COMPOSITE
of
CERTIFICATE OF INCORPORATION
of
ALCOHOL SENSORS INTERNATIONAL, LTD.
(As Amended Through October 2, 1997)
1. The name of the corporation is Alcohol Sensors International, Ltd.
2. The office of the corporation is to be located in the County of Suffolk,
State of New York.
3. (a) The corporation shall have two (2) classes of stock, aggregating
Common Shares and Convertible Preferred Shares respectively, with the authority
to issue 25,000,000 Common Shares, par value $.001, and the authority to issue
3,000,000 Convertible Preferred Shares, par value $.001. Each share of stock
shall have one (1) vote for all corporate purposes without cumulative voting
rights. No shares will have preemptive rights.
(b) Authority is hereby expressly granted to the Board of Directors of
the Corporation from time to time to issue the Convertible Preferred Shares as
Convertible Preferred Shares of any series and to declare and pay dividends
thereon in accordance with the terms thereof and, in connection with the
creation of each such series, to fix by the resolution or resolutions providing
for the issue of shares thereof, the number of shares of such series, and the
designations, powers, preferences, and rights (including voting rights), and the
qualifications, limitations, and restrictions, of such series, to the full
extent now or hereafter permitted by the laws of the State of New York.
Of the 3,000,000 authorized shares of Convertible Preferred Stock of the
Company, 833,333 shares are hereby designated Series A Cumulative Non-redeemable
Convertible Preferred Stock, par value $.001 per share, and shall possess the
rights and preferences set forth below:
SECTION 1. Number of Shares and Designation. The shares of such series
shall have a par value of $.001 per share and shall be designated as Series
A Cumulative Non-redeemable Convertible Preferred Stock (hereinafter called
the "Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be 833,333.
SECTION 2. Definitions. As used herein, the following terms shall
have the following meanings:
(a) The term "Board of Directors" shall mean the board of directors
of the Corporation and any committee authorized by such Board of
Directors to perform any of its responsibilities with respect to the
Series A Preferred Stock.
(b) The term "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to
close.
(c) The term "Closing Price" with respect to the Common Stock on
any day (other than a day on which securities are generally not traded
on the applicable securities exchange or in the applicable securities
market) shall mean the average of the reported closing bid and asked
prices on the Nasdaq National Market or, if the Common Stock is not
listed or admitted to trading on the Nasdaq National Market, the last
reported sales price regular way on the New York Stock Exchange or the
American Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the Nasdaq National Market, the New York Stock
Exchange or the American Stock Exchange, the average of the closing
bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by
the Corporation for that purpose.
(d) The term "Common Stock" shall mean the common stock, par value
$.001 per share, of the Corporation or, subject to the provisions of
Section 5, such other security resulting from any reclassification or
reclassifications thereof; provided, however, that if at any time
there shall be more than one such resulting class, the shares of each
such class then issuable upon conversion of the Series A Preferred
Stock shall be substantially in the proportion which the total number
of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting form
all such reclassifications.
(e) The term "Conversion Date" shall have the meaning set forth in
Section 5(b).
(f) The term "Conversion Price" shall have the meaning set forth in
Section 5(a).
(g) The term "Dividend Payment Date" shall have the meaning set
forth in Section 3(b).
(h) The term "Dividend Period" shall mean the period from and
including the Initial Issue Date to but not including the first
Dividend Payment Date and thereafter, each semi-annual period from and
including each Dividend Payment Date to but not including the next
Dividend Payment Date.
(i) The term "Event of Conversion" shall mean the twentieth day
during any period of thirty consecutive days on which the Closing
Price is at least $8.00 per share.
(j) The term "Excluded Securities" shall mean:
(x) Common Stock issued to employees or directors of, or
consultants to, the Corporation, pursuant to any agreement, plan or
arrangement approved by the Board of Directors, or options to
purchase or rights to subscribe for such Common Stock, or
securities by their terms convertible into or exchangeable for such
Common Stock, or options to purchase or rights to subscribe for
such convertible or exchangeable securities, in each case as
approved by the Board of Directors, but only to the extent that the
maximum aggregate number of shares of Common Stock so issued or
issuable subsequent to the Initial Issue Date pursuant to all such
agreements, plans and arrangements do not exceed (x) 300,000 shares
of Common Stock in the aggregate in any fiscal year of the
Corporation or (y) 600,000 shares of Common Stock in the aggregate
(in each case subject to adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like
occurrences); and
(y) The Warrants and shares of Common Stock issued upon the
exercise thereof; and
(z) Common Stock issued upon the exercise of warrants or
options outstanding on December 20, 1996.
(k) The term "Initial Issue Date" shall mean the date that shares
of Series A Preferred Stock are first issued by the Corporation.
(l) The term "Junior Stock" shall mean the Common Stock and any
other class or series of capital stock of the Corporation other than
the Series A preferred Stock.
(m) The term "Liquidation Preference" shall mean the Stated Value
per share plus dividends (whether or not declared) accrued and unpaid
thereon to the date of liquidation, dissolution or other winding up,
or the date of the sale of all or substantially all of the assets of
the Corporation or the merger or consolidation of the Corporation with
or into any Person in a transaction in which the Corporation is not
the surviving entity.
(n) The term "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or
unincorporated association, joint venture, joint stock company or
other entity of any kind, and shall include any successor (by merger
or otherwise) thereof.
(o) The term "Record Date" shall mean the date designated by the
Board of Directors of the Corporation at the time a dividend is
declared; provided, however, that such Record Date shall not be more
than 30 days nor less than 10 days prior to the respective Dividend
Payment Date or such other date designated by the Board of Directors
for the payment of dividends.
(p) The term "Stated Value" shall mean $3.00 (subject to equitable
adjustment to reflect stock splits, stock dividends, stock
combinations, recapitalization and like occurrences and dividends and
other distributions to holders of Common Stock of indebtedness or
assets of the Corporation).
(q) The term "Warrants" shall mean warrants to purchase 833,333
shares of Common Stock (subject to adjustment as provided in the
certificates evidencing such warrants) being issued on the Initial
Issue Date to the initial holder of the Series A Preferred Stock.
SECTION 3. Dividends; Other Distributions.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive cash dividends out of funds legally available for
payment of dividends. Dividends shall be payable in cash at the rate
of 9.0% of the Stated Value per share per annum and 9.0% per annum
(compounded semi-annually) on any accrued dividends on such shares,
whether or not declared, that remain unpaid beyond the next succeeding
Dividend Payment Date; provided, however, that the Corporation shall,
at its option, be entitled to issue additional shares of Series A
Preferred Stock in lieu of cash in respect of dividends payable on or
prior to the first four Dividend Payment Dates occurring after the
Initial Issue Date.
(b) Dividends on shares of Series A Preferred Stock shall accrue
and be cumulative from the date of issuance of such shares. Dividends
shall be payable semi-annually in arrears, when and as declared by the
Board of Directors of the Corporation, on June 30 and December 31 of
each year (each, a "Dividend Payment Date"), commencing on June 30,
1997. If any Dividend Payment Date occurs on a day that is not a
Business Day, any dividends otherwise payable on such Dividend Payment
Date shall be paid on the next Business Day. Dividends shall be paid
to the holders of record of the Series A Preferred Stock as their
names shall appear on the share register of the Corporation on the
Record Date for such dividend. Dividends payable in any Dividend
Period that is less than a full Dividend Period in length shall be
computed on the basis of a 180 day-period and actual days lapsed in
such Dividend Period. Dividends on account of arrears or any past
Dividend Periods may be declared and paid at any time to holders of
record on the Record Date therefor.
(c) So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for
payment on any Junior Stock any dividends whatsoever, whether in cash,
property or otherwise (other than dividends payable in shares of the
class or series upon which such dividends are declared or paid, or
payable in shares of Common Stock with respect to Junior Stock other
than Common Stock, together with cash in lieu of fractional shares),
nor shall the Corporation make any distribution on any Junior Stock,
nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its Subsidiaries, nor shall any
monies be paid or made available for a sinking fund for the purchase
or redemption of any Junior Stock, in each case unless (i) all
dividends to which the holders of shares of Series A Preferred Stock
shall have been entitled for all previous Dividend Periods shall have
been paid in full and (ii) all such dividends for the immediately
preceding two Dividend Periods shall have been paid exclusively in
cash.
(d) Without limiting any of the foregoing, in the event that full
dividends are not paid or made available to the holders of all
outstanding shares of Series A Preferred Stock and funds available for
the payment of dividends shall be insufficient to permit payment in
full to holders of all such stock of the full preferential amounts to
which they are then entitled, then the entire amount available for
payment of dividends shall be distributed ratably among all such
holders of Series A Preferred Stock in proportion to the full amount
to which they would otherwise be respectively entitled.
SECTION 4. Rights on Liquidation, Dissolution or Winding-Up. In the
event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the sale of all or substantially all of the
assets of the Corporation, the merger or consolidation of the Company with
or into any Person in a transaction in which the Company is not the
surviving entity or the effectuation by the Corporation of a transaction or
series of related transactions in which 50% or more of the voting power of
the Corporation is disposed of, the holders of Series A Preferred Stock
shall then be entitled to receive immediately, prior and in preference to
any distribution to the holders of any class or series of capital stock of
the Corporation, whether now existing or hereafter created, the Liquidation
Preference per share of Series A Preferred Stock (subject to equitable
adjustment to reflect stock splits, stock dividends, stock combinations,
recapitalization and like occurrences and dividends and other distributions
to holders of Common Stock of indebtedness or assets of the Corporation).
If the assets of the Corporation available for distribution to the holders
of Series A Preferred Stock shall be insufficient to permit the payment in
full of the Liquidation Preference per share, the assets of the Corporation
shall be ratably distributed among the holders of the Series A Preferred
Stock in proportion to the full amounts to which they would otherwise be
respectively entitled if all such amounts thereon were paid in full.
SECTION 5. Optional Conversion.
(a) Each holder of any shares of Series A Preferred Stock shall
have the right, at such holder's option, at any time or from time to
time, to convert any of such shares into such whole number of fully
paid and non-assessable shares of Common Stock as is equal to the
quotient obtained by dividing (A) the Liquidation Preference of such
share(s) of Series A Preferred Stock being converted by (B) the
Conversion Price, as last adjusted and then in effect, for the
share(s) of such Series A Preferred Stock being converted, by
surrender of the certificates representing the share(s) of Series A
Preferred Stock so to be converted in the manner provided in Section
5(b) hereof. The conversion price per share at which shares of Common
Stock shall be issuable upon conversion of shares of Series A
Preferred Stock shall initially be $4.50; provided, however, that such
conversion price shall be subject to adjustment as set forth in
Section 5(d) hereof (such price, as so adjusted from time to time, the
"Conversion Price").
(b) The holder of any shares of Series A Preferred Stock may
exercise the conversion right pursuant to Section 5(a) hereof as to
any portion thereof by delivering to the Corporation during regular
business hours, at the office of the Corporation or any transfer agent
of the Corporation for the Series A Preferred Stock as may be
designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating
that the holder elects to convert such shares or portion thereof and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected immediately prior to
the close of business on the date upon which the aforesaid delivery is
made (the "Conversion Date"). As promptly as practicable thereafter
the Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a certificate
to which such holder is entitled and a check or cash in respect of any
fractional interest in a share of Common Stock as provided in Section
5(c) hereof. The person in whose name the certificate or certificates
for Common Stock are to be issued shall be deemed to have become a
Common Stock holder of record immediately prior to the close of
business on the applicable Conversion Date unless the transfer books
of the Corporation are closed on that date, in which event he shall be
deemed to have become a Common Stock holder of record immediately
prior to the close of business on the next succeeding date on which
the transfer books are open, but the Conversion Price shall be that in
effect on the Conversion Date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares of
Series A Preferred Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder of
the certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of the
Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle the
holder thereof to dividends on the shares of Series A Preferred Stock
represented thereby to the same extent as if the portion of the
certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(c) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. If more than
one share of Series A Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of such Series
A Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal
to the Closing Price on the relevant Conversion Date multiplied by
such fractional interest. Fractional interests shall not be entitled
to dividends, and the holders of fractional interests shall not be
entitled to any rights as stockholders of the Corporation in respect
of such fractional interest.
(d) The Conversion Price shall be subject to adjustment from time
to time as follows:
(i) If the Corporation shall at any time, (1) pay a dividend on
its outstanding Common Stock in shares of Common Stock or effect a
distribution to holders of its outstanding Common Stock payable in
shares of Common Stock, (2) subdivide the outstanding Common Stock,
(3) combine the outstanding Common Stock into a smaller number of
shares of Common Stock, or (4) issue any securities of the Company
in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), the
Conversion Price in effect immediately prior thereto shall be
adjusted so that the registered holder of any share of Series A
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number and kind of shares of Common Stock
and other securities which such holder would have owned or have
been entitled to receive after the happening of any of the events
described above had such share been converted immediately prior to
the happening of such event. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the
Record Date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Corporation shall at any time or from time to time
after the Initial Issue Date, issue (x) shares of Common Stock, (y)
rights, options, warrants or other securities entitling the holder
thereof to subscribe for, purchase, convert to, exchange for or
otherwise acquire Common Stock (excluding any such issuance that
results in an adjustment under Section 5(d)(i) or 5(d)(iii) hereof)
or (z) rights, options, warrants or other securities entitling the
holder thereof to subscribe for, purchase, convert to, exchange for
or otherwise acquire such convertible or exchangeable securities
(in each case other than Excluded Securities and other than
issuances that result in an adjustment under Section 5(d)(i) or
5(d)(iv) hereof), without consideration or for a consideration per
share of Common Stock less than the Conversion Price in effect
immediately prior to the issuance of such Common Stock or such
rights, options, warrants or other securities, the Conversion Price
in effect immediately prior to each such issuance shall forthwith
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(I) the total number of shares of Common Stock
outstanding immediately prior to such issuance (including
any shares of Common Stock deemed to have been issued
pursuant to subdivisions (A) and (B) of Section 5(d)(ii)(3)
(it being understood that the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
immediately prior to such issuance shall be deemed to be
outstanding for all purposes of the computation required in
this clause (A))) multiplied by the Conversion Price in
effect immediately prior to such issuance, plus
(II) the consideration received by the Corporation upon
such issuance, by
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been
issued pursuant to subdivisions (A) and (B) of Section
5(d)(ii)(3) (it being understood that the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock
immediately prior to such issuance shall be deemed to be
outstanding for all purposes of the computation required in
this clause (A))) immediately after the issuance of such Common
Stock.
For the purposes of any adjustment of the Conversion Price pursuant
to this Section 5(d)(ii), the following provisions shall be
applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of
Directors, irrespective of any accounting treatment.
(3) In the case of (x) the issuance of rights, options or
warrants entitling the holder thereof to subscribe for, purchase or
otherwise acquire Common Stock, (y) securities convertible into or
exchangeable for Common Stock or (z) rights, options, warrants or
other securities convertible into or exchangeable for such
convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such rights, options or warrants
entitling the holder thereof to subscribe for, purchase or
otherwise acquire Common Stock shall be deemed to have been
issued at the time such rights, options or warrants were issued
and for a consideration equal to the consideration (determined
in the manner provided in subdivisions (1) and (2) above), if
any, received by the Corporation upon the issuance of such
rights, options or warrants plus the minimum purchase price
provided in such rights, options or warrants for the Common
Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
rights, options or warrants to subscribe for, purchase or
otherwise acquire such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed
to have been issued at the time such rights, options, warrants
or securities were issued and for a consideration equal to the
consideration received by the Corporation for any such rights,
options, warrants and securities (excluding any cash received
on account of accrued interest or accrued dividends), plus the
consideration, if any, to be received by the Corporation upon
the conversion or exchange of such securities or the exercise
of any related rights, options or warrants (the consideration
in each case to be determined in the manner provided in
subdivisions (1) and (2) above);
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such rights, options or
warrants or conversions of or exchanges for such convertible or
exchangeable securities or any change in the consideration to
be received by the Corporation upon the exercise of any such
rights, options or warrants or conversions of or exchanges for
such convertible or exchangeable securities, other than a
change resulting from the anti-dilution provisions thereof, the
Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made
upon the issuance of such rights, options, warrants or
securities not converted prior to such change been made upon
the basis of such change; and
(D) on the expiration of any such rights, options or
warrants, the termination of any such rights to convert or
exchange or the expiration of any rights, options or warrants
related to such convertible or exchangeable securities, the
Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made
upon the issuance of such rights, options, warrants or
securities or rights, options or warrants related to such
securities been made upon the basis of the issuance of only the
number of shares of Common Stock actually issued upon exercise
of such rights, options or warrants, upon the conversion or
exchange of such securities or upon the exercise of the rights,
options or warrants related to such securities and subsequent
conversion or exchange thereof.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any shares of capital stock of the Corporation
(other than Common Stock) or evidences of its indebtedness or
assets (including cash) or rights, options, warrants or other
securities entitling them to subscribe for, purchase, convert to,
exchange for or otherwise acquire Common Stock any of its
securities (excluding those referred to in Section 5(d)(i),
5(d)(ii) or 5(d)(iv)), then in each such case, the Conversion Price
shall be adjusted so that the same shall equal the price determined
by multiplying (I) the Conversion Price in effect immediately prior
to the date of such distribution by (II) a fraction, the numerator
of which shall be such Conversion Price less the fair market value
(as determined by the Board of Directors, whose determination
shall, if made in good faith, be conclusive) of the portion of the
capital stock, assets, evidences of indebtedness or rights,
options, warrants or other securities so distributed applicable to
one share of Common Stock, and the denominator of which shall be
such Conversion Price. Such adjustment shall become effective
immediately after the Record Date for the determination of
shareholders entitled to receive such distribution.
(iv) In case of any capital reorganization or any
reclassification of the stock of the Corporation (other than a
change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares) or the
consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the
Corporation is the continuing corporation and which does not result
in any change in the Common Stock) or of the sale or other
disposition of all or substantially all the properties and assets
of the Corporation as an entirety to any other Person, or the
effectuation by the Corporation of a transaction or series of
related transactions in which 50% or more of the voting power of
the Corporation is disposed of, each share of Series A Preferred
Stock shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be convertible
into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from
such consolidation or surviving such merger or to which such
properties and assets shall have been sold or otherwise disposed to
which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation, merger, sale or other disposition)
upon conversion of such shares would have been entitled upon such
reorganization, reclassification, consolidation, merger, sale or
other disposition. The provisions of this Section 5 shall similarly
apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
(e) Whenever the Conversion Price shall be adjusted as provided in
Section 5(d) the Corporation shall forthwith file, at the office of
the Corporation or any transfer agent designated by the Corporation
for the Series A Preferred Stock, a statement, signed by its chief
financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price then in effect. The Corporation
shall also cause a copy of such statement to be sent by first-class
certified mail, return receipt requested, postage prepaid, to each
holder of shares of Series A Preferred Stock at his or its address
appearing on the Corporation's records. Where appropriate, such copy
may be given in advance and may be included as part of a notice
required to be mailed under the provisions of Section 5(f).
(f) In the event the Corporation shall propose to take any action
of the types described in Section 5(d), the Corporation shall give
notice to each holder of shares of Series A Preferred Stock, in the
manner set forth in Section 5(e), which notice shall specify the
record date, if any, with respect to such action and the date on which
such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect maybe at
the date of such notice) on the Conversion Price and the number, kind
or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Series A Preferred Stock. In
the case of any action which would require the fixing of a record
date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, such notice shall be given at
least 30 days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality
or validity of any such action.
(g) The Corporation shall pay all documentary, stamp and other
transactional taxes attributable to the issuance of shares of capital
stock of the Corporation upon conversion of any shares of Series A
Preferred Stock if issued in the name of the record holder; otherwise,
such amounts shall be paid by the holder of such shares of Series A
Preferred Stock.
(h) The Corporation shall reserve, free from preemptive rights, out
of its authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the shares of Series A
Preferred Stock sufficient shares to provide for the conversion from
time to time of all outstanding shares of Series A Preferred Stock.
(i) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon delivery by
the Corporation, be duly and validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership
thereof, and free from all taxes, liens or charges with respect
thereto and not subject to any preemptive rights.
SECTION 6. Automatic Conversion. Upon the occurrence of an Event of
Conversion, all shares of Series A Preferred Stock then outstanding shall,
by virtue of and simultaneously with the occurrence of the Event of
Conversion and without any action on the part of the holders thereof, be
deemed automatically converted into that number of fully paid and
nonassessable shares of Common Stock into which such shares would have been
convertible in the event of optional conversion at such time pursuant to
Section 5 hereof.
SECTION 7. Voting.
(a) In addition to the rights hereinafter specified in this Section
7 and any other rights provided by law or the By-laws of the
Corporation, each share of Series A Preferred Stock shall entitle the
holder thereof to such number of votes per share as shall equal the
number of shares of Common Stock (rounded to the nearest whole number)
into which such share of Series A Preferred Stock is then convertible
as provided in Section 5 hereof, entitled to vote on all matters as to
which holders of Common Stock shall be entitled to vote, in the same
manner and with the same effect as such holders of Common Stock,
voting together on all matters with the holders of Common Stock as one
class.
(b) In addition to the rights specified in Section 7(a) hereof, the
holders of at least 51% in voting power of the Series A Preferred
Stock, voting separately as one class, shall have the special and
exclusive right to elect one director to the Board of Directors of the
Corporation for so long as at least 250,000 shares of Series A
Preferred Stock are outstanding (as adjusted for stock splits, stock
dividends, stock combinations, recapitalizations and like
occurrences). In any election of directors pursuant to this Section
7(b), each holder of shares of Series A Preferred Stock shall be
entitled to one vote for each share of Series A Preferred Stock held
by such holder. The special and exclusive voting right of the holders
of the Series A Preferred Stock, voting separately as one class,
contained in this paragraph (b) may be exercised either at a special
meeting of the holders of Series A Preferred Stock called as provided
below, or at any annual or special meeting of the stockholders of the
Corporation, or by written consent of such holders in lieu of a
meeting. The director to be elected pursuant to this Section 7(b)
shall serve for a term extending from the date of his election and
qualification until the time of the next succeeding annual meeting of
stockholders or until his successor has been elected and qualified,
whichever is sooner. The director to be elected pursuant to this
Section 7(b) may be removed, with or without cause, only by the
holders of at least 51% in voting power of the Series A Preferred
Stock.
(c) If at any time the directorship to be filled by the holders of
Series A Preferred Stock pursuant to Section 7(b) hereof has been
vacant for a period of ten or more days, the Secretary of the
Corporation shall deliver a notice of such vacancy to such holders of
Series A Preferred Stock and, upon the written request of the holders
of record of shares representing at least ten percent of the voting
power of the Series A Preferred Stock then outstanding, call a special
meeting of the holders of Series A Preferred Stock for the purpose of
electing a director to fill such vacancy. Such meeting shall be held
at the earliest practicable date at such place as is specified in or
determined in accordance with the By-laws of the Corporation. If such
meeting shall not be called by the Secretary of the Corporation within
ten days after receipt of said written request, then the holders of
record of shares representing at least ten percent of the voting power
of the Series A Preferred Stock then outstanding may designate in
writing one holder to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of
stockholders and shall be held at such specified place. Any holder of
Series A Preferred Stock so designated shall have access to the stock
books of the Corporation relating to the Series A Preferred Stock for
the purpose of calling a meeting of the stockholders pursuant to these
provisions.
(d) At any meeting held for the purpose of electing a director as
provided in Section 7(b) hereof, the presence, in person or by proxy,
of the holders of record of shares representing at least 51% of the
voting power of the Series A Preferred Stock then outstanding shall
constitute a quorum of the Series A Preferred Stock for such election.
At any such meeting or adjournment thereof, the absence of a quorum of
the Series A Preferred Stock shall not prevent the election of
directors other than the director to be elected by holders of Series A
Preferred Stock pursuant to Section 7(b) hereof, and the absence of a
quorum for the election of such other directors shall not prevent the
election of the director to be elected by the holders of Series A
Preferred Stock pursuant to Section 7(b) hereof, and in the absence of
either or both of such quorums, the holders of record of shares
representing at least 51% of the voting power present in person or by
proxy of the class of stock which lacks a quorum shall have power to
adjourn the meeting for the election of directors which they are
entitled to elect from time to time without notice other than
announcement at the meeting. A vacancy in the directorship to be
elected by the holders of the Series A Preferred Stock pursuant to
Section 7(b) hereof may be filled only by vote or written consent in
lieu of a meeting of the holders of at least 51% of the voting power
of the Series A Preferred Stock.
(e) The Corporation shall not, without the affirmative consent or
approval of the holders of shares representing at least 51%, by voting
power, of the Series A Preferred Stock then outstanding, voting
separately as one class, given by written consent in lieu of a meeting
or by vote at a meeting called for such purpose for which notice shall
have been given to the holders of the Series A Preferred Stock in the
manner provided in the By-laws of the Corporation:
(i) designate or issue any additional shares of Series A
Preferred Stock or in any manner authorize, create, designate,
issue or sell any class or series of capital stock (including any
shares of treasury stock) or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for
capital stock (other than Excluded Securities) or any debt security
which by its terms is convertible into or exchangeable for any
equity security or has any other equity feature or any security
that is a combination of debt and equity, which, in each case, as
to the payment of dividends, distribution of assets or redemptions,
including, without limitation, distributions to be made upon the
liquidation, dissolution or winding up of the Corporation or a
merger, consolidation or sale of the assets thereof, is senior to
or on a parity with the Series A Preferred Stock or which in any
manner adversely affects in any material respect the rights of the
holders of the Series A Preferred Stock in their capacity as such;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other
special rights, or the qualifications, limitations or restrictions,
of the Series A Preferred Stock;
(iii) reclassify the shares of any class or series of Junior
Stock into shares of any class or series of capital stock (A)
ranking, either as to payment of dividends, distributions of assets
or redemptions, including, without limitation, distributions to be
made upon the liquidation, dissolution or winding up of the
Corporation or a merger, consolidation or sale of the assets
thereof, senior to or on a parity with the Series A Preferred Stock
or (B) which in any manner adversely affects in any material
respect the rights of the holders of Series A Preferred Stock in
their capacity as such;
(iv) sell, abandon, transfer, lease or otherwise dispose of all
or substantially all of its properties or assets or merge or
consolidate with or into, or permit any subsidiary to merge with or
into any other corporation, corporations, entity or entities;
(v) take any action to voluntarily dissolve, liquidate or wind
up or carry out any partial liquidation or distribution or
transaction in the nature of a partial liquidation or dissolution;
or
(vi) take any action to cause any amendment, alteration or
repeal of any of the provisions of (i) the Certificate of
Incorporation or (ii) the By-laws, if such amendment, alteration or
repeal could adversely affect in any material respect the rights of
the holders of the Series A Preferred Stock in their capacity as
such or the director elected by the holders of the Series A
Preferred Stock.
SECTION 8. Ranking. Any and all classes of capital stock of the
Corporation, whether now existing or hereafter created, shall be deemed to
rank junior to the Series A Preferred Stock as to dividends and as to the
distribution of assets upon liquidation, dissolution or winding up.
SECTION 9. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable under any circumstances whatsoever, except (i) as
provided in Section 4 hereof or (ii) to the extent otherwise agreed to in
writing by the Corporation and the holders of any such shares.
SECTION 10. Notices. Unless otherwise specified in the Certificate of
Incorporation or the By-laws, all notices or communications given hereunder
shall be in writing and, if to the Corporation, shall be delivered to it at
its principal executive offices, and if to any holder of Series A Preferred
Stock, shall be delivered to it at its address as it appears on the stock
books of the Corporation.
Of the 3,000,000 authorized shares of Convertible Preferred Stock of
the Corporation, 600 shares are hereby designated Series B 8% Convertible
Preferred Stock, par value $.001 per share, and shall possess the rights and
preferences set forth below:
1. Designation. The designation of the series of Preferred Stock
established hereby is the "Series B 8% Convertible Preferred Stock" (the
"Series B Stock"). The number of shares constituting such series is 600,
with a stated value (the "Stated Value") of $10,000 per share. Shares of
Series B Stock converted, redeemed or purchased by the Corporation shall be
canceled and shall revert to authorized but unissued shares of Preferred
Stock undesignated as to series.
2. Conversion Rights. The holders of the Series B Stock shall each
have the following conversion rights:
(a) Right to Convert. At any time following the earlier of: (i) the
effectiveness of a registration statement for the common stock, par
value $0.001 per share (the "Common Stock"), of the Corporation into
which the Series B Stock shall convert (the "Registration Statement")
or (ii) 120 days from the date of original issuance of Series B Stock
(the "Original Issuance Date"); each share of Series B Stock shall be
convertible, at the option of the holder thereof, into that number of
fully paid and nonassessable shares of Common Stock as is determined
by dividing (A) the sum of (1) $10,000 plus (2) the amount of all
accrued but unpaid or accumulated dividends on the shares of Series B
Stock being so converted by (B) the Conversion Price (determined as
hereinafter provided) in effect at the time of conversion. The
"Conversion Price" shall be equal to the lower of: (i) the closing bid
price of a share of Common Stock, as quoted on The Nasdaq Stock
Market, for the ten consecutive trading days immediately preceding the
Original Issuance Date or (ii) 82.5% of the average closing bid price
of a share of Common Stock, as quoted on The Nasdaq Stock Market, for
the ten consecutive trading days immediately preceding the date of the
Conversion Notice (as defined in paragraph 2(d) below). In the event
that the Common Stock is not traded on The Nasdaq Stock Market, the
average closing bid price shall be as reported or quoted on such other
national or regional securities exchange or automated quotations
system upon which the Common Stock is listed and principally traded.
In the event that the Common Stock is not listed on any exchange or
quoted on a quotation system, the average closing bid price shall be
as reported or quoted on any trading market in which quotes can be
obtained.
(b) Automatic Conversion. If not sooner converted, all outstanding
shares of Series B Stock shall be subject to automatic conversion on
such date which is two years after the Original Issuance Date and such
date shall be deemed the date of the giving of the Conversion Notice
under paragraph 2(d) below.
(c) Optional Conversion. Notwithstanding the provisions of
paragraph 2(a) above, holder(s) of Series B Stock shall have the
option to convert Series B Stock into shares of Common Stock at the
Conversion Price then in effect, upon the following schedule:
(i) 100 shares of Series B Stock shall be convertible into
shares of Common Stock at any time on or after 60 days from the
Original Issuance Date;
(ii) an additional 100 shares of Series B Stock shall be
convertible into shares of Common Stock at any time on or after 90
days from the Original Issuance Date; and
(iii) all shares of Series B Stock shall be convertible into
shares of Common Stock at any time on or after 120 days from the
Original Issuance Date.
(d) Mechanics of Conversion. Before any holder of Series B Stock
shall be entitled to convert such holder's shares of Series B Stock
into shares of Common Stock, such holder shall (i) give written notice
(the "Conversion Notice") to the Corporation by facsimile transmission
(confirmed via telephonic notice) to the Chief Executive Officer or
Chief Financial Officer of the Corporation that such holder elects to
convert such share(s) of Series B Stock and shall state therein the
number of shares to be converted and the name(s) in which such holder
wishes the certificate(s) for shares of Common Stock issuable upon
such conversion to be registered and (ii) surrender (within five
business days after the date of such facsimile transmission) the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for shares of Series B Stock.
The Corporation shall, as soon as practicable thereafter, issue and
deliver to such holder of Series B Stock, a certificate or
certificates for the number of shares of Common Stock to which such
holder shall be entitled. Such conversion shall be deemed to have been
made on the date of the giving of such facsimile notice to the
Corporation; provided, that certificates representing such shares of
Series B Stock are delivered within three business days to the
Corporation or its transfer agent for shares of Series B Stock,
together with all applicable transfer taxes in the event shares of
Common Stock issuable upon such conversion are to be registered in the
name(s) of any party other than the holder of the shares of Series B
Stock being converted.
(e) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the
Corporation, at any time or from time to time after the date of
issuance of the Series B Stock, shall declare or pay, without
consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or
shall effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common
Stock or in any right to acquire Common Stock), or in the event the
outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of
Common Stock, then the Conversion Price for the Series B Stock in
effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate. In the event that the Corporation shall
declare or pay, without consideration, any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(f) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series B Stock shall be
changed into the same or a different number of shares of any other
class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination
of shares provided for in paragraph 2(e) hereof), the Conversion Price
then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so
that the Series B Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise
have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion
of the Series B Stock immediately before such change.
(g) Notices of Record Date. In the event that the Corporation shall
propose, at any time: (i) to declare any dividend or distribution upon
the Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not
out of earnings or earned surplus; (ii) to offer for subscription pro
rata to the holders of any class or series of its stock any additional
shares of stock of any class or series or other rights; (iii) to
effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge
or consolidate with or into any other corporation, or sell, lease or
convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; then, in connection with each such event, the
Corporation shall send to the holders of Series B Stock:
(A) at least twenty days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders
of Common Stock shall be entitled thereto) or for determining
rights to vote, if any, in respect of the matters referred to in
(iii) and (iv) above; and
(B) in the case of the matters referred to in (iii) and (iv)
above, at least twenty days' prior written notice of the date when
the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon the
occurrence of such event).
Any notice required by the provisions of this Section 2 to be given
to the holders of shares of Series B Stock shall be deemed given if
deposited in the United States first-class mail, postage prepaid, and
addressed to each holder of record of Series B Stock at such holder's
address appearing on the books of the Corporation.
(h) Reservation of Stock Issuable Upon Conversion. The Corporation
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 shares of Series B Stock, such number of
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series B Stock;
provided, however, that the Corporation shall not issue, cumulatively,
more than a 20% Issuance (as such term is defined in paragraph 6(a)
below) pursuant to such conversions. 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 B
Stock, the Corporation shall, no later than 75 days from the date on
which the number of authorized but unissued shares of Common Stock
become insufficient to effect the conversion of all then outstanding
shares of Series B Stock, take such corporate action as may, in the
opinion of its counsel, be necessary to cause the increase in the
number of authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for the full conversion of all
then outstanding shares of Series B Stock, including, without
limitation, engaging in best efforts to obtain the necessary
stockholder approval.
(i) Fractional Shares. No fractional share of Common Stock shall be
issued upon the conversion of any share(s) of Series B Stock. All
shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B 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 Corporation
shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined
in good faith by the Board of Directors of the Corporation).
3. Dividends. The holders of the Series B Stock shall be entitled to
receive dividends as follows:
(a) The holders of Series B Stock shall be entitled to receive
dividends at the rate of 8% per share per annum of the Stated Value
(as adjusted for any stock dividends, combinations or splits with
respect to such shares). Such dividends shall be payable in cash or
additional shares of Series B Stock (at the rate of one full share of
Series B Stock for every $10,000 of dividends). Such dividends shall
begin to accumulate on each share of Series B Stock upon such share's
issuance and shall be due and payable with respect to such share only
immediately prior to the conversion or redemption of such share
pursuant to Section 2 or 7 hereof. The Corporation shall be permitted
to issue fractional shares of Series B Stock in connection with the
payment of dividends in the form of additional shares of Series B
Stock pursuant to this Section 3.
(b) In the event the Corporation shall declare a distribution
(other than any distribution described in Section 5 or 6 hereof)
payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case, the holders of
Series B Stock shall be entitled to a proportionate share of any such
distribution as though the holders of Series B Stock were the holders
of the number of shares of Common Stock into which their respective
shares of Series B Stock are convertible as of the record date fixed
for the determination of the holders of Common Stock entitled to
receive such distribution.
(c) Nothing contained herein shall grant to the holders of Series B
Stock any dividend preference senior to the shares of Series A
Cumulative Non-Redeemable Convertible Preferred Stock, par value $.001
per share (the "Series A Convertible Stock"), of the Corporation, and
the Series B Stock is specifically made junior in the right of payment
of dividends by the Corporation to the Series A Convertible Stock.
4. Voting Rights of Series B Stock. Except as otherwise required by
law or Section 7 hereof, the holders of outstanding shares of Series B
Stock shall not be entitled to vote on any matters submitted to the
stockholders of the Corporation.
5. Liquidation Preference. The holders of the Series B Stock shall be
entitled to a liquidation preference as follows:
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
Series B Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their
ownership thereof, an amount equal to the Stated Value per share (as
adjusted for any stock dividends, combinations or splits with respect
to such shares) plus all accumulated dividends thereon. If, upon the
occurrence of such an event, the assets and funds thus distributed
among the holders of the Series B Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential
amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the
holders of Series B Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) After payment to the holders of Series B Stock of the amounts
set forth in Section 5(a) hereof, the entire remaining assets and
funds of the Corporation legally available for distribution, if any,
shall be distributed among the holders of the Common Stock in
proportion to the shares of Common Stock then held by them.
(c) Whenever the distribution provided for in this Section 5 shall
be payable in securities or property other than cash, the value of
such distribution shall be the fair market value of such securities or
other property as determined in good faith by the Board of Directors
of the Corporation.
(d) Nothing contained herein shall grant to the holders of Series B
Stock any liquidation preference senior to the shares of Series A
Cumulative Non-Redeemable Convertible Preferred Stock, par value $.001
per share (the "Series A Convertible Stock"), of the Corporation, and
the Series B Stock is hereby specifically made junior in the right of
payment upon the liquidation, dissolution or winding up of the
Corporation to the Series A Convertible Stock.
6. Mandatory Redemption.
(a) Notwithstanding anything contained in these designations to the
contrary, unless the approval of the stockholders referred to in
clause (i) or (ii) below has previously been obtained, the Corporation
shall not be required to issue any Common Shares pursuant to any
optional or automatic conversion of Series B Stock under Section 2
hereof, if, and to the extent that, (i) the issuance of Common Stock
upon conversion, when taken together with all prior issuances of
Common Stock pursuant to Section 2 hereof, would result in the
issuance by the Corporation of a number of shares of Common Stock
equal to or greater than 20% of the number of shares of Common Stock
outstanding on the Original Issuance Date (a "20% Issuance"), and such
20% Issuance requires the prior approval of the stockholders of the
Corporation pursuant to any rule, regulation, stated policy, practice
or interpretation of The Nasdaq Stock Market applicable to the
Corporation or (ii) the Board of Directors of the Corporation
determines in good faith that the issuance of such Common Stock upon
conversion (whether or not constituting a 20% Issuance) otherwise
requires the prior approval of the stockholders of the Corporation
pursuant to any applicable rule, regulation, stated policy, practice
or interpretation of any stock exchange or stock market on which the
Common Stock is then listed or admitted to trading (such prior
approval of the stockholders referred to in clauses (i) and (ii) above
herein called the "Stockholder Approval Requirement").
(b) Following the first conversion of Series B Stock to which the
provisions of Section 6(a) hereof are applicable, the Corporation (i)
shall promptly give to all holders of Series B Stock then outstanding
(determined of record not more than fifteen days before the date such
notice is given) a notice stating that the Corporation is unable to
issue any further shares of Common Stock upon conversion of Series B
Stock and that Series B Stock cannot be converted, without compliance
with the Stockholder Approval Requirement, and (ii) shall take one of
the following actions, at its election, within twenty days following
the giving of such notice:
(i) the Corporation shall notify all such holders of Series B
Stock that the Corporation intends to seek stockholder approval
pursuant to the Stockholder Approval Requirement, in which event
the Corporation shall thereafter take all action necessary to duly
call, give notice of, convene and hold a meeting of its
stockholders as promptly as reasonably practicable to consider and
vote on such matter;
(ii) the Corporation shall obtain from the stock exchange or
stock market on which the Common Stock is then listed or admitted
to trading a waiver of or exception to the Stockholder Approval
Requirement and shall commence any mailing to stockholders
notifying them of such waiver or exception that is required by the
rules of such stock exchange or stock market; or
(iii) the Corporation shall notify all such holders of Series B
Stock that the Corporation is redeeming Series B Stock pursuant to
the following provisions of this Section 6;
provided, however, that if the Corporation elects to seek stockholder
approval pursuant to clause (i) above, and such stockholder approval
is not obtained within 75 days following the date of the giving of the
Corporation's notice to the holders of Series B Stock that the
Corporation intends to seek such stockholder approval, the Corporation
shall promptly following the end of such 75 day period notify all
holders of Series B Stock that the Corporation is redeeming Series B
Stock pursuant to the following provisions of this Section 6. If the
Stockholder Approval Requirement is complied with or if a waiver of or
exception to the Stockholder Approval Requirement is obtained, the
conversion rights of the holders of the Series B Stock shall be
reinstated.
(c) If the Corporation elects or is required to redeem Series B
Stock pursuant to paragraph 6(b) hereof, the Corporation shall (i)
issue the Maximum Number of Shares of Common Stock (as hereinafter
defined in this paragraph 6(c) to the holder(s) of Series B Stock
whose Series B Stock is proposed to be converted and will (ii) redeem,
out of funds legally available therefor, all Series B Stock that
remain after such conversion (a "Mandatory Redemption") at a price per
share of Series B Stock equal to $12,220 (as adjusted for any stock
split, reverse stock split, stock dividend, or similar event resulting
in a change in Series B Stock) plus an amount equal to all dividends,
if any, accrued but unpaid on such shares to the date fixed for
redemption (the "Mandatory Redemption Price"). For purposes of this
Section 6(c), the "Maximum Number of Shares of Common Stock" shall
mean the greatest number of shares of Common Stock that may be issued
upon conversion of shares of Series B Stock without causing a 20%
Issuance. The Corporation shall honor requests for conversion under
this Section 6 in order of receipt, and should the Corporation
simultaneously receive multiple requests for conversion of Series B
Stock that would otherwise cause a 20% Issuance, the Corporation shall
honor such conversion requests pro rata in proportion to the number of
shares of Series B Stock sought to be converted by each holder.
(d) The Corporation's notice of Mandatory Redemption pursuant to
Section 6(b) hereof shall be given to each holder of record of Series
B Stock to be redeemed and shall specify the redemption date of such
Mandatory Redemption (which redemption date shall not be later than
twenty days following the date of such notice of Mandatory
Redemption), the place or places at which such Mandatory Redemption
shall be effected and the Mandatory Redemption Price and shall call
upon such holder to surrender to the Corporation, in the manner and at
a place designated, the certificate(s) representing Series B Stock of
such holder to be redeemed. No failure on the part of the Corporation
to give any notice or Mandatory Redemption required to be given by it
under this Section 6, and no defect in such notice or in the giving
thereof, shall affect the validity of the proceedings for such
Mandatory Redemption, except as to a holder of Series B Stock (i) to
whom the Corporation has failed to give such notice or (ii) whose
notice was defective. An affidavit of the Secretary of the Corporation
that notice of Mandatory Redemption has been given shall in the
absence of fraud, be prima facie evidence of the facts stated therein.
(e) Notwithstanding anything contained in these designations to the
contrary, the obligation of the Corporation to redeem Series B Stock
at any given time shall be subject to such limitations and
restrictions as may then be imposed on the Corporation under
applicable law or governmental regulation. If, on the date on which a
Mandatory Redemption is to be effected, the Corporation shall be
unable, because of any applicable law or governmental regulation, to
redeem the total number of shares of Series B Stock to be redeemed on
such date, the Corporation shall redeem, ratably among the holders of
the shares of Series B Stock to be redeemed, the maximum number of
such shares of Series B Stock (if any) which the Corporation shall be
permitted to redeem under such law or regulation. At any time
thereafter when funds of the Corporation are legally available for the
Mandatory Redemption of Series B Stock, such funds shall immediately
be used to redeem the balance of Series B Stock that the Corporation
has become obligated to redeem on any such date(s) but which it has
not redeemed. If such funds are insufficient to redeem the total
number of such shares of Series B Stock, such Series B Stock shall be
redeemed ratably among the holders of Series B Stock.
(f) From and after the date fixed for a Mandatory Redemption,
notwithstanding that any certificate for Series B Stock to be redeemed
in such Mandatory Redemption shall not have been surrendered for
cancellation, such Series B Stock shall no longer be deemed to be
outstanding, dividends thereon, if any, shall cease to accrue from and
after the date so fixed and the rights of the holders of such Series B
Stock shall forthwith after such redemption date cease and terminate,
excepting only the right of the holders thereof to receive the
Mandatory Redemption Price thereof, but without interest, upon the
surrender of their respective certificates therefor; provided, that
if, on or after the date fixed in any notice as the date of Mandatory
Redemption, the Corporation shall default in the payment of the
Mandatory Redemption Price of any Series B Stock entitled to
redemption upon the surrender of the certificate therefor, the
dividend and all other rights of the holders of such share (other than
any conversion rights) shall be reinstated retroactively to such
Mandatory Redemption Date.
(g) From and after the date fixed for a Mandatory Redemption, the
Corporation shall, at the place or places specified in the notice of
Mandatory Redemption, upon presentation and surrender to the
Corporation by the holder thereof of one or more certificates
representing Series B Stock to be redeemed, deliver or cause to be
delivered to or upon the written order of such holder, a sum in cash
equal to the Mandatory Redemption Price of each share of Series B
Stock of such holder to be redeemed, together with, if the
certificate(s) presented and surrendered by such holder represent a
greater number of shares of Series B Stock than the number of shares
to be so redeemed from such holder, one or more new certificates
registered in the name of such holder and representing the shares of
Series B Stock not redeemed.
(h) Except as provided in this Section 6, Series B Stock is not
subject to any Mandatory Redemption by the Corporation. Nothing in
these designations shall be determined to prohibit the Corporation
from purchasing or otherwise acquiring outstanding shares of its
capital stock, whether now or hereafter authorized, at any time and in
any manner not prohibited by applicable law.
(i) The Corporation shall not be required to maintain any sinking
fund for the Mandatory Redemption of Series B Stock pursuant to this
Section 6.
7. Optional Redemption.
(a) At any time on or after the Original Issuance Date through the
date ending ten trading days prior to the Mandatory Conversion Date,
the Corporation may (by resolution of its Board of Directors), at its
option, upon not less than ten days' prior written notice given by the
Corporation to each holder of Series B Stock, redeem the outstanding
shares of Series B Stock, in whole or part, at an optional redemption
price (the "Optional Redemption Price") equal to $12,200 per share
plus the amount of any accrued but unpaid dividends on the shares of
Series B Stock to be so optionally redeemed to the date of such
optional redemption. Each redemption of less than all outstanding
shares of Series B Preferred Stock shall be made pro rata in respect
of the shares of Series B Stock then outstanding. Each holder of
Series B Stock shall be permitted to convert such holder's Series B
Stock into Common Stock pursuant to Section 2 hereof for the first
five trading days following the giving of written notice provided in
this paragraph 7(a) and, following such fifth trading day, the right
of such holder to so convert shall terminate, except in the event that
the Corporation's Optional Redemption rights under this Section 7
shall be forfeited in accordance with paragraph 7(d) hereof.
(b) At least ten days prior notice by mail, postage prepaid, shall
be given to the holders of record of the shares of Series B Stock of
the corporation's election to exercise the Corporation's option to
redeem shares of Series B Stock pursuant to paragraph 7(b) (each, an
"Optional Redemption"), such notice to be addressed to each such
holder at the address of such holder appearing on the books of the
Corporation or given by such holder to the Corporation for the purpose
of notice, or if no such address appears or is so given, at the place
where the principal office of the Corporation is located. Such notice
shall state the date fixed for Optional Redemption (the "Optional
Redemption Date") and the Optional Redemption Price and shall call
upon such holder to surrender to the Corporation on said date at the
place designated in said notice such holder's certificate(s)
representing the shares of Series B Stock to be redeemed. On or after
the Optional Redemption Date, each holder of shares of Series B Stock
called for Optional Redemption shall surrender the certificate(s)
evidencing such shares of Series B Stock to the Corporation at the
place designated in such notice and shall thereupon be entitled to
receive payment of the Optional Redemption Price, together with
accrued dividends to the Optional Redemption Date. If less than all
the shares of Series B Stock represented by any such surrendered
certificate(s) are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of Optional
Redemption shall have been duly given, and if on the Optional
Redemption Date funds necessary for the Optional Redemption shall be
available and segregated from the other assets of the Corporation to
be held in trust therefor, then, notwithstanding that the
certificate(s) evidencing any shares of Series B Stock so called for
Optional Redemption shall not have been surrendered, the dividends
with respect to the shares so called for Optional Redemption shall
forthwith after such Optional Redemption Date cease to accrue and all
other rights pertaining to such shares of Series B Stock shall
terminate, except only the right of the holders to receive the
Optional Redemption Price, together with accrued and unpaid dividends
to the Optional Redemption Date, without further interest, upon
surrender of their certificates therefor.
(c) If, after notice of Optional Redemption has been given, the
Corporation deposits, on or prior to the Redemption Date fixed for
such Optional Redemption, with any bank or trust company that has a
combined capital and surplus of not less than $100 million, as a trust
fund, a sum sufficient to redeem, on the Optional Redemption Date, the
shares called for Optional Redemption, with irrevocable instructions
and authority to the bank or trust company to give the notice of
redemption thereof (or to complete the giving of such notice if
theretofore commenced) and to pay, on or after the Optional Redemption
Date, the Optional Redemption Price on the shares of Series B Stock
subject to such Optional Redemption to their respective holders upon
the surrender of their certificates evidencing Series B Stock, then,
from and after the date of the deposit (although prior to the Optional
Redemption Date), such shares of Series B Stock shall no longer be
deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares, and shall have no rights
with respect thereto except the right to receive from the bank or
trust company payment of the Optional Redemption Price for such shares
without interest, upon the surrender of their certificate(s) therefor,
except that dividends on such shares shall continue to accrue to the
Optional Redemption Date. Any interest accrued on any funds so
deposited shall be the property of, and paid to the Corporation. If
the holder(s) of any shares of Series B Stock so called for redemption
shall not, at the end of two years from the Optional Redemption Date
thereof, have claimed any funds so deposited, such bank or trust
company shall thereupon pay over to the Corporation such unclaimed
funds, and such bank or trust company shall thereafter be relieved of
all responsibility in respect thereof to such holders and such holders
shall look only to the Corporation for payment of the Optional
Redemption Price.
(d) In the event that the Corporation shall default in its
obligations to redeem all shares of Series B Stock called for Optional
Redemption pursuant to a notice of Optional Redemption given in
accordance with this Section 7, other than due to the failure of a
holder to surrender certificate(s) representing shares of Series B
Stock so called for Optional Redemption, the Corporation shall forfeit
its Optional Redemption rights with respect to (i) such shares of
Series B Stock so called for Optional Redemption and (ii) all future
Optional Redemptions of Series B Stock.
8. Exchange and Cancellation of Series B Stock.
(a) Subject to all applicable securities laws and other applicable
restrictions on transfer, at any time upon the request of any holder
of shares of Series B Stock to the Corporation at the Corporation's
office provided under Section 10 hereof, the Corporation will issue
and deliver to or upon the order of such holder in exchange therefor,
new certificate(s) representing Series B Stock registered in the name
of such person(s) as may be designated by such holder for the same
aggregate number of shares as the Series B Stock surrendered and
substantially in the form thereof, dated the date of the
certificate(s) representing Series B Stock so surrendered. Any such
new Series B Stock shall bear any required notation as to any
modification.
(b) Upon the conversion or redemption, in whole or part, of any
Series B Stock, if only a portion of the Series B Stock is issued in
such conversion or redemption, then the Corporation shall execute and
deliver to or upon the order of the holder thereof, at the expense of
the Corporation, new certificate(s) representing Series B Stock
evidencing the portion of such Series B Stock not so converted or
redeemed.
(c) All Series B Stock certificates or portions thereof which have
been converted or redeemed shall be canceled by the Corporation and no
Series B Stock certificates shall be issued in lieu of the portion of
the Series B Stock so converted or redeemed.
9. Replacement of Series B Stock Certificates. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction of
mutilation of any certificate(s) representing Series B Stock and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
reasonably satisfactory to the Corporation (if requested by the
Corporation), or in the case of any such mutilation, upon surrender and
cancellation of such certificate(s) representing Series B Stock, the
Corporation will issue new certificate(s) representing Series B Stock of
like tenor in lieu of such lost, stolen, destroyed or mutilated
certificate(s) representing Series B Stock as if the lost, stolen destroyed
or mutilated certificate(s) representing Series B Stock were then
surrendered for exchange.
10. Office for Exchange and Registration. So long as any of the shares
of Series B Stock are outstanding, the Corporation will maintain an office
or agency where Series B Stock may be presented for exchange, conversion,
redemption or registration of transfer. Such office or agency initially
shall be the principal office of the Corporation, which place may
thereafter, from time to time, be changed by notice to the holders of the
Series B Stock then outstanding.
11. Restrictions and Limitations.
(a) So long as any shares of Series B Stock remain outstanding, the
Corporation shall not, without the vote or written consent by the
holders of at least a majority of the then outstanding shares of
Series B Stock:
(i) Authorize, create or issue any other equity security senior
to Series B Stock as to liquidation preferences, other than shares
of Series A Cumulative Non-redeemable Preferred Stock of the
Corporation; or
(ii) Amend, alter or repeal, by any means, the Certificate of
Incorporation of the Corporation if the powers, preferences or
special rights of Series B Stock would thereby be materially
adversely affected.
4. The Secretary of State is designated as agent of the corporation upon
whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is c/o Martello, Lamagna, Beckenstein & Zellin, Esqs., 20 Broad
Hollow Road, Suite 2009, Melville, New York 11747.
5. The purpose or purposes of the corporation are as follows:
To engage in any lawful act or activity for which corporations may be
organized under 402 of the Business Corporation Law.
This corporation is not formed to engage in any act or activity
requiring the consent or approval of any state official, department, board,
agency or other body without such consent or approval first being obtained.
The rights, powers, and privileges provided in this certificate are
not to be deemed to be in limitation of similar, other or additional
powers, rights, and privileges granted or permitted to a corporation by the
Business Corporation Law, it being intended that this corporation shall
have all the rights, powers and privileges granted or permitted to a
corporation by such statute.
To generally purchase or acquire property, personal and real, as may
be useful to the operation of this business, generally to do and perform
everything necessary to carry out the aforesaid purposes.
6. The corporation will indemnify any officer or director, made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, of any partnership, joint
venture, trust, employee benefit plan or other enterprise, which any director or
officer of the corporation served in any capacity at the request of the
corporation, by reason of the fact that he, his testator or intestate, was a
director or officer of the corporation, or served such other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity, against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and necessarily incurred
as a result of such action or proceeding, or any appeal therein, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interest of the corporation and, in criminal actions or
proceedings, in addition, had no reasonable cause to believe that his conduct
was unlawful.