CERTIFICATE OF MERGER
OF
THE GREAT AMERICAN BACKRUB STORE, INC.
INTO
DARCO INTERNATIONAL CORP.
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST; That the names and states of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
The Great American BackRub Store, Inc. New York
Darco International Corp. Delaware
SECOND: That an Agreement of Merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 252 of
the General Corporation Law of Delaware.
THIRD: The name of the surviving corporation of the merger is Darco
International Corp., which shall herewith be changed to International
Diversified Industries, Inc., a Delaware corporation.
FOURTH: That the amendments or changes in the Certificate of Incorporation
of Darco International Corp., the surviving corporation, as are to be effected
by the merger are as follows:
I. Article First relating to the name of the corporation is deleted in its
entirety and the following Article First is inserted in its place:
"FIRST: The name of the Corporation is: International Diversified
Industries, Inc."
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II. Article Fourth relating to authorized capital stock is deleted in its
entirety and the following Article Fourth is inserted in its place:
"FOURTH: Number of Shares. The total number of shares of stock that
the Corporation shall have authority to issue is: forty million
(40,000,000), consisting of twenty five million (25,000,000) shares of
common stock (the "Common Stock") of the par value of one-tenth of one cent
($.001) each and fifteen million (15,000,000) shares of preferred stock
(the "Preferred Stock") of the par value of one-tenth of one cent ($.001)
each.
Designation of Classes; Relative Rights, etc. The designation, relative
rights, preferences and limitations of the shares of each class are as
follows:
The shares of Preferred Stock may be issued from time to time in one or
more series of any number of shares, provided that the aggregate number of
shares issued and not canceled of any and all such series shall not exceed
the total number of shares of Preferred Stock hereinabove authorized, and
with distinctive serial designations, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the issue of such
shares of Preferred Stock from time to time adopted by the Board of
Directors pursuant to authority so to do which is hereby vested in the
Board of Directors. Each series of shares of Preferred Stock (a) may have
such voting powers, full or limited, or may be without voting powers; (b)
may be subject to redemption at such time or times and at such prices; (c)
may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or series of stock; (d) may have such
rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (e) may be made convertible into or exchangeable for,
shares of any other class or classes or of any other series of the same or
any other class or classes of shares of the Corporation at such price or
prices or at such rates of exchange and with such adjustments; (f) may be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any
other series) and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other acquisition by the
Corporation or any subsidiary of, any outstanding shares of the
Corporation; and (h) may have such other relative, participating, optional
or other special rights, qualifications, limitations or restrictions
thereof; all as shall be stated in said resolution or resolutions providing
for the issue of such shares of Preferred Stock. Shares of Preferred Stock
of any series that have been redeemed (whether through the operation of a
sinking fund or otherwise) or that if convertible or exchangeable, have
been converted into or exchanged for shares of any other class or classes
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shall have the status of authorized and unissued shares of Preferred Stock
of the same series and may be reissued or a part of the series of which
they were originally a part or may be reclassified and reissued as part of
a new series of shares of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other series of
shares of Preferred Stock, all subject to the conditions or restrictions on
issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of shares of Preferred
Stock.
Subject to the provisions of any applicable law or of the By-laws of the
Corporation as from time to time amended, with respect to the closing of
the transfer books or the fixing of a record date for the determination of
shareholders entitled to vote and except as otherwise provided by law or by
the resolution or resolutions providing for the issue of any series of
shares of Preferred Stock, the holders of outstanding shares of Common
Stock shall exclusively possess voting power for the holder of record of
shares of Common Stock being entitled to one vote for each share of Common
Stock outstanding in his or her name on the books of the Corporation.
Except as otherwise provided by the resolution or resolutions providing for
the issue of any series of shares of Preferred Stock, the holders of shares
of Common Stock shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to receive such dividends
as from time to time may be declared by the Board of Directors. In the
event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment shall have been made to the
holders of shares of Preferred Stock of the full amount to which they shall
be entitled pursuant to the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock, the holders of shares of
Common Stock shall be entitled, to the exclusion of the holders of shares
of Preferred Stock of any and all series, to share, ratably according to
the number of shares of Common Stock held by them, in all remaining assets
of the Corporation available for distribution to its stockholders.
Subject to the provisions of this Certificate of Incorporation and except
as otherwise provided by law, the stock of the Corporation, regardless of
class, may be issued for such consideration and for such corporate purposes
as the Board of Directors may from time to time determine.
FOURTH-A: Designation, Number and Relative Rights, Preferences,
Privileges and Restrictions of Series A Preferred Stock. The designation,
number and relative rights, preferences, privileges and restrictions of the
Series A Preferred Stock are as follows:
Section 1. Designation, Number and Par Value. A series of preferred
stock of the Corporation (the "Preferred Stock") is hereby designated as
the Series A Convertible Preferred Stock (referred to herein as the "Series
A Preferred
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Stock"), and the number of shares of Preferred Stock so designated is
4,000,000 shares. The par value of each share of Series A Preferred Stock
shall be $.001.
Section 2. Dividends.
(a) The holders of shares of the Series A Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available therefor (and subject to the
limitation described in the last sentence of this paragraph), cumulative
dividends on the shares of the Series A Preferred Stock at the rate of 7.0%
(or $0.35) per annum per share of Series A Preferred Stock outstanding, and
no more, payable semi-annually on April 1 and October 1 in each year. Such
dividends shall be cumulative from the later of the date of issuance of the
Series A Preferred Stock or the most recent dividend payment date on which
dividends have been paid on the Series A Preferred Stock by the
Corporation. Dividends shall be payable either (at the Company's option) in
cash or in shares of Common Stock on the basis of the average Closing
Prices (as defined in Section 6(c)) of the Common Stock for the ten
consecutive trading days ending on the last trading day preceding the
record date for the dividend payment. Each such dividend shall be paid to
the holders of record of the shares of the Series A Preferred Stock as they
appear on the stock records of the Corporation on such record date, not
more than 30 days nor less than 10 days preceding the dividend payment date
thereof, as shall be fixed by the Board of Directors or a duly authorized
committee thereof. If a holder converts a share or shares of the Series A
Preferred Stock after the close of business on the record date for a
dividend and before the opening of business on the payment date for such
dividend, then, pursuant to Section 6 hereof, the holder will be required
to pay to the Corporation at the time of such conversion the amount of such
dividend (unless the shares were converted after the issuance of a notice
of redemption with respect to such shares, in which event the holder of
such shares shall be entitled to the dividend payable thereon on such
dividend payment date).
(b) If dividends are not paid in full, or declared in full and sums
set apart for the payment thereof, upon the shares of the Series A
Preferred Stock and shares of any other preferred stock ranking on a parity
as to dividends with the Series A Preferred Stock, all dividends declared
upon shares of the Series A Preferred Stock and of any other preferred
Stock ranking on a parity as to dividends shall be paid or declared PRO
RATA so that in all cases the amount of dividends paid or declared per
share on the Series A Preferred Stock and such other shares of preferred
stock shall bear to each other the same ratio that accumulated dividends
per share, including dividends accrued or in arrears, if any, on the shares
of the Series A Preferred Stock and such other shares of preferred stock
bear to each other. Except as provided in the preceding sentence, unless
cumulative dividends on the shares of the Series A Preferred Stock have
been paid or declared in full and sums set aside for the payment thereof,
no dividends (other
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than dividends in shares of Common Stock (as hereinafter defined) or in
shares of any other capital stock of the Corporation ranking junior to the
Series A Preferred Stock as to dividends and distribution of assets upon
liquidation) shall be paid or declared and set aside for payment or other
distribution made upon the Corporation's Common Stock, par value $.001 per
share (the "Common Stock"), or any other capital stock of the Corporation
ranking junior to or on a parity with the Series A Preferred Stock as to
dividends, nor shall any shares of Common Stock or shares of any other
capital stock of the Corporation ranking junior to or on a parity with the
Series A Preferred Stock as to dividends be redeemed, purchased or
otherwise acquired for any consideration (or any payment made to or
available for a sinking fund for the redemption of any such shares) by the
Corporation or any subsidiary of the Corporation (except by conversion into
or exchange for shares of capital stock of the Corporation ranking junior
to the Series A Preferred Stock as to dividends and distribution of assets
upon liquidation). Holders of shares of the Series A Preferred Stock shall
not be entitled to any dividends, whether payable in cash, property or
shares of capital stock, in excess of full accrued and cumulative dividends
as herein provided. No interest or sum of money in lieu of interest shall
be payable in respect of any dividend payment or payments on the shares of
the Series A Preferred Stock that may be in arrears.
The terms "accrued dividends," "dividends accrued" and "dividends in
arrears," whenever used herein with reference to shares of preferred stock
shall be deemed to mean an amount which shall be equal to dividends thereon
at the annual dividend rates per share for the respective series thereof
from the date or dates on which such dividends commence to accrue to the
end of the then current quarterly dividend period for such preferred stock
(or, in the case of redemption, to the date of redemption), less the amount
of all dividends paid, or declared in full and sums set aside for the
payment thereof, upon such shares of preferred stock.
(c) Dividends payable on the shares of the Series A Preferred Stock
for any period less than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in the period for which payable.
Section 3. Optional Redemption.
(a) The shares of the Series A Preferred Stock will be redeemable at
the option of the Corporation by resolution of its Board of Directors, in
whole or from time to time in part, at any time on or after the fifth
anniversary of the date of original issuance (the "Warrant Issue Date") of
Warrants to purchase Series A Preferred Stock pursuant to a Confidential
Private Offering Memorandum dated November 25, 1996, subject to the
limitations set forth below, at a redemption price of $5.25 per share (the
"Redemption Price"), plus all dividends accrued and
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unpaid on the shares of the Series A Preferred Stock up to the date fixed
for redemption, upon giving notice as provided below.
(b) If less than all of the outstanding shares of the Series A
Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be redeemed
shall be determined pro rata or by lot or in such other manner and subject
to such regulations as the Board of Directors in its sole discretion shall
prescribe.
(c) At least 30 days but not more than 60 days prior to the date fixed
for the redemption of shares of the Series A Preferred Stock, a written
notice shall be mailed to each holder of record of shares of the Series A
Preferred Stock to be redeemed in a postage prepaid envelope addressed to
such holder at his post office address as shown on the records of the
Corporation, notifying such holder of the election of the Corporation to
redeem such shares, stating the date fixed for redemption thereof (the
"Redemption Date"), and calling upon such holder to surrender to the
Corporation on the Redemption Date at the place designated in such notice
his certificate or certificates representing the number of shares specified
in such notice of redemption. On or after the Redemption Date each holder
of shares of the Series A Preferred Stock to be redeemed shall present and
surrender his certificate or certificates for such shares to the
Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the Redemption Date (unless default shall be made by the Corporation
in payment of the redemption price), all dividends on the shares of the
Series A Preferred Stock designated for redemption in such notice shall
cease to accrue, and all rights of the holders thereof as stockholders of
the Corporation, except the right to receive the redemption price of such
shares (including all accrued and unpaid dividends up to the Redemption
Date) upon the surrender of certificates representing the same, shall cease
and terminate and such shares shall not thereafter be transferred (except
with the consent of the Corporation) on the books of the Corporation, and
such shares shall not be deemed to be outstanding for any purpose
whatsoever. At its election, the Corporation prior to the Redemption Date
may deposit the redemption price (including all accrued and unpaid
dividends up to the Redemption Date) of shares of the Series A Preferred
Stock so called for redemption in trust for the holders thereof with a bank
or trust company (having a capital surplus and undivided profits
aggregating not less than $50,000,000) in the Borough of Manhattan, City
and State of New York, or in any other city in which the Corporation at the
time shall maintain a transfer agency with respect to such shares, in which
case the aforesaid notice to holders of shares of the Series A Preferred
Stock to be redeemed shall state the date of such deposit, shall specify
the office of such bank
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or trust company as the place of payment of the redemption price, and shall
call upon such holders to surrender the certificates representing such
shares at such place on or after the date fixed in such redemption notice
(which shall not be later than the Redemption Date) against payment of the
redemption price (including all accrued and unpaid dividends up to the
Redemption Date). Any interest accrued on such funds shall be paid to the
Corporation from time to time. Any moneys so deposited which shall remain
unclaimed by the holders of such shares of the Series A Preferred Stock at
the end of two years after the Redemption Date shall be returned by such
bank or trust company to the Corporation.
If a notice of redemption has been given pursuant to this Section 3
and any holder of shares of this Series A Preferred Stock shall, prior to
the close of business on the last business day preceding the Redemption
Date, give written notice to the Corporation pursuant to Section 6 below of
the conversion of any or all of the shares to be redeemed held by such
holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation, and any necessary transfer tax
payment, as required by Section 6 below), then such redemption shall not
become effective as to such shares to be converted, such conversion shall
become effective as provided in Section 6 below and any moneys set aside by
the Corporation for the redemption of such shares of converted Series A
Preferred Stock shall revert to the general funds of the Corporation
(unless such shares were converted after the close of business on the
record date for a dividend and before the opening of business on the
payment date for such dividend, in which event the holders of such shares
shall be entitled to the dividend payable thereon on such dividend payment
date).
(d) Shares of the Series A Preferred Stock redeemed, repurchased or
retired pursuant to the provisions of this Section 3 or surrendered to the
Corporation upon conversion or shall thereupon be retired and may not be
reissued as shares of the Series A Preferred Stock but shall thereafter
have the status of authorized but unissued shares of the Preferred Stock,
without designation as to series until such shares are once more designated
as part of a particular series of the Preferred Stock.
Section 4. Voting Rights.
The holders of Series A Preferred Stock shall not be entitled to vote
on any matter except (i) as provided in Section 8 and (ii) as required by
law.
Section 5. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or otherwise, after payment
or provision for payment of the debts and other liabilities of the
Corporation, the holders of
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shares of the Series A Preferred Stock shall be entitled to receive, in
cash, out of the remaining net assets of the Corporation, the amount of
Five Dollars ($5.00) for each share of the Series A Preferred Stock held by
them, plus an amount equal to all dividends accrued and unpaid on each such
share up to the date fixed for distribution, before any distribution shall
be made to the holders of shares of Common Stock or any other capital stock
of the Corporation ranking (as to any such distribution) junior to the
Series A Preferred Stock. If upon any liquidation, dissolution or winding
up of the Corporation, the assets distributable among the holders of shares
of the Series A Preferred Stock and all other classes and series of
preferred stock ranking (as to any such distribution) on a parity with the
Series A Preferred Stock are insufficient to permit the payment in full to
the holders of all such shares of all preferential amounts payable to all
such holders, then the entire assets of the Corporation thus distributable
shall be distributed ratably among the holders of the shares of the Series
A Preferred Stock and such other classes and series of preferred stock
ranking (as to any such distribution) on a parity with the Series A
Preferred Stock in proportion to the respective amounts that would be
payable per share if such assets were sufficient to permit payment in full.
(b) For purposes of this Section 5, a distribution of assets in any
dissolution, winding up or liquidation shall not include (i) any
consolidation or merger of the Corporation with or into any other
corporation, (ii) any dissolution, liquidation, winding up or
reorganization of the Corporation immediately followed by reincorporation
of another corporation or (iii) a sale or other disposition of all or
substantially all of the Corporation's assets to another corporation;
PROVIDED, HOWEVER, that, in each case, effective provision is made in the
certificate of incorporation of the resulting and surviving corporation or
otherwise for the protection of the rights of the holders of shares of the
Series A Preferred Stock.
(c) After the payment of the full preferential amounts provided for
herein to the holders of shares of the Series A Preferred Stock or funds
necessary for such payment have been set aside in trust for the holders
thereof, such holders shall be entitled to no other or further
participation in the distribution of the assets of the Corporation.
Section 6. Conversion.
(a) Holders of shares of the Series A Preferred Stock shall have the
right, exercisable at any time and from time to time on or after the first
anniversary of the Warrant Issue Date, except in the case of shares of the
Series A Preferred Stock called for redemption, to convert all or any such
shares of the Series A Preferred Stock into shares of the Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) such
that each share of Series A Preferred Stock shall be converted into the
greater of (i) two shares of Common Stock (the "Base Conversion Rate"),
subject to adjustment as described below, or
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(ii) a number shares of Common Stock equal to $8.00 divided by the average
of the Closing Prices (as defined in Section 6(c) per share of the Common
Stock for the ten (10) consecutive trading days ending on the third trading
day preceding the Conversion Date (as defined in Section 6(b)). In the case
of shares of the Series A Preferred Stock called for redemption, conversion
rights will expire at the close of business on the last business day
preceding the Redemption Date. Notice of an optional redemption must be
mailed not less than 30 days and not more than 60 days prior to the
Redemption Date. Upon conversion, no adjustment or payment will be made for
dividends, but if any holder surrenders a share of the Series A Preferred
Stock for conversion after the close of business on the record date for the
payment of a dividend and prior to the opening of business on the next
dividend payment date, then, notwithstanding such conversion, the dividend
payable on such dividend payment date will be paid to the registered holder
of such share on such record date. In such event, such share, when
surrendered for conversion during the period between the close of business
on any dividend payment record date and the opening of business on the
corresponding dividend payment date, must be accompanied by payment of an
amount equal to the dividend payable on such dividend payment date on the
share so converted (unless such share was converted after the issuance of a
notice of redemption with respect to such share, in which event such share
shall be entitled to the dividend payable thereon on such dividend payment
date).
(b) Any holder of share or shares of the Series A Preferred Stock
electing to convert such share or shares thereof shall deliver the
certificate or certificates therefor to the principal office of any
transfer agent for the Common Stock, with the form of notice of election to
convert as the Corporation shall prescribe fully completed and duly
executed and (if so required by the Corporation or any conversion agent)
accompanied by instruments of transfer in form satisfactory to the
Corporation and to any conversion agent, duly executed by the registered
holder or his duly authorized attorney, and transfer taxes, stamps or funds
therefor or evidence of payment thereof if required pursuant to Section
6(d). The conversion right with respect to any such shares shall be deemed
to have been exercised at the date (the "Conversion Date") upon which the
certificates therefor accompanied by such duly executed notice of election
and instruments of transfer and such taxes, stamps, funds, or evidence of
payment shall have been so delivered, and the person or persons entitled to
receive the shares of the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such shares
of the Common Stock upon said date.
(c) No fractional shares of the Common Stock or scrip representing
fractional shares shall be issued upon conversion of shares of the Series A
Preferred Stock. If more than one share of the Series A Preferred Stock
shall be surrendered for conversion at one time by the same holder, the
number of full shares of the Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate number
of shares of the Series A
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Preferred Stock so surrendered. Instead of any fractional shares of the
Common Stock which would otherwise be issuable upon conversion of any
shares of the Series A Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the Closing Price (as defined below) for the Common Stock on
the last trading day preceding the date of conversion. The Closing Price
for each day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such date, the average of the reported
closing bid and asked prices regular way, on the principal national
securities exchange on which Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities
exchange, the closing sale price of Common Stock, or in case no reported
sale takes place, the average of the closing bid and asked prices, on the
Nasdaq National Market or the Nasdaq SmallCap Market (collectively,
"NASDAQ"), the OTC Electronic Bulletin Board (the "Bulletin Board") or any
comparable system, or if the Common Stock is not quoted on NASDAQ, the
Bulletin Board or any comparable system, the closing sale price or, in case
no reported sale takes place, the average of the closing bid and asked
prices, as furnished by any two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for
that purpose.
(d) If a holder converts a share or shares of the Series A Preferred
Stock, the Corporation shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of Common Stock upon the conversion. The
holder, however, shall pay to the Corporation the amount of any tax which
is due (or shall establish to the satisfaction of the Corporation payment
thereof) if the shares are to be issued in a name other than the name of
such holder and shall pay to the Corporation any amount required by the
last sentence of Section 6(a) hereof.
(e) The Corporation shall reserve and shall at all times have reserved
out of its authorized but unissued shares of the Common Stock sufficient
shares of the Common Stock to permit the conversion of the then outstanding
shares of the Series A Preferred Stock. All shares of Common Stock which
may be issued upon conversion of shares of the Series A Preferred Stock
shall be validly issued, fully paid and nonassessable. In order that the
Corporation may issue shares of the Common Stock upon conversion of shares
of the Series A Preferred Stock, the Corporation will endeavor to comply
with all applicable Federal and State securities laws and will endeavor to
list such shares of the Common Stock to be issued upon conversion on each
securities exchange on which the Common Stock is listed.
(f) The conversion rate in effect at any time shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend in shares of
the Common Stock to holders of the Common Stock, (2) make a
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distribution in shares of the Common Stock to holders of the Common
Stock, (3) subdivide the outstanding shares of the Common Stock into a
greater number of shares of the Common Stock or (4) combine the
outstanding shares of the Common Stock into a smaller number of shares
of the Common Stock, the Base Conversion Rate shall be adjusted to be
equal to the Base Conversion Rate immediately prior to such event
multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately after such event and of
which the denominator shall be the number of shares of Common Stock
outstanding immediately prior to such event. An adjustment made
pursuant to this Section 6(f)(i) shall become effective immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision or combination.
(ii) In case the Corporation shall issue rights or warrants to
all holders of the Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of
holders of Common Stock entitled to receive such rights or warrants
and expiring not more than 45 days after such record date) to
subscribe for or purchase shares of the Common Stock (or securities
convertible into shares of the Common Stock) at a price per share less
than the current market price (as determined pursuant to Section
6(f)(iv)) of the Common Stock on such record date, the Base Conversion
Rate shall be adjusted so that the same shall be equal to Base
Conversion Rate immediately prior to such record date multiplied by a
fraction of which the numerator shall be the number of shares of the
Common Stock outstanding on such record date plus the number of
additional shares of the Common Stock offered (or into which the
convertible securities so offered are convertible), and of which the
denominator shall be the number of shares of the Common Stock
outstanding on such record date, plus the number of shares of the
Common Stock which the aggregate offering price of the offered shares
of the Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price. Such adjustments shall become effective immediately
after such record date.
(iii) In case the Corporation shall distribute to all holders of
the Common Stock shares of any class of capital stock other than the
Common Stock, evidence of indebtedness or other assets (other than
cash dividends out of current or retained earnings), or shall
distribute to substantially all holders of the Common Stock rights or
warrants to subscribe for securities (other than those referred to in
Section 6(f)(ii)), then in each such case the Base Conversion Rate
shall be adjusted so that the same shall be equal to the Base
Conversion Rate immediately prior to the date of such distribution
multiplied by a fraction of which the
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numerator shall be the current market price (determined as provided in
Section 6(f)(iv)) of the Common stock on the record date mentioned
below, and of which the denominator shall be such current market price
of the Common Stock, less the then fair market value (as determined by
the Board of Directors, whose determination shall be conclusive
evidence of such fair market value) of the portion of the assets so
distributed or of such subscription rights or warrants applicable to
one share of the Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of the holders
of the Common Stock entitled to receive such distribution.
Notwithstanding the foregoing, in the event that the Corporation shall
distribute rights or warrants (other than those referred to in Section
6(f)(ii), ("Rights") pro rata to holders of the Common Stock, the
Corporation may, in lieu of making any adjustment pursuant to this
Section 6(f)(iii), make proper provision so that each holder of a
share of Series A Preferred Stock who converts such share after the
record date for such distribution and prior to the expiration or
redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the shares of the Common Stock issuable
upon such conversion (the "Conversion Shares"), a number of Rights to
be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holder of Rights of a separate
certificate evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of the Common
Stock equal to the number of Conversion Shares is entitled at the time
of such conversion in accordance with the terms and provisions of and
applicable to the Rights; and (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the
number of shares of the Common Stock into which a share of the Series
A Preferred Stock so converted was convertible immediately prior to
the Distribution Date would have been entitled on the Distribution
Date in accordance with the terms and provisions of and applicable to
the Rights.
(iv) The current market price per share of the Common Stock on
any date shall be deemed to be the average of the daily closing prices
for thirty consecutive trading days commencing forty-five trading days
before the day in question. The closing price for each day shall be
the last reported sale price regular way or, in case no such reported
sale takes place on such date, the average of the reported closing bid
and asked prices on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, the
closing sale price of Common Stock, or in case no reported sale takes
place, the average of the closing bid and asked prices, on the Nasdaq
National Market or the Nasdaq SmallCap Market (collectively,
"NASDAQ"), the OTC Electronic Bulletin Board (the "Bulletin Board") or
any comparable system, or if the Common
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Stock is not quoted on NASDAQ, the Bulletin Board or any comparable
system, the closing sale price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as furnished
by any two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Corporation for that purpose.
(v) In any case in which this Section 6 shall require that an
adjustment be made immediately following a record date, the
Corporation may elect to defer (but only until five business days
following the mailing of the notice described in Section 6(j)) issuing
to the holder of any share of the Series A Preferred Stock converted
after such record date the shares of the Common Stock and other
capital stock of the Corporation issuable upon such conversion over
and above the shares of the Common Stock and other capital stock of
the Corporation issuable upon such conversion only on the basis of the
conversion rate prior to adjustment; and, in lieu of the shares the
issuance of which is so deferred, the Corporation shall issue or cause
its transfer agents to issue due bills or other appropriate evidence
of the right to receive such shares.
(g) No adjustment in the Base Conversion Rate shall be required until
cumulative adjustments result in a concomitant change of 1% or more of the
Base Conversion Rate as in effect prior to the last adjustment of the Base
Conversion Rate; PROVIDED, HOWEVER, that any adjustments which by reason of
this Section 6(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment to the
conversion rate shall be made for cash dividends.
(h) In the event that, as a result of an adjustment made pursuant to
Section 6(f), the holder of any share of the Series A Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of capital stock of the Corporation other than shares of the Common
Stock, thereafter the number of such other shares so receivable upon
conversion of any shares of the Series A Preferred Stock shall be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in this Section 6.
(i) The Corporation may make such increases in the conversion rate, in
addition to those required by Sections 6(f)(i), (ii) and (iii), as it
considers to be advisable in order than any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be
taxable to the recipients thereof.
(j) Whenever the conversion rate is adjusted, the Corporation shall
promptly mail to all holders of record of shares of the Series A Preferred
Stock a notice of the adjustment and shall cause to be prepared a
certificate signed by a
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principal financial officer of the Corporation setting forth the adjusted
conversion rate and a brief statement of the facts requiring such
adjustment and the computation thereof; such certificate shall forthwith be
filed with each transfer agent for the shares of the Series A Preferred
Stock.
(k) In the event that:
(1) the Corporation takes any action which would require an
adjustment in the Base Conversion Rate,
(2) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another
corporation and stockholders of the Corporation must approve
the transaction, or
(3) there is a dissolution or liquidation of the Corporation,
the Corporation shall mail to holders of shares of the Series A Preferred
Stock a notice stating the proposed record or effective date of the
transaction, as the case may be. The Corporation shall mail the notice at
least 10 days before such date; however, failure to mail such notice or any
defect therein shall not affect the validity of any transaction referred to
in clauses (1), (2) or (3) of this Section 6(k).
(l) If any of the following shall occur, namely: (i) any
reclassification or change of outstanding shares of the Common Stock
issuable upon conversion of shares of the Series A Preferred Stock (other
than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination),
(ii) any consolidation or merger to which the Corporation is a party other
than a merger in which the Corporation is the continuing corporation and
which does not result in any reclassification of, or change (other than a
change in name, or par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination) in,
outstanding shares of the Common Stock or (iii) any sale or conveyance of
all or substantially all of the property or business of the Corporation as
an entirety, then the Corporation, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance,
provide in its certificate of incorporation or other charter document that
each share of the Series A Preferred Stock shall be convertible into the
kind and amount of shares of capital stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of the Common Stock deliverable upon conversion of such share of the
Series A Preferred Stock immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance. Such certificate of
incorporation or other charter document shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the
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adjustments provided for in this Section 6. The foregoing, however, shall
not in any way affect the right a holder of a share of the Series A
Preferred Stock may otherwise have, pursuant to clause (ii) of the last
sentence of Section 6(f)(iii), to receive Rights upon conversion of a share
of the Series A Preferred Stock. If, in the case of any such consolidation,
merger, sale or conveyance, the stock or other securities and property
(including cash) receivable thereupon by a holder of the Common Stock
includes shares of capital stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case
may be, in such consolidation, merger, sale or conveyance, then the
certificate of incorporation or other charter document of such other
corporation shall contain such additional provisions to protect the
interests of the holders of shares of the Series A Preferred Stock as the
Board of Directors shall reasonably consider necessary by reason of the
foregoing. The provisions of this Section 6(1) shall similarly apply to
successive consolidations, mergers, sales or conveyances.
Section 7. Ranking. With regard to rights to receive dividends and
distributions upon dissolution of the Corporation, the Series A Preferred
Stock shall rank prior to the Common Stock and on a parity with any other
Preferred Stock issued by the Corporation, unless the terms of such other
Preferred Stock provide otherwise and, if applicable, the requirements of
Section 8 hereof have been complied with.
Section 8. Limitations. In addition to any other rights provided by
applicable law, so long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote, or
the written consent as provided by law, of the holders of a majority of the
outstanding shares of the Series A Preferred Stock, voting as a class,
(a) create, authorize or issue any class or series of capital stock,
or rights to subscribe to or to acquire, or any security convertible into,
any class or series of capital stock ranking as to payment of dividends,
distribution of assets upon liquidation or voting rights, prior to the
Series A Preferred Stock; or
(b) amend, alter or appeal, whether by merger, consolidation or
otherwise, any of the provisions of the Certificate of Incorporation
(including this Certificate of Designation) that would change the
preferences, rights or powers with respect to the Series A Preferred Stock
so as to affect the Series A Preferred Stock adversely;
but (except as otherwise required by applicable law) nothing herein
contained shall require such a vote or consent (i) in connection with any
increase in the total number of authorized shares of the Common Stock, or
(ii) in connection with the authorization or increase of any class or
series of capital stock ranking, as to dividends and distribution of assets
upon liquidation, junior to or on a parity with the Series A Preferred
Stock; PROVIDED, HOWEVER, that no such vote or
15
written consent of the holders of the shares of the Series A Preferred
Stock shall be required if, at or prior to the time when the issuance of
any such shares ranking prior to the Series A Preferred Stock is to be made
or any such change is to take effect, as the case may be, provision is made
for the redemption of all the then outstanding shares of the Series A
Preferred Stock.
Section 9. No Preemptive Rights. No holder of shares of the Series A
Preferred Stock will possess any preemptive rights to subscribe for or
acquire any unissued shares of capital stock of the Corporation (whether
now or hereafter authorized) or securities of the Corporation convertible
into or carrying a right to subscribe for or acquire shares of capital
stock of the Corporation."
III. The following articles were added to the Certificate of Incorporation:
"ELEVENTH: Compromise and Arrangement. Whenever a compromise or
arrangement is proposed between this Corporation and its creditors or any
class of them and/or between this Corporation and its stockholder or any
class of them, any court of equitable jurisdiction within the State of
Delaware may, on application in a summary way of this Corporation or of any
creditor or stockholder thereof or on the application of any receiver or
receivers appointed for this Corporation under the provisions of Section
291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors of class of creditors, and/or of the stockholders
or class of stockholders of this Corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the creditors or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
"TWELFTH: Liability of Directors. No director of the Corporation shall
have any personal liability to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director of the
Corporation, except (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derives an
improper personal benefit.
"THIRTEENTH: Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a
16
"proceeding"), by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was a director or officer, of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is an alleged action in an official capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but in the case of any such amendment only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and low
(including attorneys, fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be director, officer,
employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators: provided, however, that except as provided in
paragraph 10.1 hereof, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
which was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section shall be a contract
right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of final disposition of such a proceeding, shall
be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not
entitled to be indemnified under this Section or otherwise. The Corporation
may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers.
(a) Right of Claimant to Bring Suit. If a claim under paragraph 10 of
this Section is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that
the claimant has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the Corporation to
17
indemnify the claimant for the amount claimed. The burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper under the
circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not
met such applicable standard or conduct, shall be a defense to the action
or create a presumption that the claimant has not met the applicable
standard of conduct.
(b) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section 10 shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, by-laws, agreement,
vote of stockholders or disinterested directors or otherwise.
(c) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation law.
FIFTH: That the executed Agreement of Merger is on file at an office of
the surviving corporation, the address of which is 4500 140th Avenue North,
Suite 221, Clearwater, Florida 33762.
SIXTH: That a copy of the Agreement of Merger will be furnished, on
request and without cost, to any stockholder of any constituent corporation.
SEVENTH: That this Certificate of Merger shall be effective on August 3,
1998.
[SIGNATURE PAGE FOLLOWS]
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Dated: July 29, 1998
DARCO INTERNATIONAL CORP.
/s/ DAVID COIA
By:_________________________________
David Coia, President
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