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EXHIBIT 3.2
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
JENNA LANE, INC.
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware
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JENNA LANE, INC.
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
We, being, respectively, the President and Secretary of JENNA LANE,
INC., a corporation organized and existing under the General Corporation Law of
the State of Delaware (the "Corporation"), DO HEREBY CERTIFY:
FIRST: That, pursuant to authority expressly granted and vested in the
Board of Directors of said Corporation by the provisions of its Certificate of
Incorporation, as amended, said Board of Directors duly adopted, upon unanimous
written consent, the following resolution:
RESOLVED, that the Board of Directors, pursuant to authority granted
and expressly vested in it by the provisions of the Certificate of Incorporation
of the Corporation, as amended, hereby authorizes the issue from time to time of
a series of Preferred Stock of the Corporation and hereby fixes the designation,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, in addition to those set
forth in said Certificate of Incorporation, as amended, to be in their entirety
as follows:
Section 1. Designation. The series of Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock" and is sometimes
referred to herein as the "Preferred Stock". The number of shares constituting
such series shall be five hundred thousand (500,000).
Section 2. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of each share of Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock or any other
series of Preferred Stock of the Corporation by reason of their ownership
thereof, an amount equal to (i) two dollars ($2.00) per share,
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plus (ii) any and all accrued but unpaid dividends on each share of Preferred
Stock declared or otherwise due and payable pursuant to Section 5 hereof. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation available for distribution to the holders of the Preferred
Stock shall be insufficient to pay the holders of the Preferred Stock the full
amounts to which they respectively shall be entitled pursuant to this Section 2,
the holders of shares of the Preferred Stock shall share ratably in any
distribution of assets according to the respective amounts that would be payable
in respect of the shares of Preferred Stock held by them upon such distribution
if all amounts payable on or with respect to said shares were paid in full.
All of the preferential amounts to be paid to the holders of the
Preferred Stock under this Section 2 shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of the Common
Stock or any other series of Preferred Stock in connection with such
liquidation, dissolution or winding up. After payment shall have been made to
the holders of shares of the Preferred Stock of the full amounts to which they
shall have been entitled pursuant to this Section 2, the holders of shares of
the Corporation's Common Stock and the holders of shares of the Preferred Stock
shall be entitled to share in all remaining assets of the Corporation available
for distribution to its stockholders, such remaining assets to be shared by the
holders of shares of the Corporation's Common Stock and the holders of shares of
the Corporation's Preferred Stock on a pro rata basis calculated as if all of
the outstanding shares of the Preferred Stock had been converted into shares of
Common Stock pursuant to Section 3 hereof immediately prior to such payment.
For the purposes of this Section 2, the term "liquidation" shall be
deemed to include (i) a consolidation or merger of the Corporation with or into
any other corporation, (ii) a merger of any other corporation into the
Corporation, (iii) a reorganization of the Corporation, (iv) a purchase or
redemption of all or a substantial part of the outstanding shares of any class
or classes of capital stock of the Corporation, (v) a sale, transfer, assignment
or other disposition of all or substantially all the assets of the
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Corporation or (vi) a distribution to the Corporation's holders of Common Stock
of the stock of any subsidiary of the Corporation.
If the assets or surplus funds to be distributed to the holders of the
Preferred Stock are insufficient to permit the payment to such holders of their
full preferential amount, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of the Preferred
Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive.
Section 3. Conversion. The holders of any shares of the Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Preferred Stock, into that number of fully paid and nonassessable shares
of Common Stock (calculated to the nearest one-one-hundredth (1/100) of a share)
determined by dividing two dollars ($2.00) by the Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Preferred Stock without the payment of any additional consideration by the
holder thereof (the "Conversion Price") shall initially be two dollars ($2.00)
per share of Common Stock. Such initial Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into which
the Preferred Stock is convertible, as hereinafter provided.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon the closing of a public offering pursuant to an effective
underwritten registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Corporation to the public at a public offering price of at least six dollars
($6.00), subject to adjustment for stock splits, stock dividends,
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recapitalizations and other similar transactions, and having an aggregate
offering price resulting in net proceeds to the Corporation of not less than
Four Million Dollars ($4,000,000) (in the event of which offering, the person(s)
entitled to receive the Common Stock issuable upon such conversion of the
Preferred Stock shall not be deemed to have converted that Preferred Stock until
immediately prior to the closing of such offering). Each person who holds of
record Preferred Stock immediately prior to such automatic conversion shall be
entitled to all dividends which have accrued to the time of the automatic
conversion, but not paid on the Preferred Stock, pursuant to Section 5 hereof.
Such dividends shall be paid to all such holders within thirty (30) days of the
automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred Stock shall be entitled to convert the
same into full shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that he elects to convert the same and shall state
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, or to his nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled as aforesaid, together with cash in lieu of any fraction of a
share, and a certificate or certificates for such number of shares of Preferred
Stock as were represented by the certificates surrendered and not converted.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such
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shares of Common Stock on such date.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 3(d), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the date on which the first share
of Preferred Stock was originally issued.
(3) "Convertible Securities" shall mean any evidences of indebtedness,
shares (other than Common Stock and Preferred Stock) or other securities
directly or indirectly convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or, pursuant to Section 3(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, but shall not include shares of
Common Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock or upon payment of the
common stock dividend which the Corporation may choose to pay on account of the
Preferred Dividend (as defined in Section 5 hereof);
(B) to officers or employees of, or consultants to, the Corporation
pursuant to a stock purchase or option plan or other incentive program approved
by the Board of Directors, or pursuant to such employee's Employment Agreement
with the Corporation, if such shares are issued upon the execution and delivery
thereof; or
(C) by way of dividend or other distribution on shares of Common Stock
excluded from the definition of Additional Shares of Common Stock by the
foregoing clause (A) or (B).
(ii) No Adjustment of Conversion Price. No adjustment in the number of
shares of Common Stock into which the Preferred Stock is convertible shall be
made, by adjustment in the Conversion Price of
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Preferred Stock in respect of the issuance of Additional Shares of Common Stock
or otherwise, unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Share.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
Stock.
(1) Options and Convertible Securities. In the event the Corporation at
any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of any such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 3(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on the
date immediately prior to such issue, or such record date, as the case may be,
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such options or conversion or exchange of such Convertible
securities;
(B) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Corporation, or decrease in the number of
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shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recompute to reflect such increase or decrease insofar as it
effects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) upon the expiration of any such Options or any rights of conversion
or exchange under such Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, upon such expiration, shall be recompute as if:
(I) in the case of Convertible Securities or Options for Common Stock
the only Additional Shares of Common Stock issued were the shares of Common
Stock, if any, actually issued upon the exercise of such options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options for Convertible Securities only the
Convertible Securities, if any, actually issued upon the exercise thereof were
issued at the time of issue of such Options, and the consideration received by
the Corporation for the Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by the Corporation for the
issue of all such options, whether or not exercised, plus the consideration
deemed to have been received by the Corporation (determined pursuant to Section
3(d)(v)) upon the issue of the Convertible Securities with respect to which such
Options were actually exercised;
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(D) no readjustment pursuant to clause (B) or (C) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original adjustment date, or (ii) the
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their terms not more
than 30 days after the date of issue thereof, no adjustment of the Conversion
Price shall be made until the expiration or exercise of all such Options,
whereupon such adjustment shall be made in the same manner provided in clause
(C) above; and
(F) if such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed therefor, the adjustment
previously made in the Conversion Price which became effective on such record
date shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted pursuant to this subparagraph
3(d)(iii) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall declare or pay any dividend or make any other distribution on the Common
Stock payable in Common Stock, or effect a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in Common Stock), then and in any such event, Additional Shares of Common Stock
shall be deemed to have been issued:
(A) in the case of any such dividend or distribution, immediately after
the close of business on the record date for the determination of holders of any
class of securities entitled to receive such dividend or distribution, or
(B) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate action becomes
effective.
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If such record date shall have been fixed and such dividend shall not
have been fully paid on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such record date shall be
cancelled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this subparagraph 3(d)(iii) as of
the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares
of Common Stock. In the event the Corporation shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 3(d)(iii), but excluding Additional Shares of Common Stock
issued pursuant to Section 3(d)(iii)(2), which event is dealt with in Section
3(d)(vi) hereof) without consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent) to an
amount determined by multiplying the Conversion Price by a fraction:
(A) the numerator of which shall be (a) the number of shares of Common
Stock outstanding immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration received by the corporation for the total number of such
additional shares of Common Stock so issued would purchase at the Conversion
Price, and
(B) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such additional
shares of Common Stock, plus (b) the number of such additional shares of Common
Stock so issued.
(v) Determination of Consideration. For purposes of this Section 3(d),
the consideration received by the Corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
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(A) insofar as it consists of cash, be computed at the aggregate amount
of cash received by the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as determined in good faith by
the Board of Directors; and
(C) in the event Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 3(d)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Corporation
as consideration for the issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the event the
Corporation shall issue
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Additional Shares of Common Stock pursuant to Section 3(d)(iii)(2) in a stock
dividend, stock distribution or subdivision, the Conversion Price in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
(2) Combinations or Consolidations. In the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion Price
in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
(vii) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Preferred Stock thereafter shall be
convertible into the number of shares of stock or other securities or property
to which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Preferred Stock would have been entitled
upon such consolidation, merger or conveyance; and, in any case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the holders of the Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes in and
other adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Preferred Stock.
(e) No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may
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be necessary or appropriate in order to protect the conversion rights of the
holders of the Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the number of shares into which the Preferred
Stock may be converted pursuant to this Section 3, the Corporation, at its
expense, promptly shall compute such adjustment or readjustment in accordance
with the terms hereof and, upon request by any holder of Preferred Stock,
furnish to each holder of 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 Corporation, upon the written request
at any time of any holder of Preferred Stock, shall furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters and other than the dividends to be paid pursuant to Section 5
hereof) or other distribution, the Corporation shall mail to each holder of
Preferred Stock at least ten (10) days prior to the date specified herein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as from time to time shall be sufficient to effect conversion of
the Preferred Stock.
Section 4. Voting. (a) The holders of shares of Preferred Stock shall
be entitled to notice of any stockholders' meeting and to vote upon any matter
submitted to a stockholder for a vote, on the following
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basis:
(i) Holders of Common Stock shall have one vote per share on all
matters; and
(ii) Holders of Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock into which each such
share of Preferred Stock held by such holder is convertible.
Section 5. Dividends. The Corporation shall declare and pay to the
holder of each share of Preferred Stock cash dividends aggregating each year in
the amount of ten percent (10%) of the purchase price thereof (the "Preferred
Dividend") at any time that the Corporation legally may pay dividends in
accordance with Delaware law. Such dividends shall be cumulative commencing as
of the Original Issue Date, shall be paid prior and in advance of payment of
dividends on any other capital stock of the Corporation, and shall be paid on at
least an annual basis with respect to the first year after the Original Issue
Date and on at least a quarterly basis thereafter, and in all events prior to
the payment of dividends on any other capital stock of the Corporation.
Notwithstanding the foregoing, the Corporation, with respect to the Preferred
Dividend relating to the first year after the Original Issue Date, may, at its
option, if it legally may pay dividends in accordance with Delaware law, pay the
Preferred Dividend with respect to such year in the form of cash as indicated
above or in the form of one-tenth of one share of Common Stock of the
Corporation (the "Stock Dividend"), provided, that the number of shares
comprising the Stock Dividend shall be adjusted appropriately to reflect
additional issuances of Common Stock after the Original Issuance Date, stock
splits, mergers, reorganizations and the like.
Section 6. Restriction on Additional Issuances. The Corporation shall
not, without the prior written consent of the holders of at least two-thirds of
the then outstanding shares of Series A Convertible Preferred Stock, create or
issue any additional Series A Convertible Preferred Stock (other than the
500,000 shares authorized hereby) or securities of the Company which rank senior
to the Preferred Stock upon payment of dividends or upon liquidation or other
distribution of assets other than debt securities
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issued in connection with borrowings, direct or indirect, from financial
institutions or other persons by the Company, provided such securities and
borrowings do not have any equity features, including warrants, options or other
rights to purchase capital stock, and are not convertible into capital stock of
the Company. The Corporation may create another series of preferred stock on a
basis which is on a parity in any or all respects with the Series A Convertible
Preferred Stock.
SECOND: That said determination of the designation, preferences and the
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, relating to said Preferred Stock, was duly
made by the Board of Directors pursuant to the provisions of the Certificate of
Incorporation of the Corporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this Certificate has been signed by the President
of JENNA LANE, INC. and said Corporation has caused its corporate seal to be
hereunder affixed and attested by its Secretary, all as of the 31st day of
March, 1995.
JENNA LANE, INC. ATTEST:
By: /s/ Mitchell Dobies, Pres. [SEAL] /s/ Mitchell Dobies, Secy
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Mitchell Dobies, President Secretary
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