EXHIBIT 4(a)(1)
RESTATED CERTIFICATE OF INCORPORATION
OF
LIFEPOINT, INC.
It is hereby certified that:
1. (a) The present name of the corporation (hereinafter called the
"Corporation") is LifePoint, Inc.
(b) The name under which the Corporation was originally incorporated
is U.S. Drug Testing, Inc.; and the date of filing the original certificate
of incorporation of the Corporation with the Secretary of State of the
State of Delaware is October 8, 1992.
2. The provisions of the certificate of incorporation of the
Corporation, as herein and as heretofore amended and/or supplemented, are
hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Restated Certificate of
Incorporation of LifePoint, Inc., without further amendment and without any
discrepancy between the provisions of the certificate of incorporation as
heretofore amended and supplemented and the provisions of the said single
instrument hereinafter set forth except for the deletion of the name and
address of the incorporator and except for modifying the terms of the
Preferred Stock in subparagraphs Fourth so as to reflect the deletion of
the previously designated Series B 20% Cumulative Convertible Preferred
Stock and the designation of the Series C Convertible Preferred Stock.
3. The Board of Directors of the Corporation has duly adopted this
Restated Certificate of Incorporation pursuant to the provisions of Section
242 and 245 of the General Corporation Law of the State of Delaware in the
form set forth as follows:
"Restated Certificate of Incorporation
of
LifePoint, Inc.
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is LifePoint, Inc.
SECOND: The address, including street number, city, and county, of
the registered office of the Corporation in the State of Delaware is 1013
Centre Road, City of Wilmington, County of New Castle; and the name of the
registered agent of the Corporation in the State of Delaware at such
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: A. The total number of shares of stock (hereinafter referred
to as the "Capital Stock") which the Corporation shall have authority to
issue is
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78,000,000, all of which shares shall have the par value of $.001 per
share, and the Capital Stock shall be divided into two classes:
1. 3,000,000 of the shares shall be Preferred Stock.
2. 75,000,000 of the shares shall be Common Stock.
B. The relative rights, powers, privileges, preferences,
participations, qualifications, limitations and restrictions of the classes
of the Capital Stock are as follows:
1. SERIES C CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 430,000 shares of
Preferred Stock, is the Series C Convertible Preferred Stock (the "SERIES C
PREFERRED STOCK") and the stated value shall be $35.00 per share (the "STATED
VALUE").
II. NO DIVIDENDS
The Series C Preferred Stock will bear no dividends, and the holders of the
Series C Preferred Stock shall not be entitled to receive dividends on the
Series C Preferred Stock.
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms shall
have the following meanings:
A. "CLOSING SALES PRICE" as of any date, (i) means the closing sales
price for the shares of the Common Stock as reported on The American Stock
Exchange ("AMEX") by Bloomberg Financial Markets or if Bloomberg Financial
Markets is not then reporting Closing Sales Prices of such security, a
comparable reporting service of national reputation selected by the Company
and reasonably acceptable to holders of a majority of the then outstanding
shares of Series C Preferred Stock (collectively "BLOOMBERG"), or (ii) if
the AMEX is not the principal trading market for the shares of the Common
Stock, the closing sales price, or, if not so reported, the average of the
closing bid and asked prices as reported by Bloomberg on the principal
trading market for the Common Stock during the same period, or, if there is
no sale price for such period, the last reported bid price as reported by
Bloomberg for such period, or (iii) if the Closing Sales Price cannot be
calculated as of such date on any of the foregoing bases, the Closing Sales
Price on any such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Company and
reasonably acceptable to holders of a majority of the then outstanding
shares of Series C Preferred Stock, with the costs of the determination to
be borne by the Company. The manner of determining the Closing Sales Price
of the Common Stock set forth in the foregoing definition shall apply with
respect to any other security in respect of which a determination as to
market value must be made hereunder.
B. "REDEMPTION AT MATURITY" means the Company's option to redeem at
the Maturity Date (as herein defined) in cash the Series C Preferred Stock
pursuant to Article VIII.E
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C. "CONVERSION DATE" means, for any Conversion (as defined below), the
date on which the notice of conversion in the form attached hereto (the
"NOTICE OF CONVERSION") is delivered by fax, as evidenced by a mechanically
or electronically generated confirmation thereof (or delivered by other
means resulting in notice) to the Company before 4:30 p.m., Pacific time,
on the Conversion Date indicated in the Notice of Conversion. The holder
shall confirm, by overnight courier, in person (by courier or otherwise) or
by telephone (to an authorized officer of the Company or his or her
administrative assistant), the delivery of the Notice of Conversion to the
Company on the date on which the Notice of Conversion is delivered or
before 9:00 a.m., Pacific time, on the trading day immediately succeeding
such date; provided that an overnight courier delivery which is signed for
or refused by the Company prior to 12:00 noon, Pacific time, on a given day
shall be deemed to have been delivered before 9:00 a.m., Pacific time, on
such day. If the Notice of Conversion is not so faxed or otherwise
delivered or the overnight courier, in-person or telephone confirmation is
not so made or deemed to be made before such applicable times, then the
Conversion Date shall be the date as of which both such conditions are
satisfied (i.e., the Notice of Conversion is delivered on or before 4:30
p.m., Pacific time, on a given day and the overnight courier, in-person or
telephone confirmation is made or deemed to be made either on such day of
delivery or before 9:00 a.m., Pacific time, on the immediately succeeding
trading day).
D. "CONVERSION DEFAULT" means (i) following the submission by a holder
of shares of Series C Preferred Stock of a Notice of Conversion, the
Company fails for any reason (other than because of an event described in
clause (iii) below) to deliver, on or prior to the tenth (10th) business
day following the expiration of the Delivery Period (as defined below) for
such conversion, such number of shares of the Common Stock without a
restrictive legend (other than a prospectus delivery requirement legend)
covered by an effective registration statement to which such holder is
entitled upon such conversion including shares issuable in payment of the
redemption of Premium on the Series C Preferred Stock, (ii) the Company
provides notice to any holder of Series C Preferred Stock at any time of
its intention not to issue freely tradeable shares of the Common Stock upon
exercise by any holder of its conversion rights in accordance with the
terms of this Certificate of Designation (other than because of an event
described in clause (iii) below), or (iii) the Company is prohibited, at
any time, from listing shares of the Common Stock or from issuing shares of
the Common Stock upon conversion of Series C Preferred Stock (including
shares issuable upon redemption of Premium) to any holder because the
Company (A) does not at the date of such conversion have available a
sufficient number of authorized and reserved shares of the Common Stock or
(B) such listing or issuance would exceed the then unissued portion of such
holder's Cap Amount (as defined below); provided that so long as a
conversion dispute is being resolved as provided in Article IV.B(v), no
Conversion Default shall occur.
E. "CONVERSION PRICE" means $3.50, subject to adjustment as provided
herein, provided, however, if on the third anniversary of the Issuance Date
(the "MATURITY DATE"), the Market Price of the Common Stock is less than
the Conversion Price then in effect, the Conversion Price will equal the
Market Price as of such date for any share of Series C Preferred Stock then
outstanding. Notwithstanding anything to the contrary contained herein, the
adjustment of the Conversion Price provided herein shall not trigger any
anti-dilution adjustment under Article XII.D hereof or
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Section 4(a) of those certain stock purchase warrants (the "WARRANTS")
issued pursuant to the Securities Purchase Agreement (as defined herein).
F. "ISSUANCE DATE" means, with respect to each share of Series C
Preferred Stock, the date of the Closing under that certain Securities
Purchase Agreement dated as of June 20, 2001 by and among the Company and
the other signatories thereto (the "SECURITIES PURCHASE AGREEMENT"), in
which such share of Series C Preferred Stock was issued.
G. "MARKET PRICE," as of any date, means the average of the Closing
Sales Prices for the shares of the Common Stock for the twenty (20)
consecutive trading days immediately preceding such date. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of
which a determination as to market value must be made hereunder.
H. "N" means, with respect to each share of Series C Preferred Stock,
the number of days from, but excluding, the Issuance Date until the date
Premium is first redeemed in accordance with Article IV.D hereof on such
share and thereafter the number of days from and including the date on
which Premium was last redeemed in accordance with Article IV.D hereof
until the date Premium is next redeemed on such share.
I. "PREMIUM" means an amount equal to (.1)x(N/365) x (Stated Value),
provided, however, after the Maturity Date, the Premium shall mean an
amount equal to (.05)x(n/365) x (Stated Value).
IV. CONVERSION: REDEMPTION OF PREMIUM
A. Conversion at the Option of the Holder. Subject to the limitations on
conversions contained in Paragraph C of this Article IV, each holder of shares
of Series C Preferred Stock may, at any time and from time to time on or after
the Issuance Date, convert (a "CONVERSION") each of its outstanding shares of
Series C Preferred Stock and any unpaid Premium thereon into a number of fully
paid and nonassessable shares of the Common Stock determined in accordance with
the following formula:
STATED VALUE
CONVERSION PRICE
B. Mechanics of Conversion.
(i) In order to effect a Conversion, a holder shall: (x) fax (or otherwise
deliver) a copy of the fully executed Notice of Conversion to the Company or the
transfer agent for the Common Stock and (y) surrender or cause to be surrendered
the original certificates representing the Series C Preferred Stock being
converted (the "PREFERRED STOCK CERTIFICATES"), duly endorsed, along with a copy
of the Notice of Conversion as soon as practicable thereafter to the Company or
the transfer agent. The holder shall confirm by overnight courier, in person (by
courier or otherwise) or by telephone (to an authorized officer of the Company
or his or her administrative assistant), the delivery of the Notice of
Conversion to the Company on the date on which the Notice of Conversion is
delivered or before 9:00 a.m., Pacific time, on the trading day immediately
succeeding such date; provided that an overnight courier delivery which is
signed for or refused by the Company prior to 12:00 noon, Pacific time, on a
given day shall be deemed to have been delivered
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before 9:00 a.m., Pacific time, on such day. Upon receipt by the Company of the
Notice of Conversion by fax from a holder, the Company shall, within one
business day following the later of the Company's receipt of such Notice of
Conversion and the holder's overnight courier, in-person or telephone
confirmation of the delivery of such Notice of Conversion, send, via fax, a
confirmation (the "NOTICE OF CONVERSION CONFIRMATION") to such holder stating
that the Notice of Conversion has been received, the date upon which the Company
expects to deliver the shares of the Common Stock issuable upon such conversion,
and the name and telephone number of a contact person at the Company regarding
the conversion. The Company shall not be obligated to issue shares of the Common
Stock upon a conversion unless either the Preferred Stock Certificates are
delivered to the Company or the transfer agent as provided above, or the holder
notifies the Company or the transfer agent that such certificates have been
lost, stolen or destroyed and delivers the documentation to the Company required
by Article XVI.B hereof.
(ii) Delivery of Common Stock Upon Conversion. Upon the surrender of
Preferred Stock Certificates from a holder of Series C Preferred Stock
accompanied or preceded by a Notice of Conversion, the Company shall, subject to
the Company's redemption rights set forth in Article VIII.D, no later than the
later of (a) the third (3rd) business day following the Conversion Date and (b)
the business day following the date of such surrender (or, in the case of lost,
stolen or destroyed certificates, after provision of documentation pursuant to
Article XV.B) (the "DELIVERY PERIOD"), issue and deliver to the holder or its
nominee, after registration of the resale of such shares under the Securities
Act of 1933, as amended, or any similar successor statute (the "SECURITIES
ACT"), or delivery of documentation reasonably satisfactory to the Company that
the registration of such shares is not required, to such holder's nominee, (x)
that number of shares of the Common Stock issuable upon conversion of such
shares of Series C Preferred Stock being converted and (y) a certificate
representing the number of shares of Series C Preferred Stock not being
converted, if any. If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder thereof
is not then required to return such certificate for the placement of a legend
thereon, the Company may cause its transfer agent to electronically transmit the
shares of the Common Stock issuable upon conversion to the holder by crediting
the account of the holder or its nominee with DTC through its Deposit Withdrawal
Agent Commission system ("DTC TRANSFER"). If the aforementioned conditions to a
DTC Transfer are not satisfied or a DTC Transfer is otherwise not effected, the
Company shall deliver to the holder physical certificates representing the
shares of the Common Stock issuable upon conversion. Further, a holder may
instruct the Company to deliver to the holder physical certificates representing
the shares of the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.
(iii) Taxes. The Company shall pay any and all taxes which may be imposed
upon the Company with respect to the issuance and delivery of the shares of the
Common Stock upon the conversion of the Series C Preferred Stock other than
transfer taxes due upon conversion, if such holder has transferred to another
party the Series C Preferred Stock or the right to receive the shares of the
Common Stock upon the holder's conversion thereof.
(iv) No Fractional Shares. If any conversion of Series C Preferred Stock
would result in the issuance of a fractional share of the Common Stock, such
fractional share shall be disregarded and the number of shares of the Common
Stock issuable upon conversion of the Series C Preferred Stock shall be rounded
up or down to the nearest
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whole share, it being understood that .5 of one (1) share shall be rounded up to
the next highest share.
(v) Conversion Disputes. In the case of any dispute with respect to a
conversion, the Company shall promptly issue such number of shares of the Common
Stock as are not disputed in accordance with subparagraph (ii) above. If such
dispute involves the calculation of the Conversion Price, the Company shall
submit the disputed calculations to the Company's outside auditors reasonably
acceptable to the holder of Series C Preferred Stock being converted via
facsimile at any time prior to the expiration of the Delivery Period. Such
auditors, at the Company's expense, shall review the calculations and notify the
Company and the holder of the results as soon as practicable following the date
it receives the disputed calculations. The auditors' determination shall be
deemed conclusive, absent manifest error. The Company shall then issue the
appropriate number of shares of the Common Stock in accordance with subparagraph
(i) above.
C. Limitations on Conversions. The conversion of shares of Series C
Preferred Stock shall be subject to the following limitations (each of which
limitations shall be applied independently):
(i) Cap Amount. If, notwithstanding the representations and
warranties of the Company contained in the Securities Purchase Agreement,
the Company is prohibited by the rules or regulations of the AMEX or of any
securities exchange or quotation system on which the Common Stock is then
listed or traded, from listing or issuing a number of shares of the Common
Stock in excess of a prescribed amount (the "Cap Amount") without the
approval of the Company's stockholders, then the Company shall not be
required to list or issue, as applicable, shares in excess of the Cap
Amount unless the Company has obtained the required approvals. The Cap
Amount shall be allocated pro rata to the holders of Series C Preferred
Stock as provided in Article XVI.C. In the event a holder of Series C
Preferred Stock submits a Notice of Conversion and the Company is
prohibited from listing or issuing shares of the Common Stock to satisfy
such Notice of Conversion as a result of the operation of this subparagraph
(i), such holder shall be entitled to the rights set forth in Article VII
hereof.
(ii) No Five Percent Holders. Unless a holder of shares of Series C
Preferred Stock delivers a waiver in accordance with the second to last
sentence of this subparagraph (ii), in no event shall a holder of shares of
Series C Preferred Stock be entitled to receive shares of the Common Stock
upon a conversion to the extent that the sum of (x) the number of shares of
the Common Stock beneficially owned by the holder and its affiliates
(exclusive of shares issuable upon conversion of the unconverted portion of
the shares of Series C Preferred Stock or the unexercised or unconverted
portion of any other securities of the Company (including, without
limitation, the Warrants) subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (y) the number of shares
of the Common Stock issuable upon the conversion of the shares of Series C
Preferred Stock with respect to which the determination of this
subparagraph is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.99% of the outstanding shares of
the Common Stock. For purposes of this subparagraph, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 13
D-G thereunder, except as otherwise provided in clause (x) above. Except as
provided in the immediately succeeding sentence, the restriction contained
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in this subparagraph (ii) shall not be altered, amended, deleted or changed
in any manner whatsoever unless the holders of a majority of the
outstanding shares of the Common Stock and each holder of outstanding
shares of Series C Preferred Stock shall approve such alteration,
amendment, deletion or change. Notwithstanding the foregoing, a holder of
shares of Series C Preferred Stock may, by providing written notice to the
Company, (x) adjust the restriction set forth in this subparagraph (ii) so
that the limitations on beneficial ownership of 4.99% of the outstanding
shares of the Common Stock referred to above shall not be applicable to
such holder, which adjustment shall not take effect until the 61st day
after the date of such notice and (y) irrevocably waive the right to
deliver a waiver in accordance with clause (x) of this sentence.
Notwithstanding the foregoing, this Article IV.C(ii) shall not apply to any
holder who owns more than 4.99% of the outstanding shares of the Common
Stock prior to the Issuance Date.
D. Redemption of Premium. On the last date of each of the Company's fiscal
quarters, commencing September 30, 2001, in which shares of Series C Preferred
Stock are outstanding, the Company shall redeem all accrued and unpaid Premium
as of such date, such redemption to be effected by the issuance of a number of
shares of the Common Stock to each holder of Series C Preferred Stock equal to
the quotient obtained by dividing the aggregate amount of such Premium on the
shares of Series C Preferred Stock held by such holder on such date, by the
Market Price on such date. In the event of a Conversion, any and all outstanding
Premium with respect to the shares of Series C Preferred Stock being converted
shall be redeemed by the Company as of such Conversion Date by the issuance of a
number of shares of the Common Stock equal to the quotient obtained by dividing
the aggregate amount of Premium as of such Conversion Date and the shares being
converted by the Market Price on such Conversion Date. Any fractional share
resulting from the redemption of Premium shall be rounded to the nearest whole
share in accordance with Article IV.B(iv).
E. Mandatory Conversion. Subject to the limitations set forth in Paragraph
C(i) and (ii) of this Article IV, and provided all shares of the Common Stock
issuable upon conversion of all outstanding shares of Series C Preferred Stock
are then (i) authorized and reserved for issuance, (ii) registered under the
Securities Act for resale by the holders of such shares of Series C Preferred
Stock and (iii) eligible to be traded on either the AMEX, The New York Stock
Exchange (the "NYSE"), the NASD National Market (the "NNM"), the Nasdaq Small
Cap Market (the "NSCM") or the successors of any of them, and provided no
Redemption Event has occurred and is continuing, the Company may, by delivery of
a Notice of Conversion to each of the holders of Series C Preferred Stock,
require the holders of the Series C Preferred Stock to convert no more than 20%
of their outstanding shares of the Series C Preferred Stock, on a pro-rata
basis, pursuant to the applicable conversion procedures set forth in Article
IV.B (a "Mandatory Conversion") upon each of the following occurrences: if the
Closing Sales Prices of the Common Stock for ten (10) consecutive trading days
immediately preceding the date of the Notice of Conversion (which Notice shall
be delivered within three (3) business days of its date) is at or above $7.50,
$8.50, $9.50, $10.50 and $11.50, respectively, (as adjusted to reflect any stock
dividends, distributions, combinations, reclassifications and other similar
transactions effected by the Company with respect to its Common Stock);
provided, however that the holders of Series C Preferred Stock are not required
to deliver a Notice of Conversion to the Company or its transfer agent.
Notwithstanding the foregoing, in the event the Company elects to effect a
Mandatory Conversion with respect to any of the trigger prices provided for
above, thereafter, the Company will have no further right to
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elect a Mandatory Conversion with respect to such trigger price. For example, if
the Closing Sales Price of the Common Stock for the ten (10) consecutive trading
day period immediately preceding the date of the Notice of Conversion is at or
above $7.50 and the Company elects a Mandatory Conversion, thereafter the
Company will have no further right to elect another Mandatory Conversion unless
and until the Closing Sales Price for another ten (10) consecutive trading day
period is at or above $8.50. In the event the Company elects to exercise its
Mandatory Conversion rights with respect to only some of the outstanding Series
C Preferred Stock, such Series C Preferred Stock shall be converted pro rata
among the holders thereof based upon the percentage of Series C Preferred Stock
held by such holders against the then total outstanding shares of Series C
Preferred Stock.
F. Additional Mandatory Conversion. Subject to the limitations set forth
in paragraph C(i) and (ii) of this Article IV, and provided all shares of the
Common Stock issuable upon conversion of all outstanding shares of Series C
Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act for resale by the holders of such shares of
Series C Preferred Stock and (iii) eligible to be traded on either the AMEX, the
NYSE, NMN, the NSCM or the successors of any of them, and provided no Redemption
Event has occurred and is continuing, the Company may, by delivery of a Notice
of Conversion to each of the holders of Series C Preferred Stock, if, an
underwriter requires as a condition precedent to an underwritten public offering
by such underwriter of securities of the Company, provided that the offering
will provide to the Company net proceeds of at least $20,000,000 and the
offering price to the public, net of underwriting discount and commissions, is
not less than ten dollars ($10.00) per share of the Common Stock (as adjusted to
reflect any stock dividends, distributions, combinations, reclassifications and
other similar transactions effected by the Company with respect to its Common
Stock), require such holders to convert all of the outstanding shares of Series
C Preferred Stock pursuant to the applicable conversion procedures set forth in
Article IV.B (a "Mandatory Conversion"); provided, however, that the holders of
Series C Preferred Stock are not required to deliver a Notice of Conversion to
the Company or its transfer agent and provided, further, that such conversion
shall occur contemporaneously with the closing of such public offering.
G. Additional Optional Conversion. If at any time after the Issuance Date
the Common Stock (including, from and after the Conversion Date, any of the
shares of the Common Stock issuable upon conversion of the Series C Preferred
Stock) is suspended from trading on any of, or is not listed (and authorized)
for trading on at least one of, the NSCM, the NNM, the NYSE or the AMEX for an
aggregate of ten (10) full trading days in any nine (9)-month period (a
"DELISTING EVENT"), each holder of shares of Series C Preferred Stock may
convert each of its outstanding shares of Series C Preferred Stock and any
unpaid Premium thereon into shares of the Common Stock in accordance with
Article IV.A and Article IV.B hereof, provided, however, if the Market Price of
the Common Stock is less than the Conversion Price then in effect as of the date
of the Delisting Event, the Conversion Price will equal the Market Price as of
such date. Notwithstanding anything to the contrary contained herein, the
adjustment of the Conversion Price provided herein shall not trigger any
anti-dilution adjustment under Article XII.D hereof or Section 4(a) of the
Warrants.
V. RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On the Issuance Date, the Company shall reserve 110%
of the number of shares of the Common Stock which would be issuable if the
outstanding shares
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of Series C Preferred Stock were converted in their entirety on the such
Issuance Date based on the Conversion Price in effect on such Issuance Date of
the authorized, unreserved and unissued shares of the Common Stock for issuance
upon conversion of the Series C Preferred Stock and thereafter the number of
authorized, unreserved and unissued shares of the Common Stock so reserved (the
"RESERVED AMOUNT") shall not be decreased and shall at all times be sufficient
to provide for the conversion of the Series C Preferred Stock outstanding at the
then current Conversion Price thereof. The Reserved Amount shall be allocated to
the holders of Series C Preferred Stock as provided in Article XVI.C.
B. Increases to Reserved Amount. In the event the Conversion Price is
adjusted pursuant to the terms of this Certificate of Designation (an
"AUTHORIZATION TRIGGER DATE") the Company shall take immediate action
(including, if necessary, seeking stockholder approval to authorize the issuance
of additional shares of the Common Stock) to increase the Reserve Amount to 110%
of the number of shares of the Common Stock then issuable upon conversion of the
outstanding Series C Preferred Stock at the adjusted Conversion Price. In the
event the Company fails to so increase the Reserved Amount within 120 days after
an Authorization Trigger Date (such event being the "RESERVED AMOUNT TRIGGER
EVENT"), each holder of Series C Preferred Stock shall thereafter have the
option, exercisable in whole or in part at any time and from time to time by
delivery of a Redemption Notice (as defined in Article VIII.C) to the Company,
to require the Company to purchase for cash, at an amount per share equal to the
Redemption Amount (as defined in Article VIII.B), a portion of the holder's
Series C Preferred Stock such that, after giving effect to such purchase, the
holder's allocated portion of the Reserved Amount exceeds 100% of the total
number of shares of the Common Stock issuable to such holder upon conversion of
its Series C Preferred Stock at the adjusted Conversion Price. If the Company
fails to redeem any of such shares within ten (10) business days after its
receipt of such Redemption Notice, then such holder shall be entitled to the
remedies provided in Article VIII.C.
VI. FAILURE TO SATISFY CONVERSIONS
A. Buy-In Cure. Unless the Company has notified the applicable holder in
writing prior to the delivery by such holder of a Notice of Conversion that the
Company is unable to honor conversions due to the limitations contained in
Article IV.C, if (i) (a) the Company fails for any reason to deliver during the
Delivery Period shares of the Common Stock to a holder upon a conversion of
shares of Series C Preferred Stock or (b) there shall occur a Legend Removal
Failure (as defined in Article VIII.A(ii) below) and (ii) thereafter, such
holder purchases (in an open market transaction or otherwise) shares of the
Common Stock to make delivery in satisfaction of a sale by such holder of the
unlegended shares of the Common Stock (the "SOLD SHARES") which such holder
anticipated receiving upon such conversion (a "BUY-IN"), the Company shall pay
such holder (in addition to any other remedies available to the holder) the
amount by which (x) such holder's total purchase price (including brokerage
commissions, if any) for the unlegended shares of the Common Stock so purchased
exceeds (y) the net proceeds received by such holder from the sale of the Sold
Shares. For example, if a holder purchases unlegended shares of the Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of the Common Stock it sold for $10,000, the Company will be required to
pay the holder $1,000. A holder shall provide the Company written notification
indicating any amounts payable to such holder pursuant to
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this Paragraph A. The Company shall make any payments required pursuant to this
Paragraph A in accordance with and subject to the provisions of Article XVI.E.
B. Redemption Right. If the Company fails, and such failure continues
uncured for seven (7) business days after the Company has been notified thereof
in writing by the holder, for any reason to issue shares of the Common Stock
within the applicable Delivery Period with respect to any conversion of Series C
Preferred Stock, then the holder may elect at any time and from time to time
prior to the Default Cure Date (as defined below) for such Conversion Default,
by delivery of a Redemption Notice to the Company, to have all of such holder's
shares of Series C Preferred Stock for which a Notice of Conversion was given to
the holder and for which such failure exists purchased by the Company for cash,
at an amount per share equal to the Redemption Amount (as defined in Article
VIII.B). If the Company fails to redeem any of such shares within seven (7)
business days after its receipt of such Redemption Notice, then such holder
shall be entitled to the remedies provided in Article VIII.C. "DEFAULT CURE
DATE" means (i) with respect to a Conversion Default described in clause (i) of
its definition, the date the Company effects the conversion of the full number
of shares of Series C Preferred Stock, (ii) with respect to a Conversion Default
described in clause (ii) of its definition, the date the Company issues shares
of the Common Stock, without a restrictive legend (other than a prospectus
delivery requirement legend) when covered by an effective registration
statement, in satisfaction of all conversions of Series C Preferred Stock in
accordance with Article IV.A, and (iii) with respect to a Conversion Default
described in clause (i) or clause (ii) of its definition, the date on which the
Company redeems shares of Series C Preferred Stock held by such holder pursuant
to paragraph C of this Article VI.
C. Void Notice of Conversion. If for any reason a holder has not received
all of the shares of the Common Stock prior to the tenth (10th) business day
after the expiration of the Delivery Period with respect to a conversion of
Series C Preferred Stock (including shares of the Common Stock issued in
redemption of Premium on shares of Series C Preferred Stock being converted) and
such shares are not subject to a redemption notice from the holder thereof, then
the holder, upon written notice to the Company's transfer agent, with a copy to
the Company, may void its Notice of Conversion with respect to, and retain or
have returned, as the case may be, any shares of Series C Preferred Stock that
have not been converted pursuant to such holder's Notice of Conversion; provided
that the voiding of a holder's Notice of Conversion shall not affect such
holders rights and remedies which have accrued prior to the date of such notice
pursuant to Article VI hereof or otherwise.
VII. INABILITY TO LIST OR CONVERT DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time after the Issuance Date the then
unissued portion of any holder's Cap Amount is less than 110% of the number of
shares of the Common Stock then issuable upon conversion of such holder's shares
of Series C Preferred Stock (a "TRADING MARKET TRIGGER EVENT"), the Company
shall immediately notify the holders of Series C Preferred Stock of such
occurrence and shall take immediate action (including, if necessary, seeking the
approval of its stockholders to authorize the listing or issuance of the full
number of shares of the Common Stock which would be issuable upon the conversion
of the then outstanding shares of Series C Preferred Stock but for the Cap
Amount) to eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or any of its
securities on the Company's
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ability to list or issue shares of the Common Stock in excess of the Cap Amount
("TRADING MARKET PROHIBITIONS"). In the event the Company fails to eliminate all
such Trading Market Prohibitions within one hundred twenty (120) days after the
Trading Market Trigger Event, then each holder of Series C Preferred Stock shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time until such date that all such Trading Market Prohibitions are
eliminated, by delivery of a Redemption Notice (as defined in Article VIII.C) to
the Company, to require the Company to purchase for cash, at an amount per share
equal to the Redemption Amount, a number of the holder's shares of Series C
Preferred Stock such that, after giving effect to such redemption, the then
unissued portion of such holder's Cap Amount exceeds 110% of the total number of
shares of the Common Stock issuable upon conversion of such holder's shares of
Series C Preferred Stock. If the Company fails to redeem any of such shares
within ten (10) business days after its receipt of such Redemption Notice, then
such holder shall be entitled to the remedies provided in Article VII.B.
(i) Remedies. If the Company fails to redeem any shares of Series C
Preferred Stock pursuant to Article VII.A within five (5) business days after
its receipt of such Redemption Notice, and thereafter the Company is prohibited,
at any time, from listing shares of the Common Stock or from issuing shares of
the Common Stock upon conversion of Series C Preferred Stock to any holder
because such listing or issuance would exceed the then unissued portion of such
holder's Cap Amount because of applicable law or the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities, any holder
who is so prohibited from converting its Series C Preferred Stock because the
shares of the Common Stock underlying such Series C Preferred Stock may not be
listed or issued, may elect the additional remedy of requiring the Company to
issue shares of the Common Stock in accordance with such holder's Notice of
Conversion at a conversion price equal to the average of the Closing Sales
Prices for the Common Stock during the twenty (20) consecutive trading days
ending on the trading day immediately preceding the date of the holder's written
notice to the Company of its election to receive shares of the Common Stock
pursuant to this subparagraph (subject to equitable adjustment for any stock
splits, stock dividends, reclassifications or similar events during such five
trading day period).
VIII. REDEMPTION
A. Redemption by Holder. In the event (each of the events described in
clauses (i)-(v) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):
(i) (a) if the Company is in default of any of its representations,
warranties or covenants contained in that certain Registration Rights
Agreement by and among the Company and the other signatories thereto
entered into in connection with the Securities Purchase Agreement (the
"Registration Rights Agreement") and any such default continues for ten
(10) business days after the Company has been notified thereof in writing
by the holder;
(b) the Company fails to remove any restrictive legend (other than a
prospectus delivery legend) on any certificate or any shares of the Common
Stock issued to the holders of Series C Preferred Stock (a "LEGEND REMOVAL
FAILURE") upon conversion of the Series C Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase
Agreement or the Registration Rights Agreement
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and any such failure continues uncured for ten (10) business days after the
Company has been notified thereof in writing by the holder;
(ii) the Company provides notice to any holder of Series C Preferred
Stock, including by way of public announcement, at any time, of its
intention not to issue, or otherwise refuses to issue, shares of the Common
Stock to any holder of Series C Preferred Stock upon conversion in
accordance with the terms of this Certificate of Designation (other than
due to the circumstances contemplated by Articles V or VII for which the
holders shall have the remedies set forth in such Articles);
(iii) the Company shall:
(a) sell, convey or dispose of all or substantially all of its
assets (the presentation of any such transaction for stockholder
approval being conclusive evidence that such transaction involves the
sale of all or substantially all of the assets of the Company); or
(b) merge, consolidate or engage in any other business combination
with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of
incorporation of the Company and other than pursuant to a merger in
which the Company is the surviving or continuing entity and the voting
capital stock of the Company immediately prior to such merger represents
at least 50% of the voting power of the capital stock of the Company
after the merger) and its capital stock is unchanged; or
(c) have fifty percent (50%) or more of the voting power of its
capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Exchange Act), other than
its current affiliates;
(iv) the Company otherwise shall breach any material term hereunder or
under the Securities Purchase Agreement or the Registration Rights
Agreement and such breach continues for ten (10) business days after the
Company has been notified thereof in writing by the holder;
Then, upon the occurrence of any such Redemption Event, each holder of
shares of Series C Preferred Stock shall thereafter have the option, exercisable
in whole at any time or in part from time to time by delivery of a Redemption
Notice (as defined in Paragraph C below) to the Company while such Redemption
Event continues, to require the Company to purchase for cash any or all of the
then outstanding shares of Series C Preferred Stock held by such holder for an
amount per share equal to the Redemption Amount (as defined in Paragraph B
below) in effect at the time of the redemption hereunder. The occurrence of any
event described in clauses (ii) or (iii) above shall immediately constitute a
Redemption Event and there shall be no cure period. Upon the Company's receipt
of any Redemption Notice hereunder (other than during the three-trading-day
period following the Company's delivery of a Redemption Announcement (as defined
below) to all of the holders in response to the Company's initial receipt of a
Redemption Notice from a holder of Series C Preferred Stock), the Company shall
immediately (and in any event within three (3) business days following such
receipt) deliver a written notice (a "REDEMPTION ANNOUNCEMENT") to all holders
of Series C Preferred Stock stating the date upon which the Company received
such Redemption Notice and the amount of Series C Preferred Stock covered
thereby. Subject to Article VIII.D, the Company shall not redeem any shares of
Series C Preferred Stock during the three trading day period following the
delivery of a required Redemption Announcement hereunder. At any time and from
time to time during such three trading
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day period, each holder of Series C Preferred Stock may request (either orally
or in writing) information from the Company with respect to the instant
redemption (including, but not limited to, the aggregate number of shares of
Series C Preferred Stock covered by Redemption Notices received by the Company)
and the Company shall furnish (either orally or in writing) as soon as
practicable such requested information to such requesting holder.
B. Definition of Redemption Amount. The "REDEMPTION AMOUNT" with respect
to a share of Series C Preferred Stock means an amount equal to the greater of:
<Table>
V
(i) --------------- x M
C P
and (ii) V x 1.20
</Table>
where:
"V" means the Stated Value thereof, plus the accrued and unpaid
Premium thereon through the date of payment of the Redemption Amount;
"CP" means the Conversion Price in effect on the date on which the
Company receives the Redemption Notice; and
"M" means the higher of (i) the highest Closing Sales Price of the
Company's Common Stock during the period beginning on the date on which the
Company receives the Redemption Notice and ending on the date immediately
preceding the date of payment of the Redemption Amount and (ii) the fair
market value, as of the date on which the Company receives the Redemption
Notice, of the consideration payable to the holder of a share of the Common
Stock pursuant to the transaction which triggers the redemption. For
purposes of this definition, "fair market value" shall be determined by the
mutual agreement of the Company and holders of a majority of the shares of
Series C Preferred Stock then outstanding, or if such agreement cannot be
reached within five (5) business days prior to the date of redemption, by
an investment banking firm selected by the Company and reasonably
acceptable to holders of a majority of the then outstanding shares of
Series C Preferred Stock, with the costs of such appraisal to be borne by
the Company.
C. Redemption Defaults. If the Company fails to pay any holder the
Redemption Amount with respect to any share of Series C Preferred Stock within
ten (10) business days after its receipt of a notice requiring such redemption
(a "REDEMPTION NOTICE"), then the holder of Series C Preferred Stock delivering
such Redemption Notice (i) shall be entitled to interest on the Redemption
Amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest interest rate permitted by applicable law from the date on which the
Company receives the Redemption Notice until the date of payment of the
Redemption Amount hereunder, and (ii) shall have the right, at any time and from
time to time, to require the Company, upon written notice, to immediately
convert (in accordance with the terms of Paragraph A of Article IV) all or any
portion of the Redemption Amount, plus interest as aforesaid, into shares of the
Common Stock at the Conversion Price in effect during such period. In the event
the Company is not able to redeem all of the shares of Series C Preferred Stock
subject to Redemption Notices delivered prior to the date upon which such
redemption is to be effected, the Company shall redeem shares of Series C
Preferred Stock from each holder pro rata, based on the total number of shares
of Series C Preferred Stock outstanding at the time of redemption included by
such holder in all Redemption Notices delivered prior to the date upon which
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such redemption is to be effected relative to the total number of shares of
Series C Preferred Stock outstanding at the time of redemption included in all
of the Redemption Notices delivered prior to the date upon which such redemption
is to be effected.
D. Optional Redemption by Company.
(i) provided all shares of the Common Stock issuable upon conversion of all
outstanding shares of Series C Preferred Stock are then (i) authorized and
reserved for issuance, (ii) registered under the Securities Act for resale by
the holders of such shares of Series C Preferred Stock and (iii) eligible to be
traded on either the NSCM, the AMEX, the NYSE, the NNM or the successors of any
of them, and provided no Redemption Event has occurred and is continuing, if, at
any time after the Issuance Date, the Closing Sales Price of the Common Stock is
less than $3.50 for 11 or more consecutive trading days, the Company shall have
the right, during the next five (5) trading days, to call all or part of the
then outstanding shares of the Series C Preferred Stock for redemption at a
redemption price per share of the Stated Value, plus all accrued but unpaid
Premium with respect to such share to the date of redemption (hereinafter
referred to as the "Optional Redemption Date") designated in the Notice of
Redemption, payable in cash on the basis of the Market Price of the Common Stock
on such date. Notwithstanding the delivery of a Notice of Redemption, a holder
may convert such shares of Series C Preferred Stock subject to such notice by
the delivery prior to the Optional Redemption Date of a Notice of Conversion to
the Company or its transfer agent pursuant to the procedures set forth in
Article IV.B. Each Notice of Redemption shall be mailed, not less than three (3)
days prior to the Optional Redemption Date, to each holder of record of the
shares of the Series C Preferred Stock to be redeemed at his, her or its address
as it appears in the records of the Company. In the event the Company elects to
exercise its Optional Redemption rights with respect to only some of the
outstanding Series C Preferred Stock, such Series C Preferred Stock shall be
redeemed pro rata among the holders thereof based upon the percentage of Series
C Preferred Stock held by such holders against the then total outstanding shares
of Series C Preferred Stock. In the event the Company shall call for redemption
shares of the Series C Preferred Stock pursuant to this Article VIII.D, the
Company shall issue to the holder a Common Stock purchase warrant to purchase
.875 of a share of the Common Stock for each share of the Series C Preferred
Stock being redeemed, or, if only a partial optional redemption, a pro rata
amount thereof, at an exercise price equal to the Market Price of the Common
Stock during the twenty (20) trading days preceding the date of the Notice of
Redemption and with an expiration date of five years after issuance.
(ii) Company may not deliver to a holder of Series C Preferred Stock an
Optional Redemption Notice unless on or prior to the date of delivery of such
Optional Redemption Notice (as defined below), the Company shall have segregated
on the books and records of the Company an amount of cash sufficient to pay all
amounts to which the holders of Series C Preferred Stock are entitled upon such
redemption pursuant to subparagraph (i) of this Paragraph D. Any Optional
Redemption Notice delivered shall be irrevocable and shall be accompanied by a
statement executed by a duly authorized officer of the Company.
(iii) The redemption amount payable under this Section D shall be paid to
the holders of the Series C Preferred Stock being redeemed within three (3)
business days of the Optional Redemption Date; provided, however, that the
Company shall not be obligated to deliver any portion of such redemption amount
until either the certificates evidencing the Series C Preferred Stock being
redeemed are delivered to the office of the
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Company or the escrow agent or the holder notifies the Company or the escrow
agent that such certificates have been lost, stolen or destroyed and delivers
the documentation in accordance with Article XV.B hereof. Notwithstanding
anything herein to the contrary, in the event that the certificates evidencing
the Series C Preferred Stock being redeemed are not delivered to the Company or
the escrow agent prior to the third business day following the Optional
Redemption Date, the redemption of the Series C Preferred Stock pursuant to this
Article VIII.D shall still be deemed effective as of the Optional Redemption
Date and such redemption amount shall be paid to the holder of Series C
Preferred Stock being redeemed within five (5) business days of the date the
certificates evidencing the Series C Preferred Stock being redeemed are actually
delivered to the Company or the escrow agent.
E. Optional Redemption by Company at Maturity.
(i) Provided all shares of the Common Stock issuable upon conversion of all
outstanding shares of Series C Preferred Stock are then (i) authorized and
reserved for issuance, (ii) registered under the Securities Act for resale by
the holders of such shares of Series C Preferred Stock and (iii) eligible to be
traded on either the AMEX, the NYSE, the NNM, the NSCM, or the successors of any
of them, and provided no Redemption Event has occurred and is continuing, each
share of Series C Preferred Stock issued and outstanding on and after the
Maturity Date, the Company may elect to redeem by providing written notice to
the holders thereof on or after the Maturity Date of such election on not less
than ten (10) but more than twenty (20) days' notice (the "Notice of Redemption
at Maturity"), at a redemption price per share equal to the Stated Value, plus
all accrued and unpaid Premium to the date of such redemption (the "Redemption
at Maturity"). Notwithstanding the delivery of a Notice of Redemption at
Maturity, a holder may convert such shares of Series C Preferred Stock subject
to such notice by the delivery prior to the date set forth in such notice on
which the Company intends to redeem such shares of a Notice of Conversion to the
Company or its transfer agent pursuant to the procedures set forth in Article
IV.B. In the event the Company elects to exercise a Redemption at Maturity with
respect to only some of the outstanding Series C Preferred Stock, such Series C
Preferred Stock shall be redeemed pro rata among the holders thereof based upon
the percentage of Series C Preferred Stock held by such holders against the then
total outstanding shares of Series C Preferred Stock.
(ii) The Company may not deliver to a holder of Series C Preferred Stock a
Notice of Redemption at Maturity unless on or prior to the date of delivery of
such Notice of Redemption at Maturity, the Company shall have segregated on the
books and records of the Company an amount of cash sufficient to pay all amounts
to which the holders of Series C Preferred Stock are entitled upon such
redemption pursuant to subparagraph (i) of this Paragraph E. Any Notice of
Redemption at Maturity delivered shall be irrevocable and shall be accompanied
by a statement executed by a duly authorized officer of the Company.
(iii) The redemption amount payable under this Section E shall be paid to
the holders of the Series C Preferred Stock being redeemed within three (3)
business days of the redemption date specified in the Notice of Redemption at
Maturity Date; provided, however, that the Company shall not be obligated to
deliver any portion of such redemption amount until either the certificates
evidencing the Series C Preferred Stock being redeemed are delivered to the
office of the Company or the escrow agent or the holder notifies the Company or
the escrow agent that such certificates have been lost, stolen or destroyed and
delivers the documentation in accordance with Article XV.B
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hereof. Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Series C Preferred Stock being redeemed are not
delivered to the Company or the escrow agent prior to the third business day
following the Optional Redemption Date, the redemption of the Series C Preferred
Stock pursuant to this Article VIII.E shall still be deemed effective as of the
redemption date specified in the Notice of Redemption at Maturity and the
applicable redemption amount shall be paid to the holder of Series C Preferred
Stock being redeemed within five (5) business days of the date the certificates
evidencing the Series C Preferred Stock being redeemed are actually delivered to
the Company or the escrow agent.
F. Void Redemption. In the event that the Company does not pay the
applicable redemption amount within the time period set forth in Article VIII.A,
Article VIII.D or Article VIII.E, at any time thereafter and until the Company
pays such unpaid applicable redemption amount in full, a holder of Series C
Preferred Stock shall have the option (the "VOID OPTIONAL REDEMPTION OPTION")
to, in lieu of redemption, require the Company to promptly return to such holder
any or all of the shares of Series C Preferred Stock that were submitted for
redemption by such holder under this Article VIII and for which the applicable
Redemption Amount (together with any interest thereon) has not been paid, by
sending written notice thereof to the Company via facsimile and confirmed by
overnight courier, in person (by courier or otherwise) or by telephone (to an
authorized officer of the Company or his or her administrative assistant) (the
"VOID OPTIONAL REDEMPTION NOTICE"). Upon the Company's receipt of such Void
Optional Redemption Notice and overnight courier, in-person or telephone
confirmation, (i) the Notice of Redemption shall be null and void with respect
to those shares of Series C Preferred Stock subject to the Void Optional
Redemption Notice, and (ii) the Company shall immediately return any shares of
Series C Preferred Stock subject to the Void Optional Redemption Notice.
G. Limitation on Redemption. Anything in this Article VIII to the contrary
notwithstanding, if the Redemption Event is any event described in clause (iii)
of Article VIII.A, then, upon delivery of a Redemption Notice to the Company,
the Company shall not be obligated to pay the Redemption Amount in cash, but
shall instead, at its option, have the unconditional right, in redemption of the
shares of the Series C Preferred Stock which would otherwise be entitled to a
cash payment, either (i) to issue to each such holder that number of shares of
the Common Stock as is equal to the quotient of (a) the product of the
Redemption Amount and the number of shares of the Series C Preferred Stock to be
redeemed held by such holder and (b) the average of the three (3) lowest Closing
Sales Prices for the twenty (20) consecutive trading days immediately preceding
delivery of the Redemption Notice or (ii) to limit the amount of the cash
redemption to all holders to be not more than the cash proceeds to be received
from a new equity offering of shares of the Common Stock.
IX. RANK
The Series C Preferred Stock shall rank (i) prior to the Common Stock; (ii)
prior to any class or series of capital stock of the Company hereafter created
that, by its terms, ranks junior to the Series C Preferred Stock ("JUNIOR
SECURITIES"); (iii) junior to any class or series of capital stock of the
Company hereafter created (with the consent of the holders of Series C Preferred
Stock, obtained in accordance with Article XIII hereof) specifically ranking, by
its terms, senior to the Series C Preferred Stock ("SENIOR SECURITIES"); and
(iv) pari passu with the Series B Preferred Stock of the Company and any other
class or series of capital stock of the Company hereafter created (with the
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consent of the holders of the Series C Preferred Stock obtained in accordance
with Article XIII hereof) specifically ranking by its terms on parity with the
Series C Preferred Stock ("PARI PASSU SECURITIES"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
X. LIQUIDATION PREFERENCE
A. If the Company shall commence a voluntary case under the U.S. Federal
bankruptcy laws or any other applicable bankruptcy, insolvency or similar law,
or consent to the entry of an order for relief in an involuntary case under any
law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Company or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Company shall
be entered by a court having jurisdiction in the premises in an involuntary case
under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and any such decree or order shall
be unstayed and in effect for a period of 60 consecutive days and, on account of
any such event, the Company shall liquidate, dissolve or wind up, or if the
Company shall otherwise liquidate, dissolve or wind up, including, but not
limited to, the sale or transfer of all or substantially all of the Company's
assets in one transaction or in a series of related transactions (a "LIQUIDATION
EVENT"), no distribution shall be made to the holders of any shares of capital
stock of the Company (other than Senior Securities and Pari Passu Securities)
upon liquidation, dissolution or winding up unless prior thereto the holders of
shares of Series C Preferred Stock shall have received the Liquidation
Preference (as defined below) with respect to each share. If, upon the
occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series C Preferred Stock and holders of
Pari Passu Securities shall be insufficient to permit the payment to such
holders of the preferential amounts payable thereon, then the entire assets and
funds of the Company legally available for distribution to the Series C
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable
on each such share bears to the aggregate Liquidation Preference payable on all
such shares.
B. The purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other entity nor the sale or transfer
by the Company of less than substantially all of its assets shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up of the
Company.
C. The "Liquidation Preference" with respect to a share of Series C
Preferred Stock means an amount equal to the Stated Value thereof, plus the
accrued Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any Pari Passu Securities shall be as set forth in
the Certificate of Designation filed in respect thereof.
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XI. CONSENT OF SERIES B PREFERRED STOCK HOLDER
In the event that a holder seeks to have the Company redeem the holder's
shares of the Series C Preferred Stock in cash pursuant to Article V.B, Article
VI.A and B, Article VII and Article VIII.A, then the Company shall
simultaneously make such required payments pro rata to the holders of the Series
B Preferred Stock.
XII. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after
the Issuance Date, the number of outstanding shares of the Common Stock is
increased by a stock split, stock dividend, combination, reclassification
or other similar event, the Conversion Price shall be proportionately
reduced, or if the number of outstanding shares of the Common Stock is
decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Conversion Price shall be
proportionately increased. In such event, the Company shall notify the
Company's transfer agent of such change on or before the effective date
thereof.
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time
after the Issuance Date, there shall be (i) any reclassification or change
of the outstanding shares of the Common 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 of the Company with any other entity (other than a
merger in which the Company is the surviving or continuing entity and its
capital stock is unchanged), (iii) any sale or transfer of all or
substantially all of the assets of the Company or (iv) any share exchange
pursuant to which all of the outstanding shares of the Common Stock are
converted into other securities or property (each of (i)-(iv) above being a
"CORPORATE CHANGE"), then the holders of Series C Preferred Stock shall
thereafter have the right to receive upon conversion, in lieu of the shares
of the Common Stock otherwise issuable, such shares of stock, securities
and/or other property as would have been issued or payable in such
Corporate Change with respect to or in exchange for the number of shares of
the Common Stock which would have been issuable upon conversion (without
giving effect to the limitations contained in Article IV.C) had such
Corporate Change not taken place, and in any such case, appropriate
provisions (in form and substance reasonably satisfactory to the holders of
a majority of the Series C Preferred Shares then outstanding) shall be made
with respect to the rights and interests of the holders of the Series C
Preferred Stock to the end that the economic value of the shares of Series
C Preferred Stock are in no way diminished by such Corporate Change and
that the provisions hereof (including, without limitation, in the case of
any such consolidation, merger or sale in which the successor entity or
purchasing entity is not the Company, an immediate adjustment of the
Conversion Price so that the Conversion Price immediately after the
Corporate Change reflects the same relative value as compared to the value
of the surviving entity's common stock that existed between the Conversion
Price at the value of the Common Stock immediately prior to such Corporate
Change shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon
the conversion thereof. The Company shall not effect any Corporate Change
unless (i) each holder of Series C Preferred Stock has received written
notice of such transaction along with the notice sent to the holders of the
Common Stock of the
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Company, but in no event later than twenty (20) days prior to the record
date for the determination of stockholders entitled to vote with respect
thereto, (ii) the resulting, successor or acquiring entity (if not the
Company) assumes by written instrument (in form and substance reasonably
satisfactory to the holders of a majority of the Series C Preferred Shares
then outstanding) the obligations of this Certificate of Designation, and
(iii) the securities issuable upon conversion of the Series C Preferred
Stock (or replacement security) are (i) either registered with the
Securities and Exchange Commission or exempt from all applicable federal
and state registration requirements and such securities are listed for
trading on the NYSE, the AMEX, the NNM or the NSCM, and (ii) the average
weekly reported volume of trading of such securities on the principal
exchange or market on which such securities are traded for the twelve (12)
calendar weeks immediately preceding the public announcement of such
transaction, is greater than the product of the aggregate number of shares
issuable upon conversion of all such shares of Series C Preferred Stock (or
replacement securities) following such event and ten (10). The above
provisions shall apply regardless of whether or not there would have been a
sufficient number of shares of the Common Stock authorized and available
for issuance upon conversion of the shares of Series C Preferred Stock
outstanding as of the date of such transaction, and shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
C. Adjustment Due to Distribution. If, at any time after the Issuance
Date, the Company shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of the Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including
any dividend or distribution to the Company's common stockholders in shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "DISTRIBUTION"), then the holders of Series C Preferred Stock
shall be entitled to receive in such Distribution the amount of such assets
payable to the holder on an as-converted basis (without giving effect to
the limitations contained in Article IV.C) as of the record date for the
determination of stockholders entitled to such Distribution.
D. Issuance of Other Securities.
(i) If at any time after the Issuance Date and on or before the
Maturity Date the Company issues or sells or in accordance with Article
XII.D(ii) is deemed to have issued and sold any shares of the Common Stock
for no consideration or for a consideration per share less than the
Dilutive Price (as defined in this subparagraph) on the date of issuance or
deemed issuance of the Common Stock (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Conversion Price will be
reduced, as of the close of business on the date of such Dilutive Issuance,
to the price at which such shares of the Common Stock are so issued or sold
or deemed issued or sold. For purposes of this subparagraph, "Dilutive
Price" means at any time the Conversion Price then in effect.
(ii) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Article XII.D(i) hereof,
the following will be applicable:
(a) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase shares of the
Common Stock or other securities exercisable, convertible into or
exchangeable for shares of the Common Stock
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("CONVERTIBLE SECURITIES") (such warrants, rights and options to
purchase shares of the Common Stock or Convertible Securities are
hereinafter referred to as "OPTIONS") and the price per share for which
a share of the Common Stock is issuable upon the exercise of such
Options is less than the Dilutive Price in effect on the date of
issuance of such Options ("BELOW MARKET OPTIONS"), then the maximum
total number of shares of the Common Stock issuable upon the exercise of
all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date
of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. For purposes of the preceding sentence, the "price per
share for which a share of the Common Stock is issuable upon the
exercise of such Below Market Options" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market
Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below
Market Options, plus, in the case of Convertible Securities issuable
upon the exercise of such Below Market Options, the minimum aggregate
amount of additional consideration payable upon the exercise, conversion
or exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of the Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Conversion
Price will be made upon the actual issuance of such shares of the Common
Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.
(b) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the
same are issuable upon the exercise of Options) and the price per share
for which a share of the Common Stock is issuable upon such exercise,
conversion or exchange (as determined pursuant to Article
XII.D(ii)(b)(B) if applicable) is less than the Dilutive Price in effect
on the date of issuance of such Convertible Securities, then the maximum
total number of shares of the Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of
the date of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. For the purposes of the preceding sentence, the "price
per share for which a share of the Common Stock is issuable upon such
exercise, conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of the Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. No
further adjustment to the Conversion Price will be made upon the actual
issuance of such shares of the
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Common Stock upon exercise, conversion or exchange of such Convertible
Securities.
(B) If the Company in any manner issues or sells any Convertible
Securities with a fluctuating conversion or exercise price or exchange
ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion
or exchange" for purposes of the calculation contemplated by Article
XII.E(ii)(b)(A) shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to
any discounts contained in such Convertible Security have been
satisfied) if the Dilutive Price on the date of issuance of such
Convertible Security was seventy-five percent (75%) of the Dilutive
Price on such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if
the Dilutive Price at any time or times thereafter is less than or equal
to the Assumed Variable Market Price last used for making any adjustment
under this Article XII.D with respect to any Variable Rate Convertible
Security, the Conversion Price in effect at such time shall be
readjusted to equal the Conversion Price which would have resulted if
the Assumed Variable Market Price at the time of issuance of the
Variable Rate Convertible Security had been seventy-five (75%) of the
Dilutive Price existing at the time of the adjustment required by this
sentence.
(c) Change in Option Price or Conversion Rate. If there is a
reduction at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount
of additional consideration, if any, payable to the Company upon the
exercise, conversion or exchange of any Convertible Securities; or (iii)
the rate at which any Convertible Securities are convertible into or
exchangeable for shares of the Common Stock (in each such case, other
than under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such change
will be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still
outstanding provided for such changed additional consideration or
changed conversion rate, as the case may be, at the time initially
granted, issued or sold.
(d) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of the Common
Stock issuable upon exercise of any Option or upon exercise, conversion
or exchange of any Convertible Securities is not, in fact, issued and
the rights to exercise such Option or to exercise, convert or exchange
such Convertible Securities shall have expired or terminated, the
Conversion Price then in effect will be readjusted to the Conversion
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of the Common Stock
issued upon exercise or conversion thereof), never been issued.
(e) Calculation of Consideration Received. If any shares of the
Common Stock, Options or Convertible Securities are issued, granted or
sold for cash, the consideration received therefor for purposes hereof
will be the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by
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the Company in connection with such issuance, grant or sale. In case any
shares of the Common Stock, Options or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than
cash, the amount of the consideration other than cash received by the
Company will be the fair market value of such consideration, except
where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Market Price
thereof as of the date of receipt. In case any shares of the Common
Stock, Options or Convertible Securities are issued in connection with
any merger or consolidation in which the Company is the surviving
Company, the amount of consideration therefor will be deemed to be the
fair market value of such portion of the net assets and business of the
non-surviving Company as is attributable to such shares of the Common
Stock, Options or Convertible Securities, as the case may be. The fair
market value of any consideration other than cash or securities will be
determined in good faith by an investment banker or other appropriate
expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such determination to
be borne by the Company. In case any shares of the Common Stock, Options
or Convertible Securities are issued in connection with the issuance of
debt securities the amount of consideration therefor shall be the cash
received by the Company and the value of the securities issued by the
Company shall be the fair market value of all securities and instruments
issued in such transaction, with fair market value being determined by
agreement between the holder hereof and the Company or if no such
agreement is reached pursuant to the immediately preceding sentence. For
all Options and Warrants the fair market value thereof shall be
determined in accordance with the black shoals methodology.
(f) Exceptions to Adjustment of Conversion Price. No adjustment to
the Conversion Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the Issue
Date and set forth on Schedule 3(d) of the Securities Purchase Agreement
in accordance with the terms of such securities as of such date or (ii)
upon the grant or exercise of any stock, options or warrants which may
hereafter be granted or exercised under any employee benefit plan of the
Company now existing or to be implemented in the future or otherwise
granted to or exercised by an employee so long as the issuance of such
stock, options or warrant is approved by a majority of the non-employee
members of the Board of Directors of the Company, if any, or a majority
of the members of a committee of non-employee directors established for
such purpose; (iii) the issuance of securities in connection with
strategic transactions involving the Company and other entities,
including joint ventures, manufacturing, marketing or distribution
arrangements (but excluding any sale of substantially all of the
Company's assets or any merger or consolidation of the Company into or
with another entity in which the holders of the capital stock of the
Company immediately prior to such merger or consolidation do not hold at
least fifty percent (50%) in voting power of the surviving corporation);
or (iv) the issuance of stock, warrants or other securities or rights to
persons or entities in connection with lease lines, bank financing or
similar transactions, provided that such issuances are primarily for
purposes other than equity financing.
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E. Purchase Rights. If, at any time after the Issuance Date, the
Company issues any securities which are convertible into or exchangeable
for shares of the Common Stock, or rights to purchase stock, warrants,
securities or other property (the "PURCHASE RIGHTS") pro rata to the record
holders of any class of the Common Stock, then the holders of Series C
Preferred Stock will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of the Common
Stock acquirable upon complete conversion of the Series C Preferred Stock
(without giving effect to the limitations contained in Article IV.C)
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of the Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
F. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XII, the
Company, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series C Preferred
Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon the written request at any time of any
holder of Series C Preferred Stock, furnish to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of
the Common Stock and the amount, if any, of other securities or property
which at the time would be received upon conversion of a share of Series C
Preferred Stock.
XII. VOTING RIGHTS
The holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "GENERAL CORPORATION LAW") and in Article XIV below.
Notwithstanding the above, the Company shall provide each holder of Series
C Preferred Stock with prior notification of any meeting of the stockholders
(and copies of proxy materials and other information sent to stockholders) at
the same time such notice and materials are provided to the holders of Common
Stock. If the Company takes a record of its stockholders for the purpose of
determining stockholders entitled to (a) receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or (b)
to vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Company, or any proposed merger,
consolidation, liquidation, dissolution or winding up of the Company, the
Company shall mail a notice to each holder, at least twenty (20) days prior to
the record date specified therein (but in no event earlier than public
announcement of such proposed transaction), of the date on which any such record
is to be taken for the purpose of such dividend, distribution, right or other
event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the General Corporation Law the vote of the
holders of the Series C Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the holders of
E-25
at least a majority of the then outstanding shares of the Series C Preferred
Stock represented at a duly held meeting at which a quorum is present or by
written consent of the holders of at least a majority of the then outstanding
shares of Series C Preferred Stock (except as otherwise may be required under
the General Corporation Law) shall constitute the approval of such action by the
class. To the extent that under the General Corporation Law holders of the
Series C Preferred Stock are entitled to vote on a matter with holders of Common
Stock, voting together as one class, each share of Series C Preferred Stock
shall be entitled to a number of votes equal to the number of shares of the
Common Stock into which it is then convertible (subject to the limitations
contained in Article IV.C) using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is calculated.
XIV. PROTECTION PROVISIONS
So long as any shares of Series C Preferred Stock are outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent, as provided by the General Corporation Law) of holders of a majority of
the then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series C Preferred Stock;
(b) alter or change the rights, preferences or privileges of any
previously issued shares of capital stock of the Company so as to affect
adversely the Series C Preferred Stock;
(c) create any new class or series of capital stock having a
preference over the Series C Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Company (as previously
defined in Article IX hereof, "Senior Securities");
(d) create any new class or series of capital stock ranking pari passu
with the Series C Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company (as previously
defined in Article IX hereof, "Pari Passu Securities");
(e) increase the authorized number of shares of Series C Preferred
Stock;
(f) issue any shares of Senior Securities, other than shares of Series
B Stock as dividends to its holders pursuant to terms contained in its
Certificate of Designation;
(g) issue any shares of Series C Preferred Stock other than pursuant
to the Securities Purchase Agreement;
(h) redeem, or declare or pay any cash dividend or distribution on,
any Junior Securities;
(i) redeem, or declare or pay any cash dividend or distribution on,
any Pari Passu Securities (other than any cash dividend or distribution
required by subparagraph FOURTH B.1(c)(iii), (c)(vii) and (g) of the
Certificate of Designation of the Series B Preferred Stock and the
redemption of shares of Series B Preferred Stock as contemplated by the
Securities Purchase Agreement) while any redemption of Series C Preferred
Stock is pending or when any Redemption Event exists, or
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(j) increase the par value of the Common Stock.
Notwithstanding the foregoing, no change pursuant to this Article XIII
shall be effective to the extent that, by its terms, it applies to less than all
of the holders of shares of Series C Preferred Stock then outstanding.
XV. LIMITATION ON COMPANY'S ACTIONS
Anything in this Certificate of Designation to the contrary
notwithstanding, the Company shall not be obligated to make any redemption or
payment hereunder or to issue shares of the Common Stock in lieu thereof, if
such action is not permitted by the General Corporation Law or any successor
statute; provided, however, the Company will permit any holder of the Series C
Preferred Stock to pay an amount equivalent to the par value of any shares of
the Common Stock to be issued to fulfill the Company's obligation if such action
by the holder will make the action permissible under the General Corporation Law
and, upon receipt of such payment, the Company will promptly issue the shares to
the holder.
XVI. MISCELLANEOUS
A. Cancellation of Series C Preferred Stock. If any shares of Series C
Preferred Stock are converted pursuant to Article IV or redeemed, the shares so
converted or redeemed shall be canceled, shall return to the status of
authorized, but unissued preferred stock of no designated series, and shall not
be issuable by the Company as Series C Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Company, or (z) in the case of mutilation, upon surrender and cancellation of
the Preferred Stock Certificate(s), the Company shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, the Company
shall not be obligated to reissue such lost or stolen Preferred Stock
Certificate(s) if the holder contemporaneously requests the Company to convert
such Series C Preferred Stock.
C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the holders of Series C
Preferred Stock based on the number of shares of Series C Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the holders of Series C Preferred Stock based on the
number of shares of Series C Preferred Stock held by each holder at the time of
the increase in the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series C Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Series C Preferred Stock shall be allocated to the remaining holders of
shares of Series C Preferred Stock, pro rata based on the number of shares of
Series C Preferred Stock then held by such holders.
D. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to the Registration Rights Agreement is declared effective and
thereafter so long as any shares of Series C Preferred Stock are outstanding,
the Company shall deliver (or cause its transfer
E-27
agent to deliver) to each holder a written report notifying the holders of any
occurrence which prohibits the Company from issuing shares of the Common Stock
upon any such conversion. The report shall also specify (i) the total number of
shares of Series C Preferred Stock outstanding as of the end of such quarter,
(ii) the total number of shares of the Common Stock issued upon all conversions
of Series C Preferred Stock prior to the end of such quarter, (iii) the total
number of shares of the Common Stock which are reserved for issuance upon
conversion of the Series C Preferred Stock as of the end of such quarter and
(iv) the total number of shares of the Common Stock which may thereafter be
listed or issued by the Company upon conversion of the Series C Preferred Stock
before the Company would exceed the Cap Amount and the Reserved Amount. The
Company (or its transfer agent) shall deliver the report for each quarter to
each holder prior to the tenth (10th) day of the calendar month following the
quarter to which such report relates. In addition, the Company (or its transfer
agent) shall provide, within fifteen (15) days after delivery to the Company of
a written request by any holder, any of the information enumerated in clauses
(i) - (iv) of this Paragraph D as of the date of such request.
E. Payment of Cash; Defaults. Whenever the Company is required to make any
cash payment to a holder under this Certificate of Designation (upon redemption
or otherwise), such cash payment shall be made to the holder within five (5)
business days after delivery by such holder of a notice specifying that the
holder elects to receive such payment in cash and the method (e.g., by check,
wire transfer) in which such payment should be made. If such payment is not
delivered within such five (5) business day period, such holder shall thereafter
be entitled to interest on the unpaid amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law until such amount is paid in full to the holder.
F. Status as Stockholder. Upon submission of a Notice of Conversion by a
holder of Series C Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their listing or issuance
would exceed such holder's allocated portion of the Reserved Amount or Cap
Amount) shall be deemed converted into shares of the Common Stock and (ii) the
holder's rights as a holder of such converted shares of Series C Preferred Stock
shall cease and terminate, excepting only the right to receive certificates for
such shares of the Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such holder because of a failure by the Company
to comply with the terms of this Certificate of Designation. Notwithstanding the
foregoing, if a holder has not received certificates for all shares of the
Common Stock prior to the tenth (10th) business day after the expiration of the
Delivery Period with respect to a conversion of Series C Preferred Stock for any
reason, then (unless the holder otherwise elects to retain its status as a
holder of the Common Stock by so notifying the Company within five (5) business
days after the expiration of such ten (10) business day period) the holder shall
regain the rights of a holder of Series C Preferred Stock with respect to such
unconverted shares of Series C Preferred Stock and the Company shall, as soon as
practicable, return such unconverted shares to the holder. In all cases, the
holder shall retain all of its rights and remedies (including, without
limitation, the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Article VI) for the Company's failure
to convert Series C Preferred Stock.
G. Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other
E-28
injunctive relief), and nothing herein shall limit a holder's right to pursue
actual damages for any failure by the Company to comply with the terms of this
Certificate of Designation. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of Series C
Preferred Stock and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees, in the event of any such breach or
threatened breach, that the holders of Series C Preferred Stock shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
2. PREFERRED STOCK.
(a) Designation of Series. With respect to the 2,570,000 shares of the
Preferred Stock not designated as the Series C Preferred Stock, or any or all of
the 430,000 shares of the Series C Preferred Stock that, after redemption,
conversion or other acquisition by the Corporation shall be restored to the
status of shares of the Preferred Stock without series, the Board of Directors
of the Corporation is authorized, subject to the limitations prescribed by the
GCL and the provisions of this subparagraph Fourth B.2, to provide for the
issuance of the shares of the Preferred Stock in series and, by filing a
certificate pursuant to the GCL, to establish from time to time the number of
shares to be included in each such series, and to fix the designations, powers,
preferences and shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof;
(b) Priority. Each series into which the Preferred Stock shall be
subdivided by the Board of Directors subsequent to the date hereof, as herein
provided, shall, to the extent of its relative rights, powers and preferences,
be senior to the Common Stock and each subsequently created series of the
Preferred Stock unless a provision is otherwise made by the Board of Directors;
provided, however, the Preferred Stock and each series thereof shall in any
event be junior to the Series C Preferred Stock except as may otherwise be
consented to by the holders of at least the majority of the then outstanding
shares of the Series C Preferred Stock.
(c) Board Designation. The authority of the Board of Directors with
respect to each series of the Preferred Stock shall include, but not be limited
to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(iii) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(v) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date upon
or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and
at different redemption dates;
E-29
(vi) Whether the series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(viii) Any other relative rights, preferences and limitations of that
series.
(d) Dividends. Dividends on the outstanding shares of the Preferred Stock
shall be paid or declared and set apart for payment before any dividends shall
be paid or declared and set apart for payment on the shares of the Common Stock
with respect to the same dividend period.
(e) Preference on Liquidation. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation the assets available
for distribution to the holders of shares of the Preferred Stock of all series
shall be insufficient to pay such holders the full preferential amount to which
they are entitled, then such assets shall be distributed ratably among the
shares of all series of the Preferred Stock in accordance with the respective
preferential amounts (including unpaid cumulative dividends, if any) payable
with respect thereto.
3. COMMON STOCK.
(a) Designation and Dividends. The Common Stock shall be designated
"Common Stock." Subject to all of the rights of the Preferred Stock, dividends
may be paid upon the Common Stock as and when declared by the Board of Directors
out of any funds legally available for the payment of dividends.
(b) Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
and subject to the prior rights of creditors and after the holders of any then
outstanding series of the Preferred Stock shall have been paid in full amounts
to which they shall be entitled, or an amount sufficient to pay the aggregate
amount to which the holders of any then outstanding series of the Preferred
Stock shall be entitled shall have been deposited with a bank or trust company
having a capital surplus and undivided profits of at least $25,000,000 as a
trust fund for the benefit of the holders of any then outstanding series of the
Preferred Stock, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock. For the purposes of
this subparagraph Fourth B.2 (b), the consolidation or merger of the Corporation
with any other corporation or corporations shall not be deemed a liquidation or
dissolution of the Corporation.
(c) Voting Right. Each holder of the Common Stock shall be entitled to one
vote per share thereof held upon all matters.
4. DEFINITIONS.
(i) The term "Business Day" shall mean any day on which national banks in
the City of Los Angeles, State of California are open.
(ii) The term "Common Stock" shall mean the Corporation's currently
authorized Common Stock and any shares into which such Common Stock may
hereafter be changed.
FIFTH: The corporation is to have perpetual existence.
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SIXTH: 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 stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the 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 sec.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 sec.279 of Title 8 of the Delaware Code
order a meeting of the creditors or 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 a 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 stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be not
less than three (3) nor more than nine (9). The exact number of directors
shall be determined from time to time by a majority of the whole Board and
such number shall be five (5) until otherwise determined by a resolution
adopted by the majority of the whole Board. In the event that the number of
directors is increased by such a resolution of the whole Board, the vacancy
or vacancies so resulting shall be filled by a vote of a majority of the
directors then in office. No decrease in the number of directors shall
shorten the term of any incumbent director. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the Corporation would
have if there were no vacancies. No election of directors need be by
written ballot.
2. After the original or other Bylaws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of sec.109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors
of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of sec.141 of the General Corporation Law of the State of
Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the Corporation unless provisions for
such classification shall be set forth in this Certificate of
Incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to
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vote at, any meeting of stockholders. Whenever the Corporation shall be
authorized to issue more than one class of stock, no outstanding share of
any class of stock which is denied voting power under the provisions of the
Certificate of Incorporation shall entitle the holder thereof to the right
to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of sec.242 of the General Corporation Law
of the State of Delaware shall otherwise require; provided, that no share
of any such class which is otherwise denied voting power shall entitle the
holder thereof to vote upon the increase or decrease in the number of
authorized shares of said class.
4. The Board of Directors shall be divided into three (3) classes as
nearly equal in number as possible, with the term of office of Class A
expiring at the annual meeting of stockholders in 2001, of Class B expiring
at the annual meeting of stockholders in 2002, and of Class C expiring at
the annual meeting of stockholders in 2003. At each annual meeting of
stockholders beginning with the annual meeting of stockholders held in
2001, directors chosen to succeed those whose terms then expire shall be
elected for a term of office expiring at the third succeeding annual
meeting of stockholders after their election. When the number of directors
is changed, any newly created directorships or any decreases in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in numbers as possible. When the number of
directors is increased by the Board of Directors and the resultant
vacancies are filled by the Board of Directors, such additional directors
shall serve only until the next annual meeting of stockholders, at which
time they shall be subject to election and classification by the
stockholders. In the event that any director is elected by the Board to
fill a vacancy, which occurs as a result of the death, resignation or
removal of another director, such director will hold office until the
annual meeting of stockholders at which the director who died, resigned or
was removed would have been required, in the regular order of business, to
stand for re-election, even though such term may thereby extend beyond the
next annual meeting of stockholders. Each director who is elected as
provided in this paragraph 4 of Article SEVENTH shall serve until his or
her successor is duly elected and qualifies.
EIGHT: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of sec.102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of sec.145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the
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time prescribed by said laws, and all rights at any time conferred upon the
stockholders of the Corporation by this Certificate of Incorporation are granted
subject to the provisions of this Article TENTH."
Signed on January 25, 2002
/s/ ROBERT W. BEREND
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Robert W. Berend
Secretary
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