EXHIBIT 3.6
CERTIFICATE OF DESIGNATION
OF
SERIES CC CONVERTIBLE PREFERRED STOCK
OF
VALUESTAR CORPORATION
VALUESTAR CORPORATION, a corporation organized and existing under the
Colorado Business Corporation Act (the "Corporation"), in accordance with Colo.
Rev. Stat. Section 7-106-102,
HEREBY CERTIFIES:
1. The name of the Corporation is: Valuestar Corporation.
2. The text of the amendment determining the designations, preferences,
limitations, and relative rights of the class or series of shares is as
set forth on Exhibit "A", attached hereto and by this reference
incorporated herein.
3. This amendment was adopted on January 4, 2001.
4. This amendment was duly adopted by the Board of Directors of the
Corporation.
The undersigned does hereby confirm, under penalties of perjury, that
the foregoing Certificate of Designation of Valuestar Corporation constitutes
the act and deed of the Corporation, and that the facts stated herein are true.
Executed at Oakland, California on January 4, 2001.
/s/ James Stein
------------------------------------
James Stein, Chief Executive Officer
Exhibit "A"
RESOLVED, that pursuant to the authority granted to the Board of
Directors by Article THIRD, Paragraph I of the Articles of Incorporation of the
Corporation, as amended (the "Articles"), there is hereby created, and the
Corporation be, and it hereby is, authorized to issue Five Hundred Thousand
(500,000) shares of a series of convertible preferred stock, designated "SERIES
CC CONVERTIBLE PREFERRED STOCK," which Series CC Convertible Preferred Stock
(also referred to herein as "Series CC Stock" or "Series CC Preferred Stock")
shall have, in addition to the rights, restrictions, preferences and privileges
set forth in the Articles, the following terms, conditions, rights,
restrictions, preferences and privileges:
A. DIVIDENDS.
1. Generally. Subject to the preferential dividend rights of
the holders of the Corporation's Series A Convertible Preferred Stock ("Series A
Stock"), and Series B Convertible Preferred Stock ("Series B Stock") but on a
pari passu basis with the Series C Convertible Preferred Stock ("Series C
Stock"), each holder of outstanding shares of Series CC Stock shall be entitled
to receive, when and if declared by the Board of Directors and out of any funds
legally available therefor, cumulative dividends at the annual rate of $3.60 per
share (the "Series CC Preferential Dividend"), and in preference to any
declaration or payment (payable other than in Common Stock) of dividends with
respect to the Common Stock. No cash dividends shall be declared and paid on the
Common Stock or any other equity of the Company except the Series A Stock and
Series B Stock as contemplated above unless a like cash dividend amount has been
paid to the Series CC Stock on an as converted basis.
2. Payment Other Than Cash. If the Corporation shall declare a
distribution payable in securities of persons other than the Corporation,
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 CC
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of Series CC Preferred Stock were the holders
of the number of shares of Common Stock of the Corporation into which their
respective shares of Series CC Preferred Stock are convertible as of the record
date fixed for the determination of the holders of Common Stock of the
Corporation who are entitled to receive such distribution.
3. Dividend Adjustment. The Series CC Preferential Dividend
shall be appropriately adjusted for any stock splits, dividends, combinations,
recapitalizations and the like ("Appropriately Adjusted").
B. PREFERENCE ON LIQUIDATION.
1. Series CC Preference. Except upon a "Series CC Qualified
Liquidation Event" (as hereinafter defined), in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment of the preferential price is made in respect of the shares of
Series A Stock (the "Series A Preference Price"), the holders of the outstanding
shares of Series CC Stock shall be entitled, on a pari passu basis with the
Series B Stock, to be paid out of the assets of the Corporation available for
distribution to its shareholders, whether from capital, surplus funds or
earnings, and before any payment is made in respect of the shares of Series C
Stock or the shares of Common Stock, in an amount equal to $45.00 per share
(Appropriately Adjusted), together with an amount equal to eight percent (8%) of
such $45.00 at the rate of 8% for each year (or fraction thereof) after the date
of the issuance of each such share of Series CC Stock, less the amount, if any,
of any cash dividends actually paid to the Series CC Stock through the date of
liquidation (but not less than zero) (the "Series CC Preference Price").
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2. Partial Payment. Each share of Series B Stock and each
share of Series CC Stock shall rank on parity with each other share of Series B
Stock and Series CC Stock with regard to distributions on the liquidation,
dissolution or winding up of the Corporation, and no amount shall be paid or set
apart for payment on the shares of the Series B Stock or the shares of Series CC
Stock unless at the same time amounts in like proportion to the respective
Preference Prices of the Series CC Stock or Series B Stock, as the case may be,
then outstanding shall be paid or set apart. If upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to its shareholders shall be insufficient to pay the
holders of shares of Series B Stock and Series CC Stock their full respective
Preference Prices, then all of the assets of the Corporation legally available
for distribution to the holders of equity securities shall be distributed
ratably to the holders of the Series B Stock and Series CC Stock in proportion
to the respective amounts which would be payable on the shares held by them if
the respective Preference Prices were paid in full.
3. Certain Transactions. The following shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section B with
respect to the Series CC : (A) a sale of all or substantially all of the
Corporation's assets; or (B) a consolidation, merger or reorganization of the
Corporation with or into any other corporation or corporations if the
Corporation's shareholders do not control a majority of the outstanding voting
securities of such consolidated, merged or reorganized corporation(s). The
Corporation shall provide written notice of each of the above transactions to
each holder of Series CC Stock at least ten (10) days prior to such transaction
in accordance with Section D.14 (below).
4. Liquidation Adjustment. The Series CC Preference Price
shall be Appropriately Adjusted.
C. VOTING.
1. Generally. Except as otherwise required by law or expressly
provided herein, each share of Series CC Preferred Stock shall be entitled to
vote on all matters submitted or required to be submitted to a vote of the
shareholders of the Corporation in the same class and together with the holders
of Common Stock and shall be entitled to the number of votes equal to the number
of whole shares of Common Stock into which such shares of Series CC Preferred
Stock are convertible pursuant to the provisions hereof, at the record date for
the determination of shareholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited. In each such case, except as otherwise
required by law or expressly provided herein, the holders of shares of Series A
Stock, Series B Stock, Series C Stock, Series CC Stock and Common Stock shall
vote together and not as separate classes.
2. Special Voting for the Election of Directors. The Board of
Directors shall be elected as follows:
(i) So long as at least One Hundred Thousand
(100,000) shares of Series A Stock are issued and outstanding (Appropriately
Adjusted), the holders of Series A Stock shall be entitled, voting as a separate
class, to elect one (1) and only one (1) member to the Corporationss.s Board of
Directors;
(ii) So long as at least Two Hundred Thousand
(200,000) shares of Series B Stock are issued and outstanding (Appropriately
Adjusted), the holders of Series B Stock shall be entitled, voting as a separate
class, to elect two (2) and only two (2) members to the Corporation's Board of
Directors;
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(iii) So long as at least Two Hundred Thousand
(200,000) shares of Series C Stock are issued and outstanding (Appropriately
Adjusted), the holders of Series C Stock shall be entitled, voting as a separate
class, to elect one (1) and only one (1) member to the Corporationss.s Board of
Directors;
(iv) So long as at least One Hundred Thousand
(100,000) shares of Series CC Stock are issued and outstanding (Appropriately
Adjusted), the holders of Series CC Stock shall be entitled, voting as a
separate class, to elect one (1) and only one (1) member to the Corporationss.s
Board of Directors;
(v) The remaining authorized members of the Board of
Directors not entitled to be elected by any series of Preferred Stock then
outstanding from time to time shall be elected by the holders of Common Stock.
3. Removals or Resignations. Any vacancy created on the
Corporation's Board of Directors shall be filled by a successor Director who
shall be elected in a manner by which his or her predecessor was elected as
provided above. Any Director who has been elected to the Corporation's Board of
Directors as provided above may be removed during his term of office in
accordance with the Business Corporation Act of the State of Colorado, and any
vacancy thereby created shall be filled as provided in this subparagraph.
D. CONVERSION. The holders of the outstanding shares of Series CC
Stock shall have the following conversion rights (the "Conversion Rights"):
1. Right to Convert. Each share of Series CC Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such shares, at the office of the Corporation or any transfer agent
for the Corporation's shares into that number of shares of Common Stock which is
equal to the quotient obtained by dividing the Series CC Preference Price then
in effect for each share of Series CC Stock by the Series CC Conversion Price
(as such term is hereinafter defined) in effect immediately prior to the time of
such conversion. The initial price at which shares of Common Stock shall be
deliverable upon conversion of shares of Series CC Stock shall be $0.75 (as
adjusted from time to time as herein provided, the "Series CC Conversion
Price").
2. Mechanics of Conversion. Each holder of outstanding shares
of Series CC Stock who desires to convert the same into shares of Common Stock
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Corporation's shares
and shall give written notice to the Corporation at such office that such holder
elects to convert the same and shall state therein the number of shares of
Series CC Stock being converted. Thereupon, the Corporation shall issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay all declared but unpaid dividends on the shares being converted.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the certificate or certificates
representing the shares to be converted, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such date.
3. Adjustment for Stock Splits and Combinations. If the
Corporation at any time or from time to time after the date that this
Certificate of Designation was filed with the Colorado Secretary of State (the
"Filing Date") effects a division of the outstanding shares of Common Stock, the
Series CC Conversion Price shall be proportionately decreased and, conversely,
if the Corporation at any time, or from time to time, after the Filing Date
combines the outstanding shares of Common Stock, the Series CC Conversion Price
shall be proportionately increased. Any adjustment under this Section D.3 shall
be effective on the close of business on the date such division or combination
becomes effective.
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4. Adjustment for Certain Dividends and Distributions. If the
Corporation at any time or from time to time after the Filing Date pays or fixes
a record date for the determination of holders of shares of Common Stock
entitled to receive a dividend or other distribution in the form of shares of
Common Stock, or rights or options for the purchase of, or securities
convertible into, Common Stock, then in each such event the Series CC Conversion
Price shall be decreased, as of the time of such payment or, in the event a
record date is fixed, as of the close of business on such record date, by
multiplying the Series CC Conversion Price by a fraction (i) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the time of such payment or the close of business on such
record date and (ii) the denominator of which shall be (A) the total number of
shares of Common Stock outstanding immediately prior to the time of such payment
or the close of business on such record date plus (B) the number of shares of
Common Stock issuable in payment of such dividend or distribution or upon
exercise of such option or right of conversion; provided, however, that if a
record date is fixed and such dividend is not fully paid or such other
distribution is not fully made on the date fixed therefor, the Series CC
Conversion Price shall not be decreased as of the close of business on such
record date as hereinabove provided as to the portion not fully paid or
distributed and thereafter the Series CC Conversion Price shall be decreased
pursuant to this Section 4 as of the date or dates of actual payment of such
dividend or distribution.
5. Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Filing Date pays, or
fixes a record date for the determination of holders of shares of Common Stock
entitled to receive, a dividend or other distribution in the form of securities
of the Corporation other than shares of Common Stock or rights or options for
the purchase of, or securities convertible into, Common Stock, then in each such
event provision shall be made so that the holders of outstanding shares of
Series CC Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their respective shares of Series
CC Stock been converted into shares of Common Stock on the date of such event
and had such holders thereafter, from the date of such event to and including
the actual date of conversion of their shares, retained such securities, subject
to all other adjustments called for during such period under this Section D with
respect to the rights of the holders of the outstanding shares of Series CC
Stock.
6. Adjustment for Reclassification, Exchange and Substitution.
If, at any time or from time to time after the Filing Date, the number of shares
of Common Stock issuable upon conversion of the shares of Series CC Stock is
changed into the same or a different number of shares of any other class or
classes of stock or other securities, whether by recapitalization,
reclassification or otherwise (other than a recapitalization, division or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section D or
Section B of this Certificate of Designation), then in any such event each
holder of outstanding shares of Series CC Stock shall have the right thereafter
to convert such shares of Series CC Stock into the same kind and amount of stock
and other securities receivable upon such recapitalization, reclassification or
other change, as the maximum number of shares of Common Stock into which such
shares of Series CC Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
7. Reorganizations, Mergers, Consolidations or Sales of
Assets. If, at any time or from time to time after the Filing Date, there is a
capital reorganization of the Common Stock (other than a recapitalization,
division, combination, reclassification or exchange of shares provided for
elsewhere in this Section D or Section B of this Certificate of Designation) or,
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other than a Series CC Qualified Liquidation Event, a merger or consolidation of
the Corporation into or with another corporation or a sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of such capital reorganization, merger, consolidation or
sale, provision shall be made so that the holders of outstanding shares of
Series CC Stock shall thereafter receive upon conversion thereof the number of
shares of stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger or consolidation or sale, to
which a holder of the number of shares of Common Stock into which their shares
of Series CC Stock were convertible would have been entitled on such capital
reorganization, merger, consolidation or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section D
with respect to the rights of the holders of the outstanding shares of Series CC
Stock after the capital reorganization, merger, consolidation, or sale to the
end that the provisions of this Section D (including adjustment of the Series CC
Conversion Price and the number of shares into which the shares of Series CC
Stock may be converted) shall be applicable after that event and be as nearly
equivalent to such Conversion Prices and number of shares as may be practicable.
8. Sale of Shares Below Conversion Price.
(i) If, at any time or from time to time after the
Filing Date, the Corporation issues or sells, or is deemed by the express
provisions of this Section 8 to have issued or sold, Additional Shares of Common
Stock (as hereinafter defined) for an Effective Price (as hereinafter defined)
less than the then current Series CC Conversion Price, other than (A) as a
dividend or other distribution on any class of stock as provided in Section D.4
above or (B) upon a division or combination of shares of Common Stock as
provided in Section D.3 above, then, in any such event, the Series CC Conversion
Price shall be reduced, as of the close of business on the date of such issuance
or sale, to an amount determined by multiplying the Series CC Conversion Price
by a fraction (A) the numerator of which shall be (x) the number of shares of
Common Stock outstanding at the close of business on the day immediately
preceding the date of such issuance or sale, plus (y) the number of shares of
Common Stock which the aggregate consideration received (or by the express
provisions hereof deemed to have been received) by the Corporation for the total
number of Additional Shares of Common Stock so issued or sold would purchase at
such Series CC Conversion Price and (B) the denominator of which shall be the
number of shares of Common Stock outstanding at the close of business on the
date of such issuance or sale after giving effect to such issuance or sale of
Additional Shares of Common Stock. For the purpose of the calculation described
in this Section 8, the number of shares of Common Stock outstanding shall
include, in addition to the number of shares of Common Stock actually
outstanding, (A) the number of shares of Common Stock into which the then
outstanding shares of Series A Stock, Series B Stock, Series C Stock and Series
CC Stock could be converted if fully converted on the day immediately preceding
the issuance or sale or deemed issuance or sale of Additional Shares of Common
Stock; and (B) the number of shares of Common Stock which would be obtained
through the exercise or conversion of all rights, options and Convertible
Securities (as hereinafter defined) outstanding on the day immediately preceding
the issuance or sale or deemed issuance or sale of Additional Shares of Common
Stock.
(ii) For the purpose of making any adjustment
required under this Section 8, the consideration received by the Corporation for
any issuance or sale of securities shall (A) to the extent it consists of
property other than cash, be the fair value of that property as reasonably
determined in good faith by a disinterested majority of the Board of Directors
and (B) if Additional Shares of Common Stock, Convertible Securities (as
hereinafter defined) or rights or options to purchase either Additional Shares
of Common Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Corporation for a consideration which
covers both, be the portion of the consideration so received reasonably
determined in good faith by a disinterested majority of the Board of Directors
to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
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(iii) For the purpose of the adjustment required
under this Section 8, if the Corporation issues or sells any rights or options
for the purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such convertible stock or securities being hereinafter
referred to as "Convertible Securities") and if the Effective Price (as defined
in Clause (v) below) of such Additional Shares of Common Stock is less than the
then current Series CC Conversion Price, the Corporation shall be deemed to have
issued, at the time of the issuance of such rights, options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof and to have received as consideration therefor an
amount equal to (A) the total amount of the consideration, if any, received by
the Corporation for the issuance of such rights or options or Convertible
Securities plus (B) in the case of such rights or options, the minimum amount of
consideration, if any, payable to the Corporation upon the exercise of such
rights or options or, in the case of Convertible Securities, the minimum amount
of consideration, if any, payable to the Corporation upon the conversion
thereof. Thereafter, no further adjustment of the Series CC Conversion Price
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire or
otherwise terminate without having been exercised, the Series CC Conversion
Price shall thereafter be the Series CC Conversion Price that would have been in
effect had an adjustment been made on the basis that the only Additional Shares
of Common Stock so issued were the Additional Shares of Common Stock, if any,
actually issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and were issued or sold for the
consideration actually received by the Corporation upon such exercise plus (A)
the consideration, if any, actually received for the granting of all such rights
or options, whether or not exercised, (B) the consideration, if any, actually
received by issuing or selling the Convertible Securities actually converted and
(C) the consideration, if any, actually received on the conversion of such
Convertible Securities. However, if any such rights or options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Series CC Conversion Price, and any
subsequent adjustments based thereon, shall upon any such increase or decrease
becoming effective be recomputed to reflect such increase or decrease insofar as
it affects such rights, options or the rights of conversion or exchange under
such Convertible Securities.
(iv) For the purpose of any adjustment required under
this Section D.8, if (a) the Corporation issues or sells any rights or options
for the purchase of Convertible Securities and (b) if the Effective Price of the
Additional Shares of Common Stock underlying such Convertible Securities is less
than the Series CC Conversion Price, then in each such event the Corporation
shall be deemed to have issued at the time of the issuance of such rights or
options the maximum number of Additional Shares of Common Stock issuable upon
conversion of the total number of Convertible Securities covered by such rights
or options (as set forth in the legal instruments setting forth the terms of
such Convertible Securities) and to have received as consideration for the
issuance of such Additional Shares of Common Stock an amount equal to the amount
of consideration, if any, received for the issuance of such rights or options
plus (A) the minimum amount of consideration, if any, payable upon the exercise
of such rights or options and (B) the minimum amount of consideration, if any,
payable upon the conversion of such Convertible Securities. No further
adjustment of the Series CC Conversion Price shall be made as a result of the
actual issuance of the Convertible Securities upon the exercise of such rights
or options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities. The provisions of Section
D.8.(iii) for the adjustment of the Series CC Conversion Price upon the
expiration of rights or options or the rights of conversion of Convertible
Securities shall apply mutatis mutandis upon the expiration of the rights,
options and Convertible Securities referred to in this Clause D.8.(iv).
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(v) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued or deemed to be issued under this Section D.8
after the Filing Date, other than (A) shares of Common Stock issued upon
conversion of the shares of Series A Stock, Series B Stock, Series C Stock or
Series CC Stock; (B) shares of Common Stock (or options, warrants or rights
therefor) granted or issued subsequent to the Filing Date to employees,
officers, directors of the Corporation or any subsidiary pursuant to incentive
agreements, stock purchase or stock option plans, stock bonuses or awards,
warrants, contracts or other arrangements that are approved by the Board of
Directors prior to the Filing Date; (C) securities issued by the Corporation
representing in the aggregate five percent (5%) or less of the then outstanding
shares of Common Stock, on a fully-diluted basis, to contractors, consultants,
advisers to, or vendors of, the Corporation or in connection with any credit,
financing or leasing agreements or similar instruments with equipment lessors or
other persons providing equipment lease or other equipment financing; (D)
securities issued in connection with or pursuant to the acquisition of all or
any portion of another company by the Company whether by merger or any other
reorganization or by the purchase of all or any portion of the assets of another
company, pursuant to a plan, agreement or other arrangement approved by the
Board of Directors; (E) securities issued to or in connection with an
arrangement or venture with a strategic partner of the Company, provided such
issuance is unanimously approved by the Board of Directors; (F) shares of Common
Stock or Preferred Stock issued or issuable upon the exercise of any warrants,
options or other rights that are outstanding as of the Filing Date (or issued or
issuable after the reissuance of any such expired or terminated options,
warrants or rights and net of any such issued shares repurchased by the
Corporation); (G) the reissuance or assignment by the Corporation of any shares
of Common Stock outstanding as of the Filing Date to a different person from the
holder of such shares; (H) securities issued pursuant to any anti-dilution
rights of the holders of Series A Stock, Series B Stock or Series C Stock or
warrants to purchase securities of the Corporation that are outstanding as of
the Filing Date; (I) shares of Common Stock issued in a public offering by the
Corporation in which all shares of Series A Stock, Series B Stock, Series C
Stock and Series CC Stock are automatically converted into shares of Common
Stock; and (J) shares of Common Stock issued by way of dividend or other
distribution on shares of Preferred Stock and Common Stock excluded from the
definition of Additional Shares of Common Stock by the foregoing clauses (A),
(B), (C), (D), (E), (F), (G), (H), [I] and this clause (J). The "Effective
Price" of Additional Shares of Common Stock shall mean the quotient obtained by
dividing the total number of Additional Shares of Common Stock issued or sold,
or deemed to have been issued or sold, under this Section 8 into the aggregate
consideration received, or deemed to have been received for such Additional
Shares of Common Stock.
9. Certificate of Adjustment. Upon the occurrence of each
adjustment or readjustment of the Series CC Conversion Price, the Corporation,
at its sole expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series CC Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
10. Notices of Record Date. In the event of (i) any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other corporation, or any transfer of all or substantially all of the assets of
the Corporation, or any voluntary or involuntary dissolution, liquidation or
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winding up of the Corporation, the Corporation shall mail to each holder of
shares of Series CC Stock at least twenty (20) days prior to the record date
specified therein, a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up, is expected to become effective and the specific
details thereof; and (iii) the date, if any, that is to be fixed as to when the
holders of record of shares of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
11. Automatic Conversion.
(i) "Series CC Qualified Liquidation Event." Each
share of Series CC Stock shall automatically be converted into shares of Common
Stock based upon the Series CC Conversion Price upon (A) the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offering and sale of
shares of Common Stock for the account of the Corporation (other than a
registration statement effected solely to implement an employee benefit plan, a
transaction in which Rule 145 of the Securities and Exchange Commission is
applicable or any other form or type of registration in which the shares of
Common Stock issuable upon conversion of the shares of Series CC Stock cannot be
included pursuant to the Securities and Exchange Commission rules or practices)
which results in aggregate gross cash proceeds to the Corporation of at least
$15,000,000 at a per share price equal to at least $5.00 (Appropriately
Adjusted) and an aggregate value of the Corporation immediately prior to the
offering of at least $150,000,000, which aggregate value shall be determined by
multiplying (x) the number of outstanding shares of Common Stock of the
Corporation, on a fully-diluted, as-converted basis, immediately prior to the
offering, times (y) the initial per share price of the Corporation's Common
Stock as offered to the public in the offering, or (B) (x) a merger or
consolidation of the Corporation with or into another corporation or entity, or
(y) the sale of all or substantially all of the Corporation's properties and
assets, or (z) a sale of the shares of the Corporation's Common Stock, in each
circumstance in which each holder of Series CC Stock concurrently receives cash
and/or marketable securities in an aggregate amount equal to at least $100.00
per share of Series CC Stock (Appropriately Adjusted) if such event occurs on or
before March 31, 2002, or $150.00 per share of Series CC Stock (Appropriately
Adjusted) if such event occurs after March 31, 2002, and the aggregate gross
consideration received by the Corporation and/or its shareholders is at least
$100,000,000 (each a "Series CC Qualified Liquidation Event").
(ii) "Series CC Qualified Liquidity Milestone." Each
share of Series CC Stock shall automatically be converted into shares of Common
Stock based upon the Series CC Conversion Price effective as of the first date
on which the Corporation's Common Stock is qualified for listing and is trading
on the NASDAQ - National Market System ("NMS") or the New York Stock Exchange
("NSYE") and the Corporation has had, for any three consecutive months (a
"Quarter"), (i) average trading volume of at least 25,000 (Appropriately
Adjusted) shares per trading day, and (ii) an average daily high-bid and low-ask
price, if the shares are listed and traded on the NMS, or closing price, if the
shares are listed and traded on the NYSE, during such Quarter of at least $5.00
per share (Appropriately Adjusted), if such Quarter commences on or before April
1, 2002, or $7.00 per share (Appropriately Adjusted), if such Quarter commences
after April 1, 2002.
(iii) Upon Vote of 66-2/3% of the Series CC Stock.
Each share of Series CC Stock shall automatically be converted into shares of
Common Stock based upon the Series CC Conversion Price then applicable upon the
affirmative vote or written consent of the holders of at least sixty-six and two
thirds percent (66-2/3%) of the outstanding shares of Series CC Stock.
Upon the occurrence of an event specified in this Section 11, the
outstanding shares of Series CC Stock shall be converted into outstanding shares
of Common Stock, whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent. Upon the automatic
conversion of the outstanding shares of Series CC Stock, the Corporation shall
notify the holders of the outstanding shares of Series CC Stock and thereafter
such holders shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the shares. Thereupon there
shall be issued and delivered to such holder, promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the surrendered
shares of Series CC Stock of such holder were convertible on the date on which
such automatic conversion occurred.
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12. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the shares of Series CC Stock. In lieu of any
fractional share to which the holder of such shares would otherwise be entitled,
the Corporation shall pay cash equal to the product of (i) such fraction
multiplied by (ii) the fair market value of one share of the Common Stock on the
date of conversion, as determined in good faith by a disinterested majority of
the Board of Directors.
13. 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 the shares of Series CC 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 CC Stock. 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 CC Stock, the Corporation
shall take such action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
14. Notices. Any notice required by the provisions of this
Section D to be given to a holder of shares of Series CC Stock shall be deemed
given upon actual receipt or if receipt is refused or does not occur, then the
second attempted delivery as evidenced by appropriate third-party commercial
documentation (i.e., Postal Service, Federal Express, etc.).
15. No Dilution or Impairment. The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the rights of the holders of the shares of Series CC Stock
against dilution (as contemplated herein) or other impairment of their rights.
E. NO RE-ISSUANCE. No share or shares of Series CC
Stock acquired by the Corporation by reason of redemption, purchase or otherwise
shall be reissued, and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue.
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