled to a fractional share of
Common Stock as a dividend may receive, at the sole option of the
Corporation, either (i) cash in lieu of such fractional share, or (ii) the
next higher whole number of shares of Common Stock if the fractional share
to which such holder is otherwise entitled is equal to 0.5 or greater, or
the next lower whole number of shares of Common Stock if the fractional
share to which such holder is otherwise entitled is less than 0.5.
(h) Dividend Statements. At the time of each dividend payment, the
Corporation shall provide each holder of Series A Preferred with a
statement showing the manner in which it calculated the dividend payable at
such Dividend Record Date, including the calculation used to determine the
number of shares of Common Stock issued as such dividend.
(i) Place of Dividend Payment. Dividends shall be payable, and
transfer of the Series A Preferred will be registrable, at the Principal
Office of the Company. Upon request by a holder of Series A Preferred,
payment of dividends shall be made by delivery of a check or Common Stock
certificates to the registered holder mailed to such holder's address as it
appears on the Series A Preferred register.
(j) Priority of Dividends. The Corporation shall make no Distribution
(as defined below) to the holders of Common Stock in any fiscal year unless
and until any and all unpaid dividends shall have been paid upon all Series
A Preferred. "Distribution" as used in this Section means the transfer of
cash or property without consideration, whether by way of dividend or
otherwise (except a dividend in shares of the Corporation), or the purchase
or redemption of shares of the Corporation for cash or property, but does
not include (i) the repurchase of shares from a terminated employee or
consultant of the Corporation within the terms of an agreement approved by
the Corporation's Board of Directors or (ii) a distribution which is part
of a voluntary liquidation, dissolution or winding up of the Corporation.
(k) Dividends Cumulative. All dividends owing on the Series A
Preferred shall be cumulative. Dividends shall accrue or accumulate to the
extent they are unpaid. Unpaid dividends shall bear and accrue interest at
the same rate applicable to the Series A Preferred as of the time of the
Dividend Record Date for the unpaid dividend. The unpaid dividends,
together with interest thereon, shall be paid as soon as the Corporation is
legally able to pay any such dividends and interest. Interest on unpaid
dividends shall also be paid in shares of Common Stock, if possible, with
the number of shares of Common Stock issuable as interest being calculated
in the same manner as for dividends.
-3-
4. LIQUIDATION PREFERENCE
(a) Basic Preference Rights. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation (a
"Liquidation"):
(1) Payments to Holders of Series A Preferred. Each holder of
shares of Series A Preferred then outstanding shall be entitled to
receive an amount equal to $1.00 for each share of Series A Preferred
(the "Series A Liquidation Preference"), plus all accrued and unpaid
dividends thereon to the date fixed for distribution, before any
payment shall be made in respect of the Corporation's Common Stock.
(2) Payments to Holders of Common Stock. After payment has been
made to the holders of Series A Preferred of the full amounts to which
they are entitled under Paragraph 4(a)(1) above, the holders of Common
Stock shall be entitled to receive all declared and unpaid dividends
thereon to the date fixed for distribution.
(3) Should Assets Exceed Payments. The remaining assets of the
Corporation available for distribution to shareholders after payments
are made under Paragraphs 4(a)(1) and 4(a)(2) above, shall be
distributed pro rata among all of the Corporation's shareholders. For
purposes of this Paragraph 4(a)(3), holders of Series A Preferred
shall share in this distribution in proportion to the number of shares
of Common Stock they would hold had full conversion of their Series A
Preferred occurred on the day prior to the Liquidation, according to
the provisions of Sections 5 and 6, below.
(4) Should Assets Be Insufficient. If upon a Liquidation the
assets of the Corporation available for distribution to its
shareholders shall be insufficient to make full payments due under
Paragraph 4(a)(1), then the holders of the Series A Preferred then
outstanding shall share ratably in proportion to the total number of
such shares owned by each such holder, first in proportion to the
respective Series A Liquidation Preference, and next, in proportion to
the amount of unpaid dividends.
(5) Source of Liquidation Payment. The holders of stock shall be
paid under this Subsection 4(a) out of the assets of the Corporation
available for distribution to shareholders, whether from capital,
surplus or earnings.
(6) Merger or Acquisition. The Corporation shall not effect a
merger, reorganization, or consolidation of the Corporation into or
with another corporation or the sale or transfer of all or
substantially all of the assets of the Corporation until the
Corporation shall have provided notice to all holders of Series A
Preferred pursuant to Subsection 4(b), below. Unless otherwise agreed
to by the holders of a majority of the Series A Preferred which is
then outstanding, a merger, consolidation, reorganization or sale of
all or substantially all of the Corporation's assets shall be deemed
to be a Liquidation.
-4-
(b) Notice. In the event of any Liquidation of the Corporation, or in
the event of any merger, reorganization, or consolidation of the
Corporation into or with another corporation, or the sale or transfer of
all or substantially all of the assets of the Corporation, the Corporation
shall give each holder of Series A Preferred initial written notice of the
proposed action within fifteen (15) days after the date the Board of
Directors approves such action, or twenty (20) days prior to any
shareholders' meeting called to approve such action, or twenty (20) days
after the commencement of any involuntary proceeding, whichever is earlier.
(1) Content of Notice. Such initial written notice (the "Initial
Notice") shall describe the material terms and conditions of the
proposed action, including a description of the stock, cash, and
property to be received by the holders of Series A Preferred upon
consummation of the proposed action. If any material change in the
facts set forth in the Initial Notice shall occur, the Corporation
shall promptly give another written notice (the "Subsequent Notice")
to each holder of the Series A Preferred of that material change.
(2) Notice Precedes Consummation. The Corporation shall not
consummate any Liquidation of the Corporation before the expiration of
twenty (20) days after the mailing of the Initial Notice or ten (10)
days after the mailing of any Subsequent Notice, whichever is later.
But any such 20-day or 10-day period may be shortened upon the written
consent of the holders of a majority of the Series A Preferred then
outstanding.
(c) Non-Cash Distributions on Liquidation. In the event of any
Liquidation of the Corporation which will involve the distribution of
assets other than cash, the Corporation shall promptly engage a competent
independent appraiser to determine the value of the assets to be
distributed. With respect to the valuation of securities, the Corporation
shall engage such appraiser as shall be approved by the holders of a
majority of the Series A Preferred then outstanding. The Corporation shall,
upon receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Series A Preferred of the appraiser's valuation.
5. CONVERSION
(a) Conversion Rights.
(1) Optional Conversion. Each share of Series A Preferred shall
be convertible, at the option of the holder thereof, into fully paid
and non-assessable shares of Common Stock of the Corporation at any
time after the date of issuance and following (a) the authorization of
an increase in the Corporation's authorized Common Stock to no less
than 40,000,000 shares and (b) the first to occur of (i) effectiveness
with the SEC of a registration statement covering the shares of Common
Stock issuable upon conversion of the Series A Preferred or (ii) the
lapse of 150 days from the Initial Closing Date. The Series A
Preferred shall be so convertible up to and including the earlier of
(i) the day prior to the closing of a
-5-
Qualified Public Offering (as defined below) or (ii) the day fixed for
redemption of any and all remaining outstanding shares of Series A
Preferred (the "Conversion Period").
(2) Automatic Conversion. All outstanding shares of Series A
Preferred shall automatically be converted into fully paid and
non-assessable shares of Common Stock of the Corporation, at the then
applicable Conversion Price (as defined below), immediately prior to
the closing of a firm commitment underwritten public offering of the
shares of Common Stock of the Corporation pursuant to a registration
statement filed under the Securities Act of 1933, as amended, at a
price per share of not less than ten dollars ($10.00) per share (prior
to underwriter commissions and expenses and adjusted for stock splits,
stock dividends, reorganizations and the like) and with aggregate
gross offering proceeds to the Corporation of not less than Five
Million Dollars ($5,000,000) (a "Qualified Public Offering").
(b) Conversion Formula. Each share of Series A Preferred shall be
valued at one dollar ($1.00) (the "Series A Purchase Price") for purposes
of either optional or automatic conversion, notwithstanding any accrued but
unpaid dividends owing on the Series A Preferred at the time of conversion.
The number of shares of Common Stock into which each share of the Series A
Preferred shall be converted shall be determined by dividing the Series A
Purchase Price by the Series A Conversion Price or the Minimum Series A
Conversion Price (as determined as provided below) which is in effect at
the time of the conversion. The Corporation shall make provision for all
necessary payments as of the Conversion Date or Automatic Conversion Date
(as defined in Subsection 5(d), below) on account of any dividends accrued
and unpaid on the Series A Preferred surrendered for conversion.
(c) Conversion Price.
(1) The conversion price per share at which shares of Common
Stock shall be initially issuable upon conversion of any shares of
Series A Preferred (the "Series A Conversion Price") shall be equal to
the lesser of (i) $6.00 or (ii) 80% of the Market Price.
Notwithstanding the foregoing, for the first 270 days following the
initial closing of the offering by which the Debentures (which were
converted into Series A Preferred) were sold to investors (the
"Initial Closing Date"), the Conversion Price shall be not less than
$4.00 per share, which $4.00 price shall be appropriately adjusted in
the event of any stock splits or other transactions affecting the
Common Stock (the "Minimum Series A Conversion Price"). After such 270
day period, the Minimum Series A Conversion Price shall be eliminated.
The Minimum Series A Conversion price shall be further subject to
adjustment as provided in Section 6 below.
(2) The Corporation has agreed under terms contained in a
separate agreement entered between the Corporation and the holders of
Series A Preferred to register the shares of Common Stock issuable by
the Corporation as dividends on, and upon conversion of, Series A
Preferred, with the SEC. In the event such registration is not
declared effective
-6-
by the SEC within 150 days of the Initial Closing Date, the Conversion
Price or the Minimum Conversion Price, as then applicable, shall
thereafter be reduced by two percent (2%) from the Conversion Price or
Minimum Conversion Price otherwise in effect at the time of
conversion. The Conversion Price or Minimum Conversion Price shall be
reduced an additional two percent (2%) off the then applicable
Conversion Price or Minimum Conversion Price for each additional 30
days (or any fractional part of such 30-day period) during which such
registration is not effective. Such reduced Conversion Price or
Minimum Conversion Price shall thereafter be effective until all
Series A Preferred has been converted or redeemed.
(d) Mechanics of Conversion.
(1) Optional Conversion. Before any holder of Series A Preferred
will be entitled to convert the same into shares of Common Stock
pursuant to Paragraph 5(a)(1) hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Series A Preferred,
and shall give written notice to the Corporation at such office that
such holder elects to convert the same and will state therein the name
or names in which the certificate or certificates for shares of Common
Stock should be issued (the "Conversion Notice"). The Conversion
Notice shall be in the form printed on the certificate(s) representing
the Series A Preferred being converted. The Holder may submit an
irrevocable Conversion Notice to the Corporation in advance of
physical delivery of a specific Series A Preferred share
certificate(s) by transmitting a copy of the completed Conversion
Notice relating to the specific certificate(s) of Series A Preferred
to be tendered to the Corporation for conversion by facsimile (the
"Advance Conversion Notice"), followed by delivery to the Corporation
of the certificate(s) representing the shares of Series A Preferred
that are the subject of the Advance Conversion Notice within three (3)
business days thereafter. The Series A Preferred certificate(s) so
tendered for conversion shall be deemed to have been converted on the
date the Corporation receives the Advance Conversion Notice for such
Series A Preferred (the "Conversion Date"), provided the Advance
Conversion Notice is received by 6:00 p.m. (Eastern Time) on a
Business Day, and provided further, that the certificate representing
the shares of Series A Preferred then being converted is actually
delivered to the Corporation within such three (3) business day
period. If the Advance Conversion Notice is not received on a Business
Day or by 6:00 p.m. (Eastern Time) on a Business Day, then the
Conversion Date for the Series A Preferred to which the Advance
Conversion Notice relates shall be deemed to have occurred on the next
day which is a Business Day. The Company will cause its transfer agent
to issue certificates for the shares of Common Stock issuable upon
conversion and will transmit the certificates representing such shares
(together with certificates representing the balance of any shares of
Series A Preferred not being so converted) to the Holder via express
courier, by electronic transfer, or otherwise, within three (3)
business days after receipt by the Company of the original Conversion
Notice and the Series A Preferred certificates being converted (the
"Delivery Date"). If the Holder in whose name the Series A Preferred
being surrendered for conversion requests that the Corporation issue
shares of Common Stock (or shares of Series A Preferred in replacement
for
-7-
shares of Series A Preferred not being converted at the time) in a
name other than such holder's, then such holder shall be required to
demonstrate, at such holder's expense and to the Corporation's
satisfaction, that an exemption from registration under federal and
state securities laws is available for the requested issuance of
shares. The Corporation may require the delivery of an opinion of
counsel to the effect that such an exemption is available for the
transaction. Conversion shall be deemed to have occurred immediately
prior to the close of business on the date of surrender of the
certificate(s) for shares of Series A Preferred being converted or in
the case of an Advance Conversion Notice, the date such Advance
Conversion Notice is deemed received by the Corporation as provided
above. 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 holder of such shares of Common Stock on such
Conversion Date.
(2) Penalty for Late Delivery of Share Certificates Issuable upon
Conversion. The Company understands that a delay in the issuance of
the shares of Common Stock beyond the Delivery Date could result in
economic loss to the Holder. As compensation to the converting Holder
for such loss, the Company agrees to pay a late payment penalty to the
converting Holder for late delivery of such shares of Common Stock in
accordance with the following schedule (where "No. Business Days Late"
is defined as the number of business days beyond five (5) business
days from the Delivery Date):
Late Payment for Each $10,000
of Debenture Principal Amount
No. Business Days Late Being Converted to Common Stock
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10+ 1,000 + $200 for each Business
Day Late beyond 10 days
-8-
The Company shall pay any penalties incurred under this Paragraph in
immediately available funds upon demand. Nothing herein shall limit
the converting Holder's right to pursue actual damages for the
Company's failure to issue and deliver the Common Stock to the
converting Holder. Furthermore, in addition to any other remedies
which may be available to the converting Holder, in the event the
Company fails for any reason to effect delivery of such shares of
Common Stock within five (5) business days after the Delivery Date
(other than as a result of an event in the nature of a force majeure
which is totally beyond the control of the Company), the converting
Holder shall be entitled to revoke the relevant Conversion Notice by
delivering a notice to that effect to the Company, whereupon the
Company and the Holder shall be restored to their respective positions
immediately prior to delivery of the Conversion Notice. Any shares of
Common Stock delivered to Holder after such revocation shall be
forthwith returned to the Company and a replacement certificate for
the shares of Series A Preferred shall be forthwith issued in
replacement for the shares for which conversion has been so revoked.
(3) Automatic Conversion. Conversion of all the outstanding
shares of Series A Preferred into shares of Common Stock pursuant to
Paragraph 5(a)(2) hereof shall be deemed to have been made
automatically and immediately prior to the closing of a Qualified
Public Offering, as set forth in Paragraph 5(a)(2) hereof (an
"Automatic Conversion Date"). Upon such automatic conversion, the
person or persons entitled to receive the shares of Common Stock
issuable upon such conversion will be treated for all purposes as the
record holder or holders of such Common Stock on the Automatic
Conversion Date whether or not such holder or holders shall have
surrendered certificates for such holder's shares of Series A
Preferred to the Corporation. Upon the Automatic Conversion Date, the
certificates representing all the shares of Series A Preferred shall
be deemed void; as soon as practicable after the surrender by any
holder of a Series A Preferred certificate, accompanied by a statement
from the holder as to the name or names in which the certificate or
certificates for shares of Common Stock should be issued (subject to
the right of the Corporation to require proof satisfactory to it,
including an opinion of counsel, demonstrating that a registration
exemption is available under federal and state securities laws for any
transfer of shares into a name other than that of the original
holder), the Corporation shall issue and deliver to such holder or
such holder's nominee or nominees, a certificate or certificates for
the number of shares of Common Stock to which the holder is entitled.
(4) New Certificates. Upon conversion of only a portion of the
number of shares of Series A Preferred represented by a certificate
surrendered for conversion, the Corporation shall issue and deliver
upon the written order of the holder at the expense of the
Corporation, a new certificate covering the number of shares of Series
A Preferred representing the unconverted portion of the certificate so
surrendered. The Corporation may charge a reasonable fee for any
transfer of a Series A Preferred Certificate into the name of any
person who is not the original Holder.
-9-
(5) Payment of Accrued but Unpaid Dividends on Conversion. If
there remain any accrued and unpaid dividends on Series A Preferred
being converted, the Corporation shall pay such dividends to the
converting holder at the time of conversion in the form of additional
shares of Common Stock, determined by dividing the amount of the
unpaid dividends to be applied for such purpose by the Series A
Conversion Price (or, if applicable, the Minimum Series A Conversion
Price) then in effect.
(6) No Fractional Shares. The Corporation shall issue no
fractional shares of Common Stock or scrip upon conversion of shares
of Series A Preferred. If more than one share of Series A Preferred
shall be surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock issuable upon their
conversion shall be computed on the basis of the aggregate number of
shares of Series A Preferred surrendered for conversion by such
holder. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of Series A
Preferred, the Corporation may, at its sole option, pay a cash
adjustment in respect of such fractional share in an amount equal to
the same fraction of the Series A Conversion Price or Minimum Series A
Conversion Price in effect as of the day of conversion, or, in lieu of
cash, issue to such holder the next higher whole number of shares of
Common Stock if the fractional share to which the holder is otherwise
entitled is equal to 0.5 or greater, or the next lower number of whole
shares of Common Stock if the fractional share to which the holder is
otherwise entitled is less than 0.5.
(e) Taxes Incident to Conversion. The Corporation shall pay any and
all issue taxes and other taxes (excluding income taxes) that may be
payable in respect to any issue or delivery of shares of Common Stock on
conversion of Series A Preferred. The Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that in
which the Series A Preferred so converted was registered, and no such issue
or delivery shall be made unless and until the person requesting such issue
has paid to the Corporation the amount of any such tax, or has established,
to the satisfaction of the Corporation, that such tax has been, or will be,
paid.
(f) Sufficient Reserves of Stock. The Corporation shall at all times
use it s best efforts to reserve and keep available, out of its authorized
but unissued Common Stock or treasury shares, solely for the purpose of
effecting the conversion of the Series A Preferred, the full number of
shares of Common Stock deliverable upon the conversion of all Series A
Preferred from time to time outstanding.
(g) Valid Issue for Conversion. All shares of Common Stock which may
be issued upon conversion of the shares of Series A Preferred shall, upon
issuance by the Corporation, be validly issued, fully paid, non-assessable
and free from all taxes, liens and charges with respect to their issuance.
-10-
(h) Listing of Common Stock; Registration under Exchange Act. The
Corporation shall use its best efforts to maintain the listing of the
Common Stock on the OTC Electronic Bulletin Board or such other quotation
service or exchange on which the Common Stock may be listed, and shall not
take any action at any time while Series A Preferred is outstanding which
would result in the delisting of the Common Stock from any quotation
service or exchange upon which the Common Stock may be listed. The
Corporation shall file all reports required to be filed by it with the SEC
pursuant to the Securities Exchange Act of 1934 (the "1934 Act") and/or the
Securities Exchange Act of 1933 (the "1933 Act"), and shall not take any
action which would result in the deregistration of the Common Stock under
Section 12(g) of the 1934 Act.
6. ADJUSTMENT OF CONVERSION PRICE
(a) Adjustment. The Series A Conversion Price or Minimum Series
Conversion Price in effect at any time shall be adjusted from time to time
as provided in this Section 6.
(b) No Adjustment for Certain Grants, Sales, or Issuances. Anything in
these Articles of Incorporation to the contrary notwithstanding, the
Corporation shall not be required to make any adjustment of the Series A
Conversion Price or Minimum Series A Conversion Price, as the case may be,
in the case of the grant of options or other rights to purchase, or the
sale of, or the issuance of, shares of Common Stock or obligations or
securities convertible into Common Stock of the Corporation:
(1) to its officers, employees, directors, and consultants
pursuant to the Corporation's 1992 Stock Option Plan or otherwise, so
long as any such grants, sales or issuances do not exceed in the
aggregate 3,500,000 shares of Common Stock or obligations or
securities convertible into Common Stock;
(2) upon the exercise of warrants to purchase Common Stock which
are outstanding as of the initial date of the Corporation's Private
Offering Memorandum by which the Debentures convertible into Series A
Preferred were offered to investors; and
(3) upon the issuance of any shares of Common Stock as a dividend
on, or in conversion of, any shares of the Series A Preferred.
(c) Stock Splits, Stock Dividends, Stock Combinations. In case the
Corporation shall at any time subdivide the outstanding shares of Common
Stock, issue a stock dividend on the outstanding Common Stock, combine the
outstanding shares of Common Stock or reclassify the outstanding shares of
Common Stock into securities of a different class, the Series A Conversion
Price and/or the number of shares of Common Stock and/or the type of
securities issuable upon conversion of the Series A Preferred in effect
immediately prior to such subdivision, dividend or combination shall be
equitably adjusted to account for any such
-11-
transaction. The Board of Directors of the Corporation shall determine in
good faith any such adjustments and its good faith determination, absent a
showing of fraud, shall be binding and conclusive. Notice shall be provided
to all holders of Series A Preferred advising of any adjustments to the
conversion terms applicable to the Series A Preferred as soon as
practicable following the date of any such adjustment.
(d) Adjustment Formulas for Certain Issuances. Should the Corporation,
at some point after the first issuance of the Series A Preferred and before
the lapse of the Minimum Series A Conversion price, issue or sell Common
Stock, a right or option to purchase Common Stock, or shares of stock or an
obligation convertible into Common Stock for a certain consideration
receivable by the Corporation per share ("Consideration Receivable") (with
the product of the number of such shares times such Consideration
Receivable being the "Aggregate Consideration Receivable") which is less
than the Minimum Series A Conversion Price in effect at the time of such
issuance, then the Minimum Series A Conversion Price shall immediately and
automatically be adjusted as determined to the nearest cent by the
following formula:
Where z = new Minimum Series A Conversion Price;
x = current Minimum Series A Conversion Price;
y = the Aggregate Consideration Receivable on such
issuance, sale, etc.;
a = number of shares of Common Stock outstanding just
prior to such issuance, sale, etc.;
b = number of shares of Common Stock
to which all holders of Options (as
defined in 6(d)(1) below) are
entitled to subscribe for, or
purchase immediately prior to, such
issuance, sale, etc.;
c = number of shares of Common Stock
issuable to all holders of
Convertible Securities (as defined
in 6(d)(2) below), immediately prior
to such issuance, sale, etc. (using
the Series A Conversion Price then
in effect); and
d = number of shares of Common Stock
to be issued, or deemed to be issued
under 6(d)(1) and (2) below, upon
and immediately after such issuance,
sale, etc.;
then z = (x x (a + b + c)) + y
---------------------
a + b + c + d
-12-
provided, however, that the Minimum Series A Conversion Price shall not be
adjusted in the case of an equity financing of the Corporation made to
holders of Series A Preferred at a price per share which is less than the
Minimum Series A Conversion Price to the extent any such holder (together
with its affiliates, if any) does not purchase securities of the
Corporation in such financing sufficient to retain its or their total pro
rata ownership of the Corporation, with such ownership being calculated
immediately after the closing of such financing as if all securities of the
Corporation other than its outstanding Common Stock were converted or
exercised, as appropriate, into shares of the Corporation's Common Stock.
For purposes of this Subsection 6(d) only, the following provisions
shall apply:
(1) Options or Warrants. In case of the issuance or sale by the
Corporation in any manner of any options for the purchase of shares of
Common Stock or of any rights to subscribe for or to purchase shares
of Common Stock ("Options"), all shares of Common Stock which the
holders of such Options shall be entitled to subscribe for or purchase
pursuant to such Options shall be deemed to be issued or sold as of
the date of the offering of such rights or the granting of such
Options.
(2) Convertible Securities. In the case of the issuance or sale
by the Corporation in any manner of any obligations or of any shares
of stock of the Corporation that shall be convertible into or
exchangeable for Common Stock ("Convertible Securities"), all shares
of Common Stock issuable upon the conversion or exchange of such
obligations or shares shall be deemed issued as of the date such
obligations or shares are issued.
(3) Cash Consideration for Common Stock. In the case of an issue
or sale for cash of shares of Common Stock, the Consideration
Receivable by the Corporation therefor shall be the amount of cash
received, before deducting any commissions or expenses paid by the
Corporation.
(4) Non-Cash Consideration for Common Stock. In the case of the
issuance or sale (otherwise than upon conversion or exchange of
obligations or shares of stock of the Corporation) of shares of Common
Stock for a consideration other than cash or a consideration partly
other than cash, the amount of the consideration other than cash
receivable by the Corporation for such shares shall be deemed to be
the value of such consideration as determined in good faith by the
Board of Directors.
(5) Consideration Receivable for Options or Convertible
Securities.
(a) The amount of the Aggregate Consideration Receivable by the
Corporation upon the issuance of any Options referred to in Subsection (1)
above shall be the
-13-
minimum aggregate consideration named in such Options for the shares of
Common Stock covered thereby, plus the consideration, if any, received by
the Corporation for such Options.
(b) The amount of Consideration Receivable by the Corporation upon the
issuance of any obligations or shares which are convertible or exchangeable
as described in Subsection (2) above as Convertible Securities, shall be
the amount of consideration received by the Corporation upon the issuance
of such obligations or shares, plus the minimum aggregate consideration, if
any, other than such obligations or shares, receivable by the Corporation
upon such conversion or exchange, except in adjustment of dividends.
(c) The amount of Aggregate Consideration Receivable under
Subparagraphs 6(d)(5)a and 6(d)(5)b and the amount of Aggregate
Consideration Receivable upon the exercise of Options or upon the
conversion or exchange of convertible securities under this Paragraph
6(d)(5), shall be determined in the same manner provided in Paragraphs
6(d)(3) and 6(d)(4) above with respect to the Aggregate Consideration
Receivable by the Corporation as in the case of the issuance of additional
shares of Common Stock. But if such obligations or shares of stock so
convertible or exchangeable are issued in satisfaction of any dividend upon
any stock of the Corporation other than Common Stock, the amount of the
consideration received upon the original issuance of such obligations or
shares of stock shall be the value of such obligations or shares of stock,
as of the date of the adoption of the resolution declaring the dividend, as
determined in good faith by the Board of Directors at or as of that date.
(6) Other Particulars Concerning Options and Convertible
Securities. In the event that the Minimum Series A Conversion Price
shall be adjusted with respect to the issuance of Options or
Convertible Securities (as defined in Paragraphs 6(d)(1) and 6(d)(2)),
the following provisions apply:
a. No further adjustment in the Minimum Series A Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares
of Common Stock when those Options are exercised or those Convertible
Securities are converted.
b. Such Options or Convertible Securities may by their terms provide,
with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation, or increase in the number of
shares of Common Stock issuable, upon their exercise, conversion or
exchange. In such a case, the Minimum Series A Conversion Price computed
upon the original issue thereof, and any subsequent adjustments shall, upon
any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects those Options or the rights
of conversion or exchange under those Convertible Securities.
-14-
c. Upon the expiration of any such Options or any rights of conversion
under such Convertible Securities which shall not have been exercised, the
Minimum Series A Conversion Price computed upon the original issue thereof,
and any subsequent adjustments shall, upon such expiration, be recomputed
as if:
i) in the case of Convertible Securities or
Options for Common Stock, the only additional shares
of Common Stock issued were the shares of Common Stock
actually issued upon the exercise of such Options or
the conversion of such Convertible Securities; and the
Aggregate Consideration Receivable was the
consideration actually received by the Corporation for
the issue of such Convertible Securities which were
actually converted, and
ii) in the case of Options for Convertible
Securities, only the Convertible Securities actually
issued upon the exercise thereof were issued at the
time of issue of such Options; and the Aggregate
Consideration Receivable for the additional shares or
Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for
the issue of all such Options for Convertible
Securities, whether or not exercised, plus the
consideration deemed to have been received by the
Corporation (determined pursuant to Paragraph 6(d)(5))
upon the issue of the Convertible Securities when such
Options were actually exercised.
d. No readjustment pursuant to Subparagraph 6(d)(6)b or Subparagraph
6(d)(6)c shall have the effect of increasing the Minimum Series A
Conversion Price by an amount greater than the amount of the adjustment
originally made when the Options or Convertible Securities were issued.
e. In the case of any Options which expire by their terms not more
than thirty (30) days after the date of issue or sooner, no adjustment of
the Minimum Series A Conversion Price shall be made until the expiration or
exercise of all such Options.
f. Waiver of Adjustment.
i) In the event that holders of a majority of the then
currently outstanding shares of the Series A Preferred shall
consent to limit, or waive in its entirety, any
anti-dilution adjustment to which the holders of such series
would otherwise be entitled under Subsection 6(d) hereof,
the Corporation shall not be required to make any adjustment
whatsoever with respect to any shares of Series A Preferred,
or to make any adjustment with respect to any shares of
Series A Preferred in excess of any limit set by such
consent.
-15-
ii) Moreover, any holder of Series A Preferred shall be
permitted to waive in whole or in part, currently or
prospectively, by contract or any other writing, any
anti-dilution adjustment to which he or it would otherwise
be entitled pursuant to the provisions of this Section 6.
(e) No Adjustment of Series A Conversion Price Under Certain
Circumstances. Following the lapse of the Minimum Series A Conversion
Price, no adjustment to the Series A Conversion Price shall be made for
transactions described in Subsection 6(d).
7. REORGANIZATION, RECLASSIFICATION, AND SALE OF ASSETS.
If any capital reorganization or reclassification of the capital stock
of the Corporation, including any such reorganization or reclassification in
connection with any merger, consolidation, or transfer of substantially all of
the assets of the Corporation, shall not be deemed to be a Liquidation pursuant
to Section 4 hereof, and if it shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then the following shall be an
express condition of such reorganization or reclassification.
(a) Lawful and adequate provisions in a form satisfactory to the
holders of a majority of the Series A Preferred shall be made whereby each
holder of shares of Series A Preferred shall thereafter have the right to
receive, upon the terms and conditions specified herein and in lieu of the
shares of Common Stock of the Corporation immediately theretofore
receivable upon the conversion of such shares of the Series A Preferred,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore so receivable had such reorganization or reclassification not
taken place.
(b) Moreover, in any such case, appropriate provision shall be made
with respect to the rights and interests of each such holder of Series A
Preferred to the end that the provisions hereof (including without
limitation provisions for adjustments of the Minimum Series A Conversion
Price) shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities, or assets thereafter deliverable upon the
exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or lesser
number of shares of Common Stock of the surviving Corporation are issuable
to holders of the Common Stock of the Corporation outstanding immediately
prior to such merger or consolidation, the Minimum Series A Conversion
Price and terms of conversion in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock of the
Corporation.
-16-
(c) The Corporation shall not effect any such reorganization,
reclassification, consolidation, merger, or sale unless, prior to the
consummation thereof: (i) the Corporation shall have obtained the consent
of the holders of a majority of the Series A Preferred then outstanding,
and (ii) the successor corporation (if other than the Corporation)
resulting from such consolidation or merger, or the corporation purchasing
such assets, shall assume by written instrument, in a form satisfactory to
the holders of a majority of the Series A Preferred then outstanding the
obligation to deliver to such holder such shares of stock, securities, or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive. Such written instrument shall be promptly mailed or
delivered to each holder of shares of Series A Preferred at the last
address of such holder appearing on the books of the Corporation.
8. REDEMPTION
(a) Early Redemption by the Corporation.
(1) The Series A Preferred may be redeemed in whole or in part at
the election of the Corporation upon not less than 30 nor more than 60
days prior written notice by mail, at any time up to 270 days
following the Initial Closing Date, if, during such 270 day period,
the closing bid price for the Common Stock for any 20 trading days
within any 30 consecutive trading day period as quoted on the OTC
Electronic Bulletin Board (or such other quotation service as is
quoting bid and asked prices for the Common Stock), or the closing bid
price for the Common Stock as reported by the NASDAQ Stock Market or
any other national exchange upon which the Common Stock is listed for
trading which has closing bid price reporting, is less than the
Minimum Conversion Price. Notwithstanding the foregoing, if the 20 day
period during which the price of the Common Stock is less than the
Minimum Conversion Price falls totally with the last 60 days of the
270 days following the Initial Closing Date, the Corporation shall
have a full 60 days from the end of such 270 day period to exercise
its right of early redemption.
(2) To redeem the Series A Preferred pursuant to this Subsection
8(a), the Corporation shall pay the holders of Series A being redeemed
118% of the Stated Value of the Series A Preferred being redeemed,
together with accrued but unpaid interest owing to the date of
redemption, in cash. Any Series A Preferred which is redeemed in part
only shall be redeemed in principal amounts of $1,000 or whole
multiples of $1,000.
(b) Other Redemption Rights of the Corporation. The Corporation shall
be entitled to redeem any shares of Series A Preferred remaining
outstanding 36 months after the Initial Closing Date by paying to the
holders thereof the Stated Value of the shares of Series A Preferred being
redeemed, plus any accrued and unpaid dividends on such shares of Series A
Preferred to the date of redemption, upon no less than 30 and not more than
60 days advance
-17-
written notice of the date fixed for such redemption. The Corporation shall
pay cash for all amounts due on such redemption.
(c) Redemption Notices. The notice of redemption to be sent to all
holder of Series A Preferred (the "Redemption Notice") shall state the date
fixed for redemption (the "Redemption Date"), the paying agent with whom
funds sufficient to make the redemption have been deposited, and the number
of shares to be redeemed from each such holder, together with the amount of
any accrued and unpaid dividends to be paid as of the Redemption Date. Any
partial redemption shall be pro rata as between the holders of all Series A
Preferred.
(d) Right to Convert Series A Preferred Pending Redemption.
Notwithstanding the above, any holder of Series A Preferred may convert the
shares of Series A Preferred so called for redemption, plus all dividends
accrued and unpaid on such shares to the Redemption Date, into shares of
Common Stock, at any time following the giving of the Notice of Redemption
and prior to the Redemption Date.
9. NO IMPAIRMENT
The Corporation shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance of performance of any of the terms in this
Article to be observed or performed by the Corporation. The Corporation shall at
all times in good faith assist in the carrying out of all the provisions of
Sections 5, 6 and 7 hereof.
10. CERTIFICATE AS TO ADJUSTMENTS
(a) Upon the occurrence of each adjustment of the Series A Conversion
Price pursuant to Section 6, or any transaction requiring a change in the
conversion terms applicable to the Series A Preferred as required by any
other provision of this Article, the Corporation, at its expense, shall
promptly compute any such adjustment and prepare and furnish to each holder
of Series A Preferred a certificate setting forth such adjustment and/or
any other change in the conversion terms applicable to the Series A
Preferred, showing in detail the facts upon which such adjustment and/or
change is based; and
(b) Upon the written request at any time from any holder of Series A
Preferred the Corporation shall furnish to such holder a like certificate
setting forth (i) such adjustment, (ii) the Series A Conversion Price at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of Series A Preferred.
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11. NOTICE OF RECORD DATES
In the event:
(a) that the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to vote upon any matter to
be submitted to shareholders of Common Stock or other votable securities of
the Corporation;
(b) that the Corporation shall take a record of the holders of its
Common Stock entitling them to receive a dividend, or any other
distribution, payable in cash or other property of the Corporation;
(c) that the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase
any shares of stock of any class or to receive any other rights;
(d) of any capital reorganization of the Corporation, reclassification
of the capital stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock), consolidation, or
merger of the Corporation with or into another corporation or conveyance of
all or substantially all of the assets of the Corporation to another
corporation; or
(e) of the voluntary or involuntary dissolution, liquidation, or
winding up of the Corporation;
then, the Corporation shall cause to be mailed to the holders of record of
outstanding Series A Preferred, at least twenty (20) days prior to the date
specified therein, a notice stating the date on which that record is to be taken
or that event is to take place. The notice shall also specify the date, if any
is to be fixed, as of which 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, reorganization, consolidation, merger,
conveyance, dissolution, liquidation, or winding up.
12. FORM OF NOTICES
Any notice required by the provisions of this Article to be given either to
the holders of shares of Series A Preferred or the Corporation shall be in
writing and shall be deemed given if hand delivered, delivered by courier, or
deposited in the United States mail, postage prepaid, addressed to each holder
of record of Series A Preferred at such holder's address appearing on the books
of the Corporation or, in the case of notice to the Corporation, to its
Principal Office, sent to the attention: "Chief Financial Officer."
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13. VOTING
The shares of Series A Preferred shall not be entitled to vote on
matters submitted to shareholders of the Corporation except for matters upon
which a vote of Series A Preferred is specifically required under this Article
or the law of the State of Colorado.
14. AMENDMENTS AND CHANGES
As long as any of the Series A Preferred shall be issued and
outstanding, the Corporation shall not take any action without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
a majority of the Series A Preferred then outstanding, if such action would
materially and adversely affect such Series A Preferred by way of:
(a) Any amendment, or repeal of any provision of, the Corporation's
Articles of Incorporation or Bylaws;
(b) Any action that increases the number of authorized shares of
preferred stock or which would materially and adversely alter or change the
preferences, rights, privileges, or powers of, or the restrictions provided
for the benefit of, the Series A Preferred;
(c) Authorize, create, or issue shares of any class of stock, bonds,
debentures, notes, or other obligations convertible into or exchangeable
for or having option rights to purchase, any shares of stock of the
Corporation having any preference or priority, as to dividends, assets or
otherwise on a parity with or superior to any preferences or priority of
the Series A Preferred; or
(d) Reclassify any outstanding shares into shares having any
preference or priority as to dividends, assets or otherwise on a parity
with or superior to any such preference or priority of Series A Preferred.
15. DEFINITIONS
Unless the context otherwise clearly requires, or unless specifically
defined elsewhere in this Designation, definitions of capitalized terms used in
this Designation are as follows:
(a) "1933 Act" means the Securities Act of 1933, as amended and in
effect at any particular time.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended
and in effect at any particular time.
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(c) "Advance Conversion Notice" has the meaning ascribed to it in
Paragraph 5(d)(1) of this Designation.
(d) "Aggregate Consideration Receivable" has the meaning ascribed to
it in Subsection 6(d) of this Designation.
(e) "Automatic Conversion Date" has the meaning ascribed to it in
Paragraph 5(d)(3) of this Designation.
(f) "Common Stock" means the no par value common stock of the
Corporation of the class authorized at the date of issuance of the Series A
Preferred and stock of any other class into which such presently authorized
common stock may be changed, and any other shares of stock of the
Corporation which do not have any priority in the payment of dividends or
upon liquidation over any other class of stock.
(g) "Consideration Receivable" has the meaning ascribed to it in
Subsection 6(d) of this Designation.
(h) "Conversion Date" has the meaning ascribed to it in Paragraph
5(d)(1) of this Designation.
(i) "Conversion Period" has the meaning ascribed to it in Paragraph
5(a)(1) of this Designation.
(j) "Convertible Securities" has the meaning ascribed to it in
Paragraph 6(d)(2) of this Designation.
(k) "Corporation" means the person named as the "Corporation" in the
first paragraph of this Designation until a successor corporation shall
have become such pursuant to the applicable provisions hereof, and
thereafter "Corporation" shall mean such successor corporation.
(l) "Debentures" means the Corporation's 8% Adjustable Rate
Convertible Subordinated Debentures Due December 31, 1999, which are
convertible into shares of Series A Preferred.
(m) "Delivery Date" means three (3) business days after receipt by the
Corporation of the original Conversion Notice and the Series A Preferred
certificates being converted, as described in paragraph 5(d)(1).
(n) "Distribution" has the meaning ascribed to it in Subsection 3(j)
of this Designation.
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(o) "Dividend Record Dates" means March 31, June 30, September 30 and
December 31 of each year, as described in Subsection 3(a) of this
Designation.
(p) "Initial Closing Date" has the meaning ascribed to it in Paragraph
5(c)(1) of this Designation.
(q) "Initial Notice" has the meaning ascribed to it in Paragraph
4(b)(1) of this Designation.
(r) "Liquidation" has the meaning ascribed to it in Subsection 4(a) of
this Designation.
(s) "Market Price" has the meaning ascribed to it in Subsection 3(e)
of this Designation.
(t) "Minimum Series A Conversion Price" has the meaning ascribed to it
in Subsection 5(c) of this Designation.
(u) "Options" has the meaning ascribed to it in Paragraph 6(d)(1) of
this Designation.
(v) "Qualified Public Offering" has the meaning ascribed to it in
Subparagraph 5(a)(2)a of this Designation.
(w) "Private Offering Memorandum" means the Corporation's offering
document by which the Debentures were offered to investors.
(x) "Redemption Date" has the meaning ascribed to it in Subsection
8(c) of this Designation.
(y) "Redemption Notice" has the meaning ascribed to it in Subsection
8(c) of this Designation.
(z) "SEC" means the United States Securities and Exchange Commission
or any successor agency of the United States.
(aa) "Series A Conversion Price" has the meaning ascribed to it in
Subsection 5(c) of this Designation.
(bb) "Series A Liquidation Preference" has the meaning ascribed to it
in Paragraph 4(a)(1) of this Designation.
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(cc) "Series A Preferred" means the Corporation's no par value Series
A Cumulative Convertible Redeemable Preferred Stock, stated value $1.00 per
share, with the rights, preferences and designation set forth in this
Designation.
(dd) "Series A Purchase Price" has the meaning ascribed to it in
Subsection 5(b) of this Designation.
(ee) "Stated Value" means $1.00 per share, as described in Section 2
of this Designation.
(ff) "Subsequent Notice" has the meaning ascribed to it in Paragraph
4(b)(1) of this Designation.
16. HEADINGS
The headings of the Sections, Subsections, Paragraphs and Subparagraphs
of this Article are inserted for convenience only and shall not be deemed to
constitute a part of this Article.
[END OF CERTIFICATE OF DESIGNATION]