CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
CONVERTIBLE SERIES G PREFERRED STOCK
OF
PROJECTAVISION, INC.
Projectavision, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the Board of Directors of the Corporation duly adopted a
resolution at a meeting duly convened on June 9, 1998, at which a quorum was
present and acting throughout, and that such resolution has not been amended,
modified, or rescinded, and is now in full force and effect providing for the
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of the
Corporation's Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by Article Fourth of the Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the rights, preferences and
designations of the authorized and unissued shares of Preferred Stock shall
hereafter be as follows:
Section 1. Designation. Two thousand (2,400) shares of Preferred Stock
are hereby designated as Series G Convertible Preferred Stock (the "Preferred
Stock"). The rights, preferences, privileges and qualifications, limitations and
restrictions of the Preferred Stock are set forth in Sections 2 through 7 of
this Resolution. The rights, preferences, privileges and qualifications,
limitations and restrictions of the remaining shares of Preferred Stock shall be
determined by the Board of Directors, from time to time after the date of the
adoption of this Resolution, pursuant to the provisions of Article Fourth of the
Certificate of Incorporation.
Section 2. Dividends. The holders of the Preferred Stock are entitled
to receive if, when and as declared by the Board of Directors out of funds
legally available therefor, cumulative dividends, payable in cash or common
stock of the Corporation, par value $.0001 per share (the "Common Stock") at
the Corporation's election, at the rate of 6% per annum of the Liquidation Value
of the Preferred Stock until and through May 6, 2001, except with respect to the
shares of Preferred Stock issued to the RBB Bank, in which event the date shall
be June 9, 2001. The dividend is payable annually within seven (7) business days
after each December 31st of each year, commencing December 31, 1998 (each, a
"Dividend Declaration Date"). Dividends shall be paid only with respect to
shares of Preferred Stock actually issued and outstanding on a Dividend
Declaration Date and to the holders of record as of the Dividend Declaration
Date, provided, however, that in the event that dividends have accrued with
respect to converted shares of Preferred Stock and in converting such shares,
the accrued but unpaid dividends were not converted therewith, such accrued but
unpaid dividends shall be paid to the holder of the Preferred Stock (as of the
date of the Conversion Notice, as defined below) on the Dividend Declaration
Date. Dividends shall accrue from the first day of the annual period in which
such dividend may be payable, except with respect to the first annual dividend
which shall accrue from the date of issuance of the Preferred Stock, May 7,
1998, except with respect to the Preferred Stock issued to the RBB Bank, in
which event the date shall be June 9, 1998. In the event that the Corporation
elects to pay dividends in Common Stock, each holder of Preferred Stock shall
receive shares of Common Stock equal to the quotient of (i) the product of 6%
multiplied by the Liquidation Value of the Preferred Stock outstanding on the
applicable Dividend Declaration Date divided by (ii) the average of the closing
bid quotation of the Common Stock as reported on the over-the-counter market, or
the closing sale price if listed on a national exchange, for the five (5)
trading days immediately prior to the Dividend Declaration Date (the "Stock
Dividend Price").
Section 3. Conversion. Subject to the provisions of Section 3(b)
below, the holders of the Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Subject to the provisions of Section 3(b) below,
the Preferred Stock, and accrued but unpaid dividends as of the date of any
conversion, shall be convertible at any time and from time to time after July 1,
1998
(b) Limitation of Conversion Rights. Notwithstanding the provisions of
Section 3(a) above, in the event that the conversion of any shares of
outstanding Preferred Stock would result in a holder of Preferred Stock owning,
in the aggregate (along with any other securities that may now or hereafter be
owned or acquired by the holder), more than 4.99% of all of the then issued and
outstanding Common Stock of the Company, such shares of Preferred Stock shall
not be convertible into shares of Common Stock until such time as the conversion
of such shares of Preferred Stock would result in the holder owning, in the
aggregate (along with any other securities that may now or hereafter be owned or
acquired by the holder), no more than 4.99% of the then issued and outstanding
Common Stock of the Company.
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(c) Automatic Conversion. All unconverted shares of Preferred Stock on
the three (3) year anniversary date of the date of the "Closing" (as that term
is defined in that certain Subscription and Purchase Agreement by and between
the Company and the Subscriber), along with all accrued and unpaid dividends,
shall automatically be converted into shares of Common Stock at the Conversion
Price.
(d) Conversion Price. As used herein, the term Conversion Price shall
be the product of (i) the average closing bid quotation of the Common Stock as
reported on the over-the-counter market, or the closing sale price if listed on
a national securities exchange, for the five (5) trading days immediately
preceding the date of the Conversion Notice referred to in Section 3(e) below
multiplied by (ii) .70; provided; however; that in no event shall the Conversion
Price exceed $1.375.
(e) Mechanics of Conversion. Failure to Convert Any holder of
Preferred Stock who wishes to exercise its Conversion Rights pursuant to
paragraph (a) of this Section 3, must surrender the certificate therefor at the
principal executive office of the Corporation, and give written notice, which
may be via facsimile transmission, to the Corporation at its principal executive
office that it elects to convert the same (the "Conversion Notice"). No
Conversion Notice with respect to any shares of Preferred Stock can be given
prior to the time such shares of Preferred Stock are eligible for conversion in
accordance with the provisions of Section 3(a) above. Any such premature
Conversion Notice shall automatically be null and void. The Corporation shall,
within three (3) business day after receipt of an appropriate and timely
Conversion Notice (the "Conversion Deadline"), issue to such holder of Preferred
Stock a certificate for the number of shares of Common Stock to which the holder
shall be entitled (which may include shares with respect to accrued but unpaid
dividends as of the date of the Conversion Notice if so specified in the
Conversion Notice). Such conversion shall be deemed to have been made only after
both the certificate for the shares of Preferred Stock to be converted have been
surrendered and the Conversion Notice is received by the Corporation (the
"Conversion Documents"), 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 at and after such time. In the
event that the Conversion Notice is sent via facsimile transmission, the
Corporation shall be deemed to have received such Conversion Notice on the first
business day on which such facsimile Conversion Notice is actually received,
provided that the necessary certificates are actually received by the
Corporation within two (2) business days thereafter.
In the event that the Corporation fails to deliver to holder any of the
shares of Common Stock entitled to be delivered
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pursuant to a conversion of Preferred Stock on or prior to the Conversion
Deadline, then in such event, in addition to the Corporation's obligation to
deliver said shares of Common Stock, the Corporation shall also be obligated to
pay to holder, for each business day after the Conversion Deadline that it fails
to deliver the shares of Common Stock underlying the Preferred Stock required to
be converted (the "Unconverted Preferred Stock"), a penalty, as liquidated
damages, equal to one percent (1%) of the outstanding face amount of the
Unconverted Preferred Stock payable in cash or shares of Common Stock at the
option of the holder. Such deliveries of additional shares pursuant to this
subparagraph shall be made every seven (7) business days until the Corporation
is in compliance with all lawful conversions hereunder.
(f) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Corporation at any time or
from time to time while shares of Preferred Stock are issued and outstanding
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or if the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion Price in effect
immediately before such event shall, concurrently with the effectiveness of such
event, be proportionately decreased or increased, as appropriate. If the
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(g) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Preferred Stock shall be changed into the
same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in paragraph (f) of this
Section 3), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by
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the holders upon conversion of the Preferred Stock immediately before that
change.
(h) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek 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 the carrying out of all of the provisions of
this Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment. The provisions of this paragraph (h) may be
waived by the affirmative vote of the holders of at least a majority of the then
outstanding shares of Preferred Stock voting together as a single class and
taken in advance of any action that would conflict with this paragraph (h).
(i) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of any Conversion Price pursuant to this Section 3, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Preferred Stock a notice setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
(j) Notices of Record Date. If the Corporation shall propose at any
time: (i) to declare any dividend or distribution upon its Common Stock, whether
in cash, property, stock or other securities, other than a regular cash dividend
out of earnings or earned surplus or a dividend as to which adjustment of the
Conversion Price will be made under paragraph (f) of this Section 3; (ii) to
offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock other than one as to which
adjustments of the Conversion Price will be made under paragraph (f) of this
Section 3; or (iv) to merge or consolidate with or into any other corporation,
or sell all or substantially all of its assets, or to liquidate, dissolve or
wind up; then, in connection with such event, the Corporation shall send to the
holders of the Preferred Stock;
(1) at least ten (10) days' prior written notice of the Date on
which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the Date
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on which the holders of Common Stock shall be entitled
thereto) or for determining rights;
to vote, if any, in respect of the matters referred to in
clauses (iii) and (iv) above; and
(2) in the case of the matters referred to in clauses (iii) and
(iv) above, at least ten (10) days' prior written notice of
the Date when the same shall take place (and specifying the
Date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
(k) Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
conversion.
(l) 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 the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and 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 the Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to its Certificate of Incorporation.
(m) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be rounded up to the nearest whole share.
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(n) Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by hand, by
certified or registered mail, return receipt requested, postage prepaid, or by
U.S. express mail service, or by private overnight mail service (e.g. Federal
Express), or by facsimile transmission. Any such notice shall be deemed to have
been given (a) on the business day actually received if given by hand or
facsimile transmission, (b) on the business day immediately subsequent to
mailing, if sent by U.S. express mail service or private overnight mail service,
or (c) three (3) business days following the mailing thereof, if mailed by
certified or registered mail, postage prepaid, return receipt requested, and all
such notices shall be sent to the following addresses (or to such other address
or addresses as a party may have advised the other in the manner provided
herein):
If to the Company:
Marvin Maslow
Chief Executive Officer
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
with copies simultaneously by like means to:
Clifford A. Brandeis, Esq.
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, NY 10022
If to the Subscriber, to the address of Subscriber as set forth in the
Subscription Agreement.
(o) Termination of Conversion Rights and Dividends. Notwithstanding
anything set forth herein to the contrary, all Conversion Rights (including, but
not limited to the right to Automatic Conversion) and rights to receive
dividends on the Preferred Stock shall automatically and irrevocably cease,
whether or not the holder has submitted a written notice of conversion with
respect to any shares of Preferred Stock, in the event that a holder is in
material breach of the provisions set forth in Section 3(h) of that certain
Subscription and Purchase Agreement dated as of May 7, 1998 by and between the
Corporation and Zubair Kazi, or Section 3(h) of the certain Subscription and
Purchase Agreement dated as of June 9, 1998 by and between the Corporation and
RBB Bank (in either case the "Subscription Agreement").
(p) Business Day. As used herein, the term "business day" shall mean any
day other than a Saturday, Sunday or a day
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when the federal and state banks located in the State of New York are required
or permitted to close.
Section 4. Voting Rights. The holders of the Preferred Stock shall have
no voting rights whatsoever, except as otherwise provided by the Delaware
General Corporation Law (the "Delaware Law"), and as expressly set forth in this
Section 4 and in Section 7(b) below. To the extent that under Delaware Law the
vote of the holders of the Preferred Stock, voting separately as a class or
series as applicable, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the holders of at least a
majority of the shares of the Preferred Stock represented at a duly held meeting
at which a quorum is present or by written consent of a majority of the shares
of Preferred Stock (except as otherwise may be required under Delaware Law)
shall constitute the approval of such action by the class. To the extent that
under Delaware Law the holders of the Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible using the record date
for the taking of such vote of stockholders as the date as of which the
Conversion Price is calculated and conversion is effected. Holders of the
Preferred Stock shall be entitled to notice of (and copies of proxy materials
and other information sent to shareholders) all shareholder meetings or written
consents with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's by-laws and applicable statutes.
Section 5. Redemption.
(a) With respect to the Preferred Stock issued to Zubair kuai, at any
time until September 4, 1998, one hundred and twenty (120) calendar days
following the date of issuance of the Preferred Stock (the "Redemption Period")
and from time to time during the Redemption Period, the Corporation shall have
the right, upon no more than thirty (30) days prior written notice to the
holder, give written notice (the "Redemption Notice") of its intent to redeem
any or all of the shares of Preferred Stock for which the holder thereof has not
requested conversion at a per share price equal to one hundred and twenty
percent (120%) of the Liquidation Value, plus any accrued and unpaid dividends
up until the date redemption is actually effected. Redemption of the Preferred
Stock referred to in the Redemption Notice must occur within thirty (30) days of
the date of the giving of the Redemption Notice. Upon the giving of the
Redemption Notice, the holder of the Preferred Stock shall thereafter no longer
have any Conversion Rights.
(b) With respect to the Preferred Stock issued to RBB Bank, at any time
until October 6, 1998, one hundred and twenty (120) calendar days following the
date of issuance of the Preferred Stock (the "Redemption Period") and from time
to time during the Redemption Period, the Corporation shall have the right, upon
no more than thirty (30) days prior written notice to the holder, give written
notice (the "Redemption Notice") of its intent to redeem any or all of the
shares of Preferred Stock for which the holder thereof has not requested
conversion at a per share price equal to one hundred and twenty percent (120%)
of the Liquidation Value, plus any accrued and unpaid dividends up until the
date redemption is actually effected. Redemption of the Preferred Stock referred
to in the Redemption Notice must occur within thirty (30) days of the date of
the giving of the Redemption Notice. Upon the giving of the Redemption Notice,
the holder of the Preferred Stock shall thereafter no longer have any Conversion
Rights. In addition, in the event that the Company's shares of Common Stock are
not listed or quoted on either the Nasdaq Small Cap Market or the Nasdaq
Bulletin Board, then RBB may require the Company to redeem its outstanding
Preferred Shares for the Liquidation Value.
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Section 6. Liquidation Preference. The holders of shares of Preferred
Stock will be entitled to receive, in the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, out of or to
the extent of the net assets of the Corporation legally available for such
distribution, before any distributions are made with respect to any Common Stock
or any stock ranking junior to the Preferred Stock, $1,000.00 per share, plus
any declared but unpaid dividends (the "Liquidation Preference"). After payment
of the full amount of the Liquidation Preference, the holders of shares of
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation.
Section 7. Restrictions and Limitations.
(a) Shares of Preferred Stock acquired by the Corporation by
reason of purchase, conversion, redemption or otherwise shall be retired and
shall become authorized but unissued shares of Preferred Stock, which may be
reissued as part of a new series of Preferred Stock hereafter created under
Article Fourth of the Certificate of Incorporation.
(b) So long as shares of Preferred Stock remain outstanding,
the Corporation shall not, without the affirmative vote of the holders of at
least a majority of the then outstanding shares of Preferred Stock voting
together as a separate class, amend the terms of this Resolution. The holders of
the outstanding shares of the Preferred Stock shall be entitled to vote as a
separate class upon a proposed amendment of the Certificate of Incorporation if
the amendment would alter or change the powers, preferences or special rights of
the shares of Preferred Stock so as to affect them adversely.
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IN WITNESS WHEREOF, Projectavision, Inc. has caused this Certificate to be
signed by its President and attested by its Secretary this 7th day of May, 1998.
PROJECTAVISION, INC.
By: /s/ Marvin Maslow
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Marvin Maslow
Chairman of the Board
Attest:
/s/ Jules Zimmerman
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Jules Zimmerman
Secretary
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