EXHIBIT 4.1
CERTIFICATE OF DESIGNATION OF SERIES B
5% CONVERTIBLE PREFERRED STOCK
DEAN HELLER
SECRETARY OF STATE
204 NORTH CARSON STREET, SUITE 1
CARSON CITY, NEVADA 89701-4299
(775) 684-5708
WEBSITE: SECRETARY OF STATE.BIZ
CERTIFICATE OF DESIGNATION
(PURSUANT TO NRS 78.1955)
IMPORTANT: READ ATTACHED INSTRUCTIONS BEFORE COMPLETING FORM.
ABOVE SPACE IS FOR OFFICE USE ONLY
CERTIFICATE OF DESIGNATION
FOR NEVADA PROFIT CORPORATIONS
(PURSUANT TO NRS 78.1955)
1. Name of corporation:
Cirond Corporation
2. By resolution of the board of directors pursuant to a provision in the
articles of incorporation, this certificate establishes the following
regarding the voting powers, designations, preferences, limitations,
restrictions and relative rights of the following class or series of
stock:
See the attached Exhibit A.
3. Effective date of filing (optional):
-----------------------------------
(Must not be later than 90 days after the
certificate is filed)
4. Officer Signature: /s/ ISAAC MOSS
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FILING FEE: $175.00
IMPORTANT: Failure to include any of the above information and submit
the proper fees may cause this filing to be rejected.
SUBMIT IN DUPLICATE
THIS FORM MUST BE ACCOMPANIED BY APPROPRIATE FEES. SEE ATTACHED FEE
SCHEDULE.
EXHIBIT A
CIROND CORPORATION
CERTIFICATE OF DESIGNATION OF
OF
SERIES B 5% CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 78.1955 OF THE
NEVADA REVISED STATUTES
SECTION 1. DEFINITIONS. Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement shall have
the meanings given such terms in the Purchase Agreement. For the purposes
hereof, the following terms shall have the following meanings:
"BANKRUPTCY EVENT" means any of the following events: (a) the
Corporation or any Significant Subsidiary (as such term is defined in
Rule 1-02(s) of Regulation S-X) thereof commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation or any Significant Subsidiary thereof; (b) there is
commenced against the Corporation or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after
commencement; (c) the Corporation or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the
Corporation or any Significant Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 days; (e)
the Corporation or any Significant Subsidiary thereof makes a general
assignment for the benefit of creditors; (f) the Corporation or any
Significant Subsidiary thereof calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its
debts; or (g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
"CHANGE OF CONTROL TRANSACTION" means the occurrence after the
date hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 50% of the
voting securities of the Corporation, or (b) a replacement at one time
or within a one year period of more than one-half of the members of the
Corporation's board of directors which is not approved by a majority of
those individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the board
of directors on
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any date whose nomination to the board of directors was approved by a
majority of the members of the board of directors who are members on
the date hereof), or (c) the execution by the Corporation of an
agreement to which the Corporation is a party or by which it is bound,
providing for any of the events set forth above in (a) or (b).
"CLOSING DATE(S)" means the Trading Day(s) when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Holders' obligations to pay the Subscription Amount and (ii) the
Corporation's obligations to deliver the Securities have been satisfied
or waived.
"CLOSING PRICE" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Trading Market, the closing bid
price of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Purchasers
holding a majority of the Stated Value of the Preferred Stock then
outstanding.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Corporation's common stock, par value
$0.001 per share, and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"COMMON STOCK EQUIVALENTS" means any securities of the
Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
"CONVERSION AMOUNT" means the sum of the Stated Value at
issue.
"CONVERSION DATE" shall have the meaning set forth in Section
6(a).
"CONVERSION PRICE" shall have the meaning set forth in Section
6(b).
"CONVERSION SHARES" means, collectively, the shares of Common
Stock into which the shares of Preferred Stock are convertible in
accordance with the terms hereof.
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"CONVERSION SHARES REGISTRATION STATEMENT" means a
registration statement that meets the requirements of the Registration
Rights Agreement and registers the resale of all Conversion Shares by
the Holder, who shall be named as a "selling stockholder" thereunder,
all as provided in the Registration Rights Agreement.
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in
Section 3(a).
"DILUTIVE ISSUANCE" shall have the meaning set forth in
Section 7(b) hereof.
"EFFECTIVE DATE" means the date that the Conversion Shares
Registration Statement is declared effective by the Commission.
"EQUITY CONDITIONS" shall mean, during the period in question,
(i) the Corporation shall have duly honored all conversions scheduled
to occur or occurring by virtue of one or more Notices of Conversion,
if any, (ii) all liquidated damages and other amounts owing in respect
of the Preferred Stock shall have been paid; (iii) there is an
effective Conversion Shares Registration Statement pursuant to which
the Holder is permitted to utilize the prospectus thereunder to resell
all of the shares issuable pursuant to the Transaction Documents (and
the Corporation believes, in good faith, that such effectiveness will
continue uninterrupted for the foreseeable future), (iv) the Common
Stock is trading on the Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed for trading on a
Trading Market (and the Corporation believes, in good faith, that
trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to
the Transaction Documents, (vi) there is then existing no Triggering
Event or event which, with the passage of time or the giving of notice,
would constitute a Triggering Event, (vii) all of the shares issued or
issuable pursuant to the transaction proposed would not violate the
limitations set forth in Section 6(c), and (viii) no public
announcement of a pending or proposed Fundamental Transaction, Change
of Control Transaction or acquisition transaction has occurred that has
not been consummated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXEMPT ISSUANCE" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Corporation
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Corporation or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any securities issued under the Purchase Agreement
(including the warrants issued to Ascendiant Securities, LLC and the
Additional Investment Right Securities), convertible securities,
options or warrants issued and outstanding on the date of the Purchase
Agreement, provided that such securities have not been amended since
the date of the Purchase Agreement to increase the number of such
securities or to decrease the exercise
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or conversion price of any such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the
business of the Corporation and in which the Corporation receives
benefits in addition to the investment of funds, but shall not include
a transaction in which the Corporation is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities.
"FIVE YEAR REDEMPTION" shall mean the redemption of the
Preferred Stock pursuant to Section 8(a).
"FIVE YEAR REDEMPTION AMOUNT" shall mean the sum of (i) 100%
of the aggregate Stated Value then outstanding, (ii) accrued but unpaid
dividends and (iii) all liquidated damages and other amounts due in
respect of the Preferred Stock.
"FIVE YEAR REDEMPTION DATE" shall have the meaning set forth
in Section 8(a).
"FUNDAMENTAL TRANSACTION" shall have the meaning set forth in
Section 7(f)(iii) hereof.
"HOLDER" shall have the meaning given such term in Section 2
hereof.
"JUNIOR SECURITIES" means the Common Stock and all other
equity or equity equivalent securities of the Corporation other than
those securities that are explicitly senior or pari passu in rights or
liquidation preference to the Preferred Stock.
"OPTIONAL REDEMPTION" shall have the meaning set forth in
Section 8(c).
"OPTIONAL REDEMPTION AMOUNT" shall mean the sum of (i) 120% of
the Stated Value of the Preferred Stock then outstanding, (ii) accrued
but unpaid dividends and (iii) all liquidated damages and other amounts
due in respect of the Preferred Stock.
"OPTIONAL REDEMPTION NOTICE" shall have the meaning set forth
in Section 8(c).
"OPTIONAL REDEMPTION NOTICE DATE" shall have the meaning set
forth in Section 8(c).
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the number
of transfers of any particular shares of Preferred Stock and regardless
of the number of certificates which may be issued to evidence such
Preferred Stock.
"PERSON" means a corporation, an association, a partnership,
an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
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"PURCHASE AGREEMENT" means the Securities Purchase Agreement,
dated as of the Original Issue Date, to which the Corporation and the
original Holders are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Corporation and the original Holder are parties, as amended, modified
or supplemented from time to time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts
set forth below such Purchaser's signature block on the signature pages
hereto, in United States Dollars and in immediately available funds.
"SUBSIDIARY" shall have the meaning given to such term in the
Purchase Agreement.
"THRESHOLD PERIOD" shall have the meaning set forth in Section
6(e).
"TRADING DAY" means a day on which the Common Stock is traded
on a Trading Market.
"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in
the Purchase Agreement.
"TRIGGERING EVENT" shall have the meaning set forth in Section
9(a).
"TRIGGERING REDEMPTION AMOUNT" for each share of Preferred
Stock means the sum of (i) the greater of (A) 120% of the Stated Value
and (B) the product of (a) the Closing Price on the Trading Day
immediately preceding the date of the Triggering Event and (b) the
Stated Value divided by the then Conversion Price, (ii) all accrued but
unpaid dividends thereon and (iii) all liquidated damages and other
amounts due in respect of the Preferred Stock
SECTION 2. DESIGNATION, AMOUNT AND PAR VALUE. The series of
preferred stock shall be designated as its Series B 5% Convertible
Preferred Stock (the "PREFERRED STOCK") and the number of shares so
designated shall be 6,000 (which shall not be subject to increase
without the consent of all of the holders of the Preferred Stock (each,
a "HOLDER" and collectively, the "HOLDERS")). Each share of Preferred
Stock shall have a par
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value of $0.001 per share and a stated value equal to $1,000 (the
"STATED VALUE"). Capitalized terms not otherwise defined herein shall
have the meaning given such terms in Section 1 hereof.
SECTION 3. DIVIDENDS.
a) Holders shall be entitled to receive and the Corporation
shall pay, cumulative dividends at the rate per share (as a percentage
of the Stated Value per share) of 5% per annum (subject to increase
pursuant to Section 9(b)), payable quarterly on April 1, July 1,
October 1 and January 1, beginning with January 1, 2005 and on any
Conversion Date (except that, if such date is not a Trading Day, the
payment date shall be the next succeeding Trading Day)("DIVIDEND
PAYMENT DATE"). The form of dividend payments to each Holder shall be
made in the following order: (i) if funds are legally available for the
payment of dividends and the Equity Conditions have not been met, in
cash only, (ii) if funds are legally available for the payment of
dividends and the Equity Conditions have been met, and the Corporation
is in compliance with Sections 78.215 and 78.288 of the Nevada Revised
Statutes, at the sole election of the Corporation, in cash or shares of
Common Stock which shall be valued solely for such purpose at 90% of
the average of the 20 Closing Prices immediately prior to the Dividend
Payment Date; (iii) if funds are not legally available for the payment
of dividends, the Equity Conditions have been met, and the Corporation
is in compliance with Sections 78.215 and 78.288 of the Nevada Revised
Statutes, in shares of Common Stock which shall be valued at 90% of the
average of the 20 Closing Prices immediately prior to the Dividend
Payment Date; (iv) if funds are not legally available for the payment
of dividends and the Equity Conditions relating to registration have
been waived by such Holder, and, prior to February 28, 2005, the
Corporation is in compliance with Sections 78.215 and 78.288 of the
Nevada Revised Statutes, as to such Holder only, in unregistered shares
of Common Stock which shall be valued at 90% of the average of the 20
Closing Prices immediately prior to the Dividend Payment Date; and (v)
if funds are not legally available for the payment of dividends and the
Equity Conditions have not been met, then, at the election of such
Holder, such dividends shall accrue to the next Dividend Payment Date
or shall be accreted to the outstanding Stated Value. The Holders shall
have the same rights and remedies with respect to the delivery of any
such shares as if such shares were being issued pursuant to Section 6.
As of the Closing Date, the Corporation may not lawfully pay dividends.
The Corporation shall promptly notify the Holders at any time the
Corporation shall become able or unable, as the case may be, to
lawfully pay cash dividends. If at any time the Corporation has the
right to pay dividends in cash or Common Stock, the Corporation must
provide the Holder with at least 20 Trading Days' notice of its
election to pay a regularly scheduled dividend in Common Stock.
Dividends on the Preferred Stock shall be calculated on the basis of a
360-day year, shall accrue daily commencing on the Original Issue Date,
and shall be deemed to accrue from such date whether or not earned or
declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends.
Except as otherwise provided herein, if at any time the Corporation
pays dividends partially in cash and partially in shares, then such
payment shall be distributed ratably among the Holders
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based upon the number of shares of Preferred Stock held by each Holder.
Any dividends, whether paid in cash or shares, that are not paid within
three Trading Days following a Dividend Payment Date shall continue
to accrue and shall entail a late fee, which must be paid in cash, at
the rate of 10% per annum or the lesser rate permitted by applicable
law (such fees to accrue daily, from the Dividend Payment Date through
and including the date of payment).
b) So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any Subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior
Securities. So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any Subsidiary thereof shall directly or
indirectly pay or declare any dividend or make any distribution (other
than a dividend or distribution described in Section 6 or dividends due
and paid in the ordinary course on preferred stock of the Corporation
at such times when the Corporation is in compliance with its payment
and other obligations hereunder) upon, nor shall any distribution be
made in respect of, any Junior Securities so long as any dividends due
on the Preferred Stock remain unpaid, nor shall any monies be set aside
for or applied to the purchase or redemption (through a sinking fund or
otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock.
SECTION 4. VOTING RIGHTS. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of the shares
of the Preferred Stock then outstanding, (a) alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, (b) authorize or create any class of stock
ranking as to dividends, redemption or distribution of assets upon a Liquidation
(as defined in Section 5) senior to or otherwise pari passu with the Preferred
Stock, (c) amend its certificate of incorporation or other charter documents so
as to affect adversely any rights of the Holders, (d) increase the authorized
number of shares of Preferred Stock, or (e) enter into any agreement with
respect to the foregoing.
SECTION 5. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"LIQUIDATION"), the Holders shall be entitled to receive out of the assets of
the Corporation, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value per share plus any accrued
and unpaid dividends thereon and any other fees or liquidated damages owing
thereon before any distribution or payment shall be made to the holders of any
Junior Securities, and if the assets of the Corporation shall be insufficient to
pay in full such amounts, then the entire assets to be distributed to the
Holders shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A Fundamental Transaction or Change of Control
Transaction shall not be treated as a Liquidation. The Corporation shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.
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SECTION 6. CONVERSION.
a) CONVERSIONS AT OPTION OF HOLDER. Each share of Preferred
Stock shall be convertible into that number of shares of Common Stock
(subject to the limitations set forth in Section 6(c)) determined by
dividing the Stated Value of such share of Preferred Stock by the
Conversion Price, at the option of the Holder, at any time and from
time to time from and after the Original Issue Date. Holders shall
effect conversions by providing the Corporation with the form of
conversion notice attached hereto as ANNEX A (a "NOTICE OF
CONVERSION"). Each Notice of Conversion shall specify the number of
shares of Preferred Stock to be converted, the number of shares of
Preferred Stock owned prior to the conversion at issue, the number of
shares of Preferred Stock owned subsequent to the conversion at issue
and the date on which such conversion is to be effected, which date may
not be prior to the date the Holder delivers such Notice of Conversion
to the Corporation by facsimile (the "CONVERSION DATE"). If no
Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion to the
Corporation is deemed delivered hereunder. The calculations and entries
set forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions, as the case may
be, of shares of Preferred Stock, a Holder shall not be required to
surrender the certificate(s) representing such shares of Preferred
Stock to the Corporation unless all of the shares of Preferred Stock
represented thereby are so converted, in which case the Holder shall
deliver the certificate representing such share of Preferred Stock
promptly following the Conversion Date at issue. Shares of Preferred
Stock converted into Common Stock or redeemed in accordance with the
terms hereof shall be canceled and may not be reissued.
b) CONVERSION PRICE. The conversion price for the Preferred
Stock shall equal $0.43 (the "CONVERSION Price"), subject to adjustment
herein.
c) BENEFICIAL OWNERSHIP LIMITATION. The Corporation shall not
effect any conversion of the Preferred Stock, and the Holder shall not
have the right to convert any portion of the Preferred Stock to the
extent that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion of the Preferred Stock with
respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, nonconverted Stated
Value of Preferred Stock beneficially owned by the Holder or any of its
affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Corporation
(including the Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 6(c), beneficial
ownership shall be calculated in accordance with
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Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this Section 6(c) applies, the determination of whether
the Preferred Stock is convertible (in relation to other securities
owned by the Holder together with any affiliates) and of which shares
of Preferred Stock is convertible shall be in the sole discretion of
such Holder, and the submission of a Notice of Conversion shall be
deemed to be such Holder's determination of whether the shares of
Preferred Stock may be converted (in relation to other securities owned
by such Holder) and which shares of the Preferred Stock is convertible,
in each case subject to such aggregate percentage limitations. To
ensure compliance with this restriction, the Holder will be deemed to
represent to the Corporation each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Corporation shall have
no obligation to verify or confirm the accuracy of such determination.
For purposes of this Section 6(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in the most recent
of the following: (A) the Corporation's most recent Form 10-Q or Form
10-K, as the case may be, (B) a more recent public announcement by the
Corporation or (C) any other notice by the Corporation or the
Corporation's transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of the
Holder, the Corporation shall within two Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Corporation, including the Preferred
Stock, by the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The
provisions of this Section 6(c) may be waived by the Holder upon, at
the election of the Holder, not less than 61 days' prior notice to the
Corporation, and the provisions of this Section 6(c) shall continue to
apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
d) MECHANICS OF CONVERSION
i. DELIVERY OF CERTIFICATE UPON CONVERSION. Not later
than three Trading Days after each Conversion Date (the "SHARE
DELIVERY DATE"), the Corporation shall deliver to the Holder
(A) a certificate or certificates which, after the Effective
Date, shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase
Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of shares of Preferred
Stock, and (B) a bank check in the amount of accrued and
unpaid dividends (if the Corporation has elected or is
required to pay accrued dividends in cash). After the
Effective Date, the Corporation shall, upon request of the
Holder, deliver any certificate or certificates required to be
delivered by the Corporation under this Section electronically
through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
If in the case of any Notice of Conversion such certificate or
certificates are not delivered to or as directed by the
applicable Holder by the third
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Trading Day after the Conversion Date, the Holder shall be
entitled to elect by written notice to the Corporation at any
time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which
event the Corporation shall immediately return the
certificates representing the shares of Preferred Stock
tendered for conversion.
ii. OBLIGATION ABSOLUTE; PARTIAL LIQUIDATED DAMAGES. The
Corporation's obligations to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with
the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same,
any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by
the Holder or any other Person of any obligation to the
Corporation or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Corporation to the Holder in connection with the issuance
of such Conversion Shares. In the event a Holder shall elect
to convert any or all of the Stated Value of its Preferred
Stock, the Corporation may not refuse conversion based on any
claim that such Holder or any one associated or affiliated
with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining conversion of
all or part of this Preferred Stock shall have been sought and
obtained and the Corporation posts a surety bond for the
benefit of the Holder in the amount of 150% of the Stated
Value of Preferred Stock outstanding, which is subject to the
injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the
extent it obtains judgment. In the absence of an injunction
precluding the same, the Corporation shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed
conversion. If the Corporation fails to deliver to the Holder
such certificate or certificates pursuant to Section 6(d)(i)
within two Trading Days of the Share Delivery Date applicable
to such conversion, the Corporation shall pay to such Holder,
in cash, as liquidated damages and not as a penalty, for each
$5,000 of Stated Value of Preferred Stock being converted, $50
per Trading Day (increasing to $100 per Trading Day after 3
Trading Days and increasing to $200 per Trading Day 6 Trading
Days after such damages begin to accrue) for each Trading Day
after the Share Delivery Date until such certificates are
delivered. Nothing herein shall limit a Holder's right to
pursue actual damages for the Corporation's failure to deliver
certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder
shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief.
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iii. COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY
DELIVER CERTIFICATES UPON CONVERSION. If the Corporation fails
to deliver to the Holder such certificate or certificates
pursuant to Section 6(d)(i) by a Share Delivery Date, and if
after such Share Delivery Date the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a "BUY-IN"),
then the Corporation shall pay in cash to the Holder the
amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled
to receive from the conversion at issue multiplied by (2) the
price at which the sell order giving rise to such purchase
obligation was executed. For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the aggregate sale price
giving rise to such purchase obligation is $10,000, under
clause (A) of the immediately preceding sentence the
Corporation shall be required to pay the Holder $1,000. The
Holder shall provide the Corporation written notice indicating
the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence
reasonably requested by the Corporation. Nothing herein shall
limit a Holder's right to pursue any other remedies available
to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Corporation's failure to timely
deliver certificates representing shares of Common Stock upon
conversion of the shares of Preferred Stock as required
pursuant to the terms hereof.
iv. RESERVATION OF SHARES ISSUABLE UPON CONVERSION. The
Corporation covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of
Common Stock solely for the purpose of issuance upon
conversion of the Preferred Stock and payment of dividends on
the Preferred Stock, each as herein provided, free from
preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall (subject to any
additional requirements of the Corporation as to reservation
of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions
of Section 7) upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid,
nonassessable and, if the Conversion Shares Registration
Statement is then effective under the Securities Act,
registered for public sale in accordance with such Conversion
Shares Registration Statement.
v. FRACTIONAL SHARES. Upon a conversion hereunder, the
Corporation shall not be required to issue stock certificates
representing fractions of shares of
11
the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on
the Closing Price at such time. If the Corporation elects not,
or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
vi. TRANSFER TAXES. The issuance of certificates for
shares of the Common Stock on conversion of the Preferred
Stock shall be made without charge to the Holders thereof for
any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided
that the Corporation shall not be required to pay any tax that
may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion
in a name other than that of the Holder of such shares of
Preferred Stock so converted and the Corporation shall not be
required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that
such tax has been paid.
SECTION 7. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND STOCK SPLITS. If the Corporation, at
any time while the Preferred Stock is outstanding: (A) shall pay a
stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the
Corporation pursuant to this Preferred Sock), (B) subdivide outstanding
shares of Common Stock into a larger number of shares, (C) combine
(including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification
of shares of the Common Stock any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
b) SUBSEQUENT EQUITY SALES. If the Corporation or any
Subsidiary thereof, as applicable, at any time while Preferred Stock is
outstanding, shall offer, sell, grant any option to purchase or offer,
sell or grant any right to reprice its securities, or otherwise dispose
of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at
an effective price per share less than the then Conversion Price (such
lower price, the "BASE SHARE PRICE" and such issuances collectively, a
"DILUTIVE ISSUANCE"), as adjusted hereunder (if the holder of the
Common
12
Stock or Common Stock Equivalents so issued shall at any time, whether
by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion
Price), then the Conversion Price shall be reduced to a price equal to
the Base Share Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued. The Corporation
shall notify the Holder in writing, no later than the Business Day
following the issuance of any Common Stock or Common Stock Equivalents
subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price
and other pricing terms (such notice, the "Dilutive Issuance Notice").
For purposes of clarification, whether or not the Corporation provides
a Dilutive Issuance Notice pursuant to this Section 7(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Conversion.
c) SUBSEQUENT RIGHTS OFFERINGS. If the Corporation, at any
time while the Preferred Stock is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to Holders)
entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Closing Price at the record date
mentioned below, then the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the
Common Stock Outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock Outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered
(assuming receipt by the Corporation in full of all consideration
payable upon exercise of such rights, options or warrants) would
purchase at such Closing Price. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
d) PRO RATA DISTRIBUTIONS. If the Corporation, at any time
while Preferred Stock is outstanding, shall distribute to all holders
of Common Stock (and not to Holders) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security,
then in each such case the Conversion Price shall be determined by
multiplying such Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the
Closing Price determined as of the record date mentioned above, and of
which the numerator shall be such Closing Price on such record date
less the then fair market value at such record date of the portion of
such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall
13
be described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
e) CALCULATIONS. All calculations under this Section 7 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Corporation, and the description of any such shares of Common
Stock shall be considered on issue or sale of Common Stock. For
purposes of this Section 7, the number of shares of Common Stock deemed
to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
issued and outstanding.
f) NOTICE TO HOLDERS.
i. ADJUSTMENT TO CONVERSION PRICE. Whenever the
Conversion Price is adjusted pursuant to any of this Section
7, the Corporation shall promptly mail to each Holder a notice
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment. If the Corporation issues a variable rate
security, despite the prohibition thereon in the Purchase
Agreement, the Corporation shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities
may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the
lowest possible adjustment price in the case of an MFN
Transaction. The term "MFN TRANSACTION" shall mean a
transaction in which the Corporation issues or sells any
securities in a capital raising transaction or series of
related transactions which grants to an investor the right to
receive additional shares based upon future transactions of
the Corporation on terms more favorable than those granted to
such investor in such offering (but not including customary
anti-dilution provisions that adjust the conversion or
exercise price of outstanding securities).
ii. NOTICE TO ALLOW CONVERSION BY HOLDER. If (A) the
Corporation shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Corporation shall
declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Corporation shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval
of any stockholders of the Corporation shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Corporation is a party,
any sale or transfer of all or substantially all of the assets
of the Corporation, of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property; (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
14
of the affairs of the Corporation; then, in each case, the
Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Preferred
Stock, and shall cause to be mailed to the Holders at their
last addresses as they shall appear upon the stock books of
the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the
date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange;
PROVIDED, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. Holders are entitled to convert the Conversion
Amount of Preferred Stock during the 20-day period commencing
the date of such notice to the effective date of the event
triggering such notice.
iii. FUNDAMENTAL TRANSACTION. If, at any time while this
Preferred Stock is outstanding, (A) the Corporation effects
any merger or consolidation of the Corporation with or into
another Person, (B) the Corporation effects any sale of more
than 50% of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether
by the Corporation or another Person) is completed pursuant to
which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property,
or (D) the Corporation effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to
which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such
case, a "FUNDAMENTAL TRANSACTION"), then upon any subsequent
conversion of this Preferred Stock, the Holder shall have the
right to receive, for each Conversion Share that would have
been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder
of one share of Common Stock (the "ALTERNATE Consideration").
For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock
in such Fundamental Transaction, and the Corporation shall
apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be
15
given the same choice as to the Alternate Consideration it
receives upon any conversion of this Preferred Stock following
such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the
Corporation or surviving entity in such Fundamental
Transaction shall file a new Certificate of Designation with
the same terms and conditions and issue to the Holder new
preferred stock consistent with the foregoing provisions and
evidencing the Holder's right to convert such preferred stock
into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (f)(iii) and
insuring that this Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
iv. EXEMPT ISSUANCE. Notwithstanding the foregoing, no
adjustment will be made under this Section 7 in respect of an
Exempt Issuance.
SECTION 8. REDEMPTION.
a) FIVE YEAR REDEMPTION. On the fifth anniversary of the
Original Issue Date (the "FIVE YEAR REDEMPTION DATE"), the Corporation
shall redeem all of the then outstanding shares of Preferred Stock, for
an amount in cash or, if the Equity Conditions are met during the 30
days prior to and on the Five Year Redemption Date and at the election
of the Corporation, in shares of Common Stock, equal to the Five Year
Redemption Amount (such redemption, the "FIVE YEAR REDEMPTION"). The
Corporation covenants and agrees that it will honor all Notices of
Conversion tendered up until such amounts are paid in full.
b) REDEMPTION PROCEDURE. The payment of cash or Common Stock
pursuant to a Five Year Redemption shall be made on the Five Year
Redemption Date. If the Corporation elects to pay the Five Year
Redemption Amount in shares of Common Stock, such shares of Common
Stock shall be valued solely for such purpose at 90% of the average of
the 30 Closing Prices immediately prior to the Five Year Redemption
Date. If any portion of the cash or Common Stock payment for a Five
Year Redemption shall not be paid by the Corporation by the respective
due date, interest shall accrue thereon at the rate of 18% per annum
(or the maximum rate permitted by applicable law, whichever is less)
until the such payment, plus all amounts owing thereon, is paid in
full.
c) OPTIONAL REDEMPTION. Subject to the provisions of this
Section 8(c), at any time prior to the Five Year Redemption Date the
Corporation may deliver a notice to the Holders (an "Optional
Redemption Notice" and the date such notice is deemed delivered
hereunder, the "Optional Redemption Notice Date") of its irrevocable
election to redeem on the 30th Trading Day following the Optional
Redemption Notice Date (such date, the "Optional Redemption Date" and
such redemption, the "Optional Redemption") all or a part of the then
outstanding Preferred Stock, for an amount, in
16
cash, equal to the Optional Redemption Amount. The Optional Redemption
Amount is due in full on the Optional Redemption Date. The Corporation
may only tender an Optional Redemption Notice if during the 20-Trading
Day period prior to the Optional Redemption Notice Date through the
Optional Redemption Date, each of the Equity Conditions shall have been
met. If any of the Equity Conditions shall cease to be satisfied at any
time during the required period, then the Holder may elect to nullify
the Optional Redemption Notice by notice to the Corporation within 3
Trading Days after the first day on which any such Equity Condition has
not been met (provided that if, by a provision of the Transaction
Documents the Corporation is obligated to notify the Holder of the
non-existence of an Equity Condition, such notice period shall be
extended to the third Trading Day after proper notice from the
Corporation) in which case the Optional Redemption Notice shall be null
and void, ab initio. Any election by the Corporation under this Section
8(c) shall be done on a pro rata basis with respect to all of the then
outstanding shares of Preferred Stock. If any portion of the cash
payment for an Optional Redemption pursuant to this Section 8(c) shall
not be paid by the Corporation by the respective due date, interest
shall accrue thereon at the rate of 18% per annum (or the maximum rate
permitted by applicable law, whichever is less) until such payment,
plus all amounts owing thereon, is paid in full.
SECTION 9. REDEMPTION UPON TRIGGERING EVENTS.
a) "TRIGGERING EVENT" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. the failure of a Conversion Shares Registration
Statement to be declared effective by the Commission on or
prior to the 180th day after the Original Issue Date;
ii. if, during the Effectiveness Period, the
effectiveness of the Conversion Shares Registration Statement
lapses for any reason for more than an aggregate of 25
calendar days (which need not be consecutive days) during any
12 month period, or the Holder shall not be permitted to
resell Registrable Securities under the Conversion Shares
Registration Statement for more than an aggregate of 25
calendar days (which need not be consecutive days) during any
12 month period;
iii. the Corporation shall fail to deliver certificates
representing Conversion Shares issuable upon a conversion
hereunder that comply with the provisions hereof prior to the
5th Trading Day after such shares are required to be delivered
hereunder, or the Corporation shall provide written notice to
any Holder, including by way of public announcement, at any
time, of its intention not to comply with requests for
conversion of any shares of Preferred Stock in accordance with
the terms hereof;
17
iv. one of the Events (as defined in the Registration
Rights Agreement) described in subsections (i), (ii) or (iii)
of Section 2(b) of the Registration Rights Agreement shall not
have been cured to the satisfaction of the Holders prior to
the expiration of 30 days from the Event Date (as defined in
the Registration Rights Agreement) relating thereto (other
than an Event resulting from a failure of a Conversion Shares
Registration Statement to be declared effective by the
Commission on or prior to the 180th day after the Original
Issue Date, which shall be covered by Section 9(a)(i));
v. the Corporation shall fail for any reason to pay in
full the amount of cash due pursuant to a Buy-In within 5 days
after notice therefor is delivered hereunder or shall fail to
pay all amounts owed on account of an Event within five days
of the date due;
vi. the Corporation shall fail to have available a
sufficient number of authorized and unreserved shares of
Common Stock to issue to such Holder upon a conversion
hereunder;
vii. the Corporation shall fail to observe or perform
any other covenant, agreement or warranty contained in, or
otherwise commit any breach of the Transaction Documents, and
such failure or breach shall not, if subject to the
possibility of a cure by the Corporation, have been remedied
within 30 calendar days after the date on which written notice
of such failure or breach shall have been given;
viii. the Corporation shall redeem more than a de
minimis number of Junior Securities;
ix. there shall have occurred a Bankruptcy Event;
x. the Corporation shall enter into an agreement that
provides for a Change of Control or Fundamental Transaction or
a Change of Control or Fundamental Transaction shall otherwise
occur; or
xi. Common Stock shall fail to be listed or quoted for
trading on a Trading Market for more than 5 Trading Days,
which need not be consecutive Trading Days.
b) Upon the occurrence of a Triggering Event, each Holder
shall (in addition to all other rights it may have hereunder or under
applicable law) have the right, exercisable at the sole option of such
Holder, to require the Corporation to, (i) with respect to the
Triggering Events set forth in Sections 9(a)(iii), (v), (vii), (ix)(as
to voluntary filings only) or (x), redeem all of the Preferred Stock
then held by such Holder for a redemption price, in cash, equal to the
Triggering Redemption Amount; or, (ii) at
18
the option of the Holder and with respect to the Triggering Events set
forth in Sections 9(a)(i), (ii), (iv), (vi), (viii), (ix)(as to
involuntary filings only) and (xi), either (A) redeem all of the
Preferred Stock then held by such Holder for a redemption price, in
shares of Common Stock, equal to a number of shares of Common Stock
equal to the Triggering Redemption Amount divided by 75% of the average
of the 10 Closing Prices immediately prior to the date of election
hereunder or (B) increase the dividend on all of the outstanding
Preferred Stock held by such Holder to equal 18% per annum thereafter.
The Triggering Redemption Amount, if in cash or in shares, shall be due
and payable or issuable, as the case may be, within 5 Trading Days of
the date on which the notice for the payment therefor is provided by a
Holder. If the Corporation fails to pay the Triggering Redemption
Amount hereunder in full pursuant to this Section on the date such
amount is due in accordance with this Section (whether in cash or
shares of Common Stock), the Corporation will pay interest thereon at a
rate of 18% per annum (or such lesser amount permitted by applicable
law), accruing daily from such date until the Triggering Redemption
Amount, plus all such interest thereon, is paid in full. For purposes
of this Section, a share of Preferred Stock is outstanding until such
date as the Holder shall have received Conversion Shares upon a
conversion (or attempted conversion) thereof that meets the
requirements hereof or has been paid the Triggering Redemption Amount
plus all accrued but unpaid dividends and all accrued but unpaid
liquidated damages in cash.
SECTION 10. MISCELLANEOUS.
a) NOTICES. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Corporation, at the address set forth
above, facsimile number (604) 205-3984, ATTN: NICHOLAS MILLER or such
other address or facsimile number as the Corporation may specify for
such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries
to be provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of
the Corporation, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
19
b) ABSOLUTE OBLIGATION. Except as expressly provided herein,
no provision of this Certificate of Designation shall alter or impair
the obligation of the Corporation, which is absolute and unconditional,
to pay the liquidated damages (if any) on, the shares of Preferred
Stock at the time, place, and rate, and in the coin or currency, herein
prescribed.
c) LOST OR MUTILATED PREFERRED STOCK CERTIFICATE. If a
Holder's Preferred Stock certificate shall be mutilated, lost, stolen
or destroyed, the Corporation shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated certificate,
or in lieu of or in substitution for a lost, stolen or destroyed
certificate, a new certificate for the shares of Preferred Stock so
mutilated, lost, stolen or destroyed but only upon receipt of evidence
of such loss, theft or destruction of such certificate, and of the
ownership hereof, and indemnity, if requested, all reasonably
satisfactory to the Corporation.
d) GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Certificate of
Designation shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction
Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the "NEW YORK COURTS"). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the
New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Certificate of Designation and
agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Certificate
of Designation or the transactions contemplated hereby. If either party
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.
20
e) WAIVER. Any waiver by the Corporation or the Holder of a
breach of any provision of this Certificate of Designation shall not
operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Certificate
of Designation. The failure of the Corporation or the Holder to insist
upon strict adherence to any term of this Certificate of Designation on
one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that
term or any other term of this Certificate of Designation. Any waiver
must be in writing.
f) SEVERABILITY. If any provision of this Certificate of
Designation is invalid, illegal or unenforceable, the balance of this
Certificate of Designation shall remain in effect, and if any provision
is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall
be found that any interest or other amount deemed interest due
hereunder violates applicable laws governing usury, the applicable rate
of interest due hereunder shall automatically be lowered to equal the
maximum permitted rate of interest.
g) NEXT BUSINESS DAY. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
h) HEADINGS. The headings contained herein are for convenience
only, do not constitute a part of this Certificate of Designation and
shall not be deemed to limit or affect any of the provisions hereof.
*********************
21
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series B 5%
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the "COMMON STOCK"), of Cirond Corporation, a Nevada
corporation (the "CORPORATION"), according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Corporation in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
Date to Effect Conversion:
-----------------------------------------------
Number of shares of Preferred Stock owned prior to Conversion:
-----------
Number of shares of Preferred Stock to be Converted:
---------------------
Stated Value of shares of Preferred Stock to be Converted:
---------------
Number of shares of Common Stock to be Issued:
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Applicable Conversion Price:
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Number of shares of Preferred Stock subsequent to Conversion:
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[HOLDER]
By:
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Name:
Title:
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