EXHIBIT 3.1
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
OF THE
SERIES A 10% CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.01 PAR VALUE)
OF
ALLIS-CHALMERS CORPORATION
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Allis-Chalmers Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company (hereinafter called the "Board of Directors")
in accordance with the provisions of the Restated Certificate of Incorporation
of the Company, the Board of Directors hereby creates a series of preferred
stock, par value $.01 per share, of the Company and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Designation and Amount. The shares of such series shall be
designated as the "Series A 10% Cumulative Convertible Preferred Stock, par
value $0.01 per share (the "SERIES A PREFERRED STOCK") and the number of shares
constituting such series shall be 4,200,000. Such number of shares may be
increased from time to time by resolution of the Board of Directors to the
extent dividends on the Series A Preferred Stock are paid in shares of Series A
Preferred Stock pursuant to Section 4(a) or may be decreased from time to time
by resolution of the Board of Directors; provided, however, that such number may
not be decreased below the number of then currently outstanding shares of Series
A Preferred Stock.
Certain Definitions. For the purposes of the Certificate of
Designation, Preferences and Rights which embodies this resolution, unless the
context otherwise requires, capitalized terms used and not otherwise defined in
such Certificate of Designation, Preferences and Rights shall have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural):
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to clause (iii) of Section
11(b), deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than (i) shares of
Common Stock issued upon conversion of the Series A Preferred Stock, (ii) shares
of Common Stock issued concurrently with the issuance of the Series A Preferred
Stock or (iii) shares issued in connection with the following matters:
(a) Options issued to Leonard Toboroff to purchase 500,000 shares
of Common Stock at $.50 per share.
(b) Warrants to purchase 1,165,000 shares of Common Stock to
Wells Fargo Energy Capital, Inc. at $.15 per share and 335,000 shares of
Common Stock at $1.00 per share along with a "put" by Wells Fargo Energy
at $1,500,000.00.
(c) Warrants to Energy Spectrum Partners, LP for 437,500 shares
of Common Stock at $.15 per share and an agreement to issue an
additional 875,000 warrants at the same price in the event the Series A
Preferred Stock is not redeemed on or before its first anniversary.
(d) Shares of Common Stock issuable under the Mortensen
Agreement.
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(e) Shares of Common Stock issuable to Munawar H. Hidayatallah
pursuant to his Employment Agreement with the Company.
(f) Shares issued directly or under warrants, in replacement of
warrants issued to Houlihan, Lokey, Howard & Zukin for 620,000 shares of
common stock of Mountain Compressed Air, Inc.
"BUSINESS DAY" shall mean any day on which banks are open for business in
Houston, Texas (other than a Saturday or a Sunday), provided, that any reference
to "days" (unless Business Days are specified) shall mean calendar days.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the common stock of the Company, par value $.15 per
share, any stock into which such stock shall have been converted or changed or
any stock resulting from any reclassification of such stock and all other stock
of any class or classes (however designated) of the Company, the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
"Company" shall mean Allis-Chalmers Corporation, a Delaware corporation.
"CONVERSION PRICE" shall initially be $.75 per share, and on February 1, 2003
shall be lowered to the lesser of (i) $.60 per share or (ii) 75% of the Market
Price established as of the trading day prior to February 4, 2003, calculated in
accordance with the procedures set forth in the definition of "Market Price".
The Conversion Price, as in effect per the prior sentence, shall be further
adjusted and readjusted from time to time as provided in Section 11(b) and, as
so adjusted and readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by Section 11(b).
"CONVERTIBLE SECURITIES" shall mean with respect to the Company any evidences
of indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR VALUE" shall mean with respect to any securities or other property, the
fair value thereof as of a date which is within 15 days of the date as of which
the determination is to be made (a) determined by agreement between the Company
and the Holder, or (b) if the Company and the Holder fail to agree, determined
jointly by an independent investment banking firm retained by the Company and by
an independent investment banking firm retained by the Holder, either of which
firms may be an independent investment banking firm regularly retained by the
Company, or (c) if the Company or the Holder shall fail so to retain an
independent investment banking firm within ten Business Days of the retention of
such a firm by the Holder or the Company, as the case may be, determined solely
by the firm so retained, or (d) if the firms so retained by the Company and by
the Holder shall be unable to reach a joint determination within 15 Business
Days of the retention of the last firm so retained, determined by another
independent investment banking firm which is not a regular investment banking
firm of the Company chosen by the first two such firms.
"HOLDER" shall have the meaning set forth in Section 3.
"LIQUIDATION VALUE" shall mean, as of any date, an amount equal to $1.00 per
share of Series A Preferred Stock (as appropriately adjusted for any subdivision
or combination of Series A Preferred Stock) plus an amount equal to all
dividends (whether or not declared) accrued and unpaid to such date on the
Series A Preferred Stock.
"MAJOR DECISION" shall mean the decision (whether at a meeting or by written
consent) of the Board of Directors of the Company to do any of the following:
(g) to sell all or substantially all of the assets of the
Company;
(h) to seek protection under any federal or state bankruptcy or
insolvency laws now or hereafter in effect;
(i) to create, by reclassification or otherwise, any class or
series of stock ranking prior or on parity with the Series A Preferred
Stock either as to dividends or upon liquidation, dissolution or winding
up;
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(j) to approve any merger, consolidation or compulsory share
exchange of the Company with or into any entity;
(k) to file a registration statement covering any of the
Company's securities with any federal or state securities commission or
any similar regulatory body, whether within or without the United States
of America;
(l) to approve any financing by the Company which involves in
excess of $1,000,000;
(m) to issue any Additional Shares of Common Stock or any
Convertible Securities or any Options with respect to any of the
foregoing, except for (i) Options granted to employees of the Company
with the approval of the compensation committee of the Board of
Directors, or (ii) Additional Shares of Common Stock issued in
connection with the Mortensen Agreement;
(n) to repurchase or redeem (or permit any subsidiary of the
Company to repurchase) any shares of the capital stock of the Company
except as required herein or pursuant to the terms of that certain
Employment Agreement between the Company and Munawar H. Hidayatallah;
(o) to amend, alter or repeal any of the provisions of the
Certificate of Incorporation of the Company (including the Certificate
of Designation, Preferences and Rights that embodies this resolution);
(p) to amend, alter or repeal any of the provisions of the
Certificate of Incorporation of the Company except to increase the
authorized shares of Common Stock; or
(q) to change the material focus of the Company's business.
"MANDATORY REDEMPTION DATE" shall mean February 1, 2004.
"MANDATORY REDEMPTION EVENT" shall mean the consummation of an offering of
equity securities by the Company that results in net proceeds to the Company at
least equal to the Liquidation Value of the Series A Preferred Stock.
"MARKET PRICE" shall mean on any date specified herein, with respect to
Common Stock or to common stock of a third party, the amount per share equal to
(i) the average of the closing prices thereof for the ten (10) trading days
prior to such date, in each case as officially reported on the principal
national securities exchange on which the same are then listed or admitted to
trading, or (ii) if no shares of Common Stock or no shares of such common stock
(or equivalent equity interests), as the case may be, are then listed or
admitted to trading on any national securities exchange, the average of the
reported closing bid and asked prices thereof for the ten (10) trading days
prior to such date as quoted in the Nasdaq National Market or, if no shares of
Common Stock or no shares of such common stock (or equivalent equity interest),
as the case may be, are then quoted in the Nasdaq National Market, as published
by the National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by any member firm of the New York
Stock Exchange selected by the Company; provided that with respect to (ii)
above, if the average daily trading volume for the subject shares for the thirty
(30) days prior to the date of determination shall be less than 1,000 shares per
day, then the subject Market Price shall be the average of the closing bid price
of such shares on the ten (10) trading days prior to the date of determination,
or (iii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange or quoted or published in the
over-the-counter market, the Fair Value thereof.
"Mortensen Agreement" shall mean, collectively, that certain Stock Purchase
Agreement and Shareholder Agreement dated February 1, 2002, between the Company
and Jens H. Mortensen, Jr.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the
Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONAL REDEMPTION DATE" shall have the meaning specified in Section 8(b).
"OPTIONS" shall mean rights, options or warrants to subscribe for, purchase
or otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
"OTHER SECURITIES" shall mean when referring to the Company, any stock (other
than Company Common Stock) and any other securities of the Company or any other
Person (corporate or otherwise) which the Holder of Series A
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Preferred Stock at any time shall be entitled to receive, or shall have
received, upon conversion of Series A Preferred Stock, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 11(b) or otherwise.
"PERSON" shall mean and include an individual, a partnership, a limited
partnership, an association, a joint venture, a corporation, a trust, a limited
liability company, an unincorporated organization and a government or any
department or agency thereof.
"QUARTERLY DIVIDEND PAYMENT DATE" shall have the meaning specified in Section
4(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall have the meaning specified in Section 1.
Limitation on Holders. All of the outstanding shares of the
Series A Preferred Stock must be held at all times by only one Person (such
Person being referred to herein as the "Holder"). The Holder shall not have the
right to transfer less than all of the outstanding shares of the Series A
Preferred Stock to a third party, except for redemptions and conversions
provided for herein.
Dividends and Distributions.
Dividend Amounts and Payment Dates. The Holder of shares of
Series A Preferred Stock, in preference to the holders of shares of the
Common Stock of the Company and of any other capital stock of the
Company ranking junior to the Series A Preferred Stock as to payment of
dividends, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for that purpose, cash
dividends at the annual rate of $.10 per share, which dividends shall be
fully cumulative, in equal quarterly payments on the last day of
December, March, June and September in each year, except that if any
such date is not a Business Day, then such dividends shall be payable on
the next Business Day (each such date being referred to herein as a
"QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly
Dividend Payment Date following the date of original issue of the Series
A Preferred Stock. Notwithstanding the foregoing, on any Quarterly
Dividend Payment Date, the Company may, at its sole option, elect to pay
the dividend due on such Quarterly Dividend Payment Date in shares of
Series A Preferred Stock, valued at $1.00 per share, in lieu of a cash
dividend payment.
Accrual of Dividends; Partial Dividend Periods. Dividends payable
pursuant to this Section 4 shall accrue and be cumulative from the date
of original issue of the Series A Preferred Stock whether or not there
are funds legally available for the payment of such dividends and
whether or not such dividends are declared. The amount of dividends
payable for the initial dividend period and any other period shorter
than a full quarterly dividend period shall be determined on the basis
of a 360-day year of twelve 30-day months. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of the Holder of shares of Series A Preferred Stock
entitled to receive payment of a dividend declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Voting Rights. The Holder of shares of Series A Preferred Stock
shall have the following voting rights:
Election of Director. So long as any shares of Series A Preferred
Stock are outstanding, the Holder shall have, in addition to the other
voting rights set forth herein, the right, voting separately as a single
class, in person or by proxy, to elect members of the Board of Directors
of the Company (such director(s) to be in addition to the number of
directors constituting the Board of Directors immediately prior to the
exercise of such right and in addition to any directors that are elected
pursuant to, and without regard for any restrictions with respect to the
election of such director(s) by the Series A Preferred Stock set forth
in, the certificates of designation of any other preferred stock of the
Company, with the remaining directors to be elected by the classes or
series of stock entitled to vote thereon) as follows:
If the Holder owns at least 25% of the outstanding Common Stock,
on a fully diluted basis, which shall include shares issuable
upon conversion of the Series A Preferred Stock, the Holder shall
have the right to elect three (3) members of the Board
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of Directors of the Company; provided that the Holder shall have
the right to elect such larger number of Directors as most
closely reflects the Holder's ownership percentage of the
outstanding Common Stock on a fully diluted basis; rounding to
the nearest whole number of Directors; and further provided that
the Holder shall not be entitled to elect a majority of the
members of the Board of Directors unless the Holder shall own in
excess of 50% of the outstanding Common Stock, on a fully diluted
basis; and
If the Holder owns less than 25% but more than 10% of the
outstanding Common Stock on a fully diluted basis, the Holder
shall have the right to elect two (2) members of the Board of
Directors; and
If the Holder owns less than 10% but more than 5% of the
outstanding Common Stock on a fully diluted basis, the Holder of
Series A Preferred Stock shall have the right to elect one (1)
member of the Board of Directors. If the Holder owns less than 5%
of the outstanding Common Stock on a fully diluted basis, the
Holder shall not be entitled to elect any members of the Board of
Directors except as provided in subsection (b) below.
Default Election Rights. If at any time or times the Series A
Preferred Stock is not redeemed on the Mandatory Redemption Date or upon
the occurrence of a Mandatory Redemption Event, then the Holder of the
Series A Preferred Stock shall have, in addition to the other voting
rights set forth herein, the right, voting separately as a single class,
in person or by proxy, to elect two (2) additional members of the Board
of Directors of the Company. Such directors shall be in addition to the
number of directors constituting the Board immediately prior to the
accrual of such right and in addition to any directors that are elected
pursuant to, and without regard for any restrictions with respect to the
election of such directors by the Series A Preferred Stock set forth in,
the certificates of designation of any other preferred stock of the
Company, the remaining directors to be elected by the classes or series
of stock entitled to vote thereon. Such voting rights shall continue
until such time as the Series A Preferred Stock is redeemed as provided
below; provided, however, that the Holder of the Series A Preferred
Stock shall again have such voting right to elect such directors at any
subsequent time during which the Series A Preferred Stock is not
redeemed on the Mandatory Redemption Date or upon the occurrence of a
Mandatory Redemption Event.
Exercise of Voting Rights. The voting rights of the Holder of the
Series A Preferred Stock, voting separately as one class pursuant to
this Section 5, may be exercised either at an annual or special meeting
of the stockholders of the Company, or by written consent of such Holder
in lieu of a meeting. If at any time (i) the voting right to elect a
number of directors pursuant to Section 5(b) shall have vested in the
Holder or (ii) the directorship or directorships filled by the Holder
pursuant to Section 5(a) or 5(b) becomes vacant, the Holder may, by
sending a written consent addressed to the Secretary of the Company,
elect such directors referred to in clause (i) above or fill such
vacancy or vacancies referred to in clause (ii) above, as the case may
be.
Any director elected pursuant to this Section 5 shall serve until
the next annual meeting or until his or her successor shall be elected
and shall qualify; provided, however, that with respect to any directors
elected by the Holder pursuant to Section 5(b), when the right of such
Holder to elect directors pursuant to such Section 5(b) shall terminate,
the terms of office of all directors so elected by such Holder shall
thereupon automatically terminate, and the number of directors
constituting the entire Board shall thereupon be the number of directors
remaining following said termination.
Any director elected by the Holder may be removed from office
only by consent of the Holder.
Provisions of Certificate of Incorporation and Bylaws. So long as
any shares of Series A Preferred Stock are outstanding, the Certificate
of Incorporation and Bylaws of the Company shall contain provisions
ensuring that the number of directors of the Company shall at all times
be such that the exercise by the Holder of the right to elect a director
or directors pursuant to this Section 5 will not contravene any
provisions of the Company's Certificate of Incorporation or Bylaws.
Additional Voting Rights; Major Decisions. (i) Until such time
as all except one of the outstanding shares of the Series A Preferred
Stock shall have been redeemed, the Company will not either directly or
indirectly, without the written consent of the Holder of the Series A
Preferred Stock,
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consummate any transaction constituting a Major Decision; and (ii)
except as otherwise provided herein or required by law, the Holder of
Series A Preferred Stock shall vote as a single class with the holders
of Common Stock and shall have such votes in respect of each share of
Series A Preferred Stock on any matter, including, without limitation,
the election of directors, submitted to the holders of Common Stock as
the number of shares of Common Stock into which shares of Series A
Preferred Stock may then be converted. The Holder shall be entitled to
notice of any stockholders' meeting or solicitation of stockholders'
consents in the manner provided in the Bylaws of the Company for general
notices.
Certain Restrictions.
Prohibition on Payment of Dividends in Respect of Other Capital
Stock. Whenever quarterly dividends payable on shares of Series A
Preferred Stock as provided in Section 4 hereof are in arrears,
thereafter and until all accrued and unpaid dividends, whether or not
declared, on the outstanding shares of Series A Preferred Stock shall
have been paid in full, or in the event the Series A Preferred Stock is
not redeemed on the Mandatory Redemption Date or upon the occurrence of
a Mandatory Redemption Event, as applicable, the Company shall not: (i)
declare or pay dividends, or make any other distributions, on any shares
of capital stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock
or (ii) declare or pay dividends, or make any other distributions, on
any shares of capital stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all capital stock ranking on a parity with the Series A
Preferred Stock and on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all such shares
are then entitled.
Prohibition on Redemption of Capital Stock. Whenever quarterly
dividends payable on shares of the Series A Preferred Stock as provided
in Section 4 hereof are in arrears, thereafter and until all accrued and
unpaid dividends, whether or not declared, on the outstanding shares of
each series of the Series A Preferred Stock shall have been paid in
full, or in the event each series of the Series A Preferred Stock is not
redeemed on the Mandatory Redemption Date or upon the occurrence of a
Mandatory Redemption Event, as applicable, the Company shall not: (i)
redeem or purchase or otherwise acquire for consideration any shares of
capital stock ranking (either as to dividends or upon liquidation,
dissolution or winding up) junior to, or on a parity with, the Series A
Preferred Stock; or (ii) redeem or purchase or otherwise acquire for
consideration any shares of the Series A Preferred Stock, except the
Company (A) shall redeem outstanding shares of Series A Preferred Stock
pursuant to Section 7 hereof and (B) may otherwise redeem shares of
Series A Preferred Stock pursuant to Section 8 hereof.
Prohibition on Acquisition of Capital Stock by Subsidiary. The
Company shall not permit any subsidiary of the Company to purchase or
otherwise acquire for consideration any shares of capital stock of the
Company unless the Company could purchase such shares at such time and
in such manner.
Mandatory Redemption by the Company.
Redemption. Upon the earlier to occur of a Mandatory Redemption
Event or the Mandatory Redemption Date, the Company shall redeem all
except one share of the Series A Preferred Stock as set forth herein.
The Company will not take any action that consummates or finalizes a
Mandatory Redemption Event unless at least thirty (30) days prior to
such action it shall have delivered written notice of such impending
Mandatory Redemption Event by mail, postage prepaid, to the Holder at
its address then appearing on the books of the Company. The Company
will, within five Business Days after the occurrence of any Mandatory
Redemption Event, deliver written notice of such Mandatory Redemption
Event by mail, postage prepaid, to the Holder at its address then
appearing on the books of the Company.
Redemption Price. Redemption of shares of the Series A Preferred
Stock to be redeemed pursuant to this Section 6 shall be at a redemption
price equal to the Liquidation Value per share, which shall include an
amount equal to all dividends (whether or not declared) accrued and
unpaid to such date. The redemption shall be made on the earlier of the
Mandatory Redemption Date or not less than five (5) nor more than ten
(10) Business Days following the delivery of notice of the occurrence of
a Mandatory Redemption Event, as appropriate. If the Company shall not
have sufficient funds legally available for redeeming the shares of the
Series A Preferred Stock at the designated date above for redemption,
the
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Company shall redeem such number of the Holder's shares of Series A
Preferred Stock as possible out of funds legally available therefor and
shall redeem the remaining shares to be redeemed (with dividends
continuing to accrue on such shares until redeemed) as soon as
practicable after the Company has funds legally available therefor.
Shares Deemed No Longer Outstanding. From and after payment in
full of the redemption price of any shares of the Series A Preferred
Stock redeemed pursuant to this Section 7, including an amount equal to
accrued and unpaid dividends thereon to the date designated for
redemption, and notwithstanding that any certificate representing shares
of the Series A Preferred Stock to be redeemed shall not have been
surrendered for cancellation, such shares shall no longer be deemed
outstanding, and the Holder shall have no rights in or with respect to
the Company except the right to receive, whether or not the certificates
representing the shares of the applicable series of the Series A
Preferred Stock are surrendered prior to, on or subsequent to the date
designated for redemption, the redemption price therefor, which shall
include an amount equal to accrued and unpaid dividends thereon to the
date designated for redemption.
Redemption of Remaining Share. Following redemption of all except
one share of the Series A Preferred Stock, the Company shall, upon the
written request of the Holder, redeem the remaining share of Series A
Preferred Stock at a redemption price equal to the Liquidation Value of
such share.
Optional Redemption.
Optional Redemption. The Company, at its option, may at any time
redeem all (excluding, subject to Section 8(f) hereof, one share), of
the shares or such lesser part, of the shares of the then outstanding
shares of the Series A Preferred Stock, at a redemption price equal to
the Liquidation Value, which shall include an amount equal to all
dividends (whether or not declared) accrued and unpaid to such date.
Notice of Optional Redemption. In the event the Company elects to
redeem all but excluding one of the outstanding shares of the Series A
Preferred Stock as set forth above, the Company will, at least 30 days
prior to the date fixed for the redemption of the Series A Preferred
Stock pursuant to this Section 8, deliver written notice of such
redemption election by mail, postage prepaid, to the Holder of record of
the Series A Preferred Stock at its address then appearing on the books
of the Company. Such notice shall specify the date fixed for redemption
(the "OPTIONAL REDEMPTION DATE"), which shall be not less than 30 days
and not more than 90 days after the date such notice is delivered. Such
notice shall be accompanied by the certificate described in Section
8(e).
Redemption Price. Redemption of the Series A Preferred Stock to
be redeemed pursuant to this Section 8 shall be at a redemption price
equal to the Liquidation Value per share, which shall include an amount
equal to all dividends (whether or not declared) accrued and unpaid to
such date. The redemption shall be made on the Optional Redemption Date.
Shares Deemed No Longer Outstanding. From and after payment in
full of the redemption price of any shares of the Series A Preferred
Stock redeemed pursuant to this Section 8, which shall include an amount
equal to accrued and unpaid dividends thereon to the date designated for
redemption, and notwithstanding that any certificate representing shares
of the Series A Preferred Stock called for redemption shall not have
been surrendered for cancellation, such shares shall no longer be deemed
outstanding, and the Holder shall have with respect to such shares no
rights in or with respect to the Company except the right to receive,
whether or not certificates representing the shares of the applicable
series of the Series A Preferred Stock are surrendered prior to, on or
subsequent to the Optional Redemption Date, the redemption price
therefor, which shall include an amount equal to accrued and unpaid
dividends thereon to the date designated for redemption.
Delivery of Officer's Certificate. Each notice delivered pursuant
to Section 8(b) shall be accompanied by an Officer's Certificate,
specifying (i) that such redemption is being elected pursuant to this
Section 8, (ii) the dividends that would be due on each share of the
Series A Preferred Stock to be redeemed, accrued to the Optional
Redemption Date, and (iii) describing any conversion rights applicable
to the Series A Preferred Stock.
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Redemption of Remaining Share. The Company may redeem all of the
outstanding shares of Series A Preferred Stock in accordance with the
provisions set forth above, at any time when the Holder shall own less
than 5% of the outstanding Common Stock on a fully diluted basis.
Reacquired Shares. Any shares of Series A Preferred Stock
converted, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of preferred stock without designation as to class or series and
may thereafter be issued, but not as shares of Series A Preferred Stock.
Liquidation, Dissolution or Winding Up.
Liquidation Preference. Except as provided in Section 10(b), upon
any liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of capital stock
of the Company ranking junior (upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless, prior thereto, the Holder of
shares of Series A Preferred Stock shall have received an amount equal
to the Liquidation Value for all outstanding shares of Series A
Preferred Stock or (ii) to the holders of shares of capital stock
ranking on a parity (upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon
such liquidation, dissolution or winding up.
Insolvency. If the Company shall commence a voluntary case under
the federal bankruptcy laws or any other applicable federal or state
bankruptcy, insolvency or similar law, or consent to the entry of an
order for relief in an involuntary case under any such 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 federal bankruptcy laws
or any other applicable federal or state bankruptcy, insolvency or
similar law, or appointing 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 90 consecutive days and on
account of any such event the Company shall liquidate, dissolve or wind
up, no distribution shall be made (i) to the holders of shares of
capital stock of the Company ranking junior (upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the Holder of shares of Series A Preferred Stock shall have
received an amount equal to the Liquidation Value for all outstanding
shares of Series A Preferred Stock to the date of such payment, or (ii)
to the holders of shares of capital stock ranking on a parity (upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
Business Combinations. Neither the consolidation, merger or other
business combination of the Company with or into any other Person or
Persons nor the sale of all or substantially all of the assets of the
Company shall be deemed to be a liquidation, dissolution or winding up
of the Company for purposes of this Section 10.
Conversion. The shares of Series A Preferred Stock may be
converted at any time, at the option of the Holder, in whole or in part, into
shares of Common Stock, on the terms and conditions set forth in this Section
11.
Conversion Ratio. Subject to the provisions for adjustment set
forth below, each share of Series A Preferred Stock shall be convertible
in the manner hereinafter set forth into that number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock
equal to the Liquidation Value divided by the Conversion Price.
14
Anti-Dilution Adjustments. The Conversion Price and the number of
shares of Common Stock into which each share of Series A Preferred Stock
is convertible shall be subject to adjustment from time to time as
follows:
Issuance of Additional Shares of Common Stock. In case the
Company, at any time or from time to time after the date hereof,
shall issue or sell Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
clause (iii) below) for a consideration per share (determined
pursuant to clause (iv) below) less than the Conversion Price, on
the date of and immediately prior to such issue or sale, then,
and in each such case, subject to clause (v) below, the
Conversion Price shall be reduced, concurrently with such issue
or sale, to a price equal to the consideration per share
(determined pursuant to clause (iv) below) for which such
Additional Shares of Common Stock were issued or sold or deemed
issued or sold.
Adjustment for Change in Capital Stock. If the Company:
pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock or
Options;
subdivides its outstanding shares of Common
Stock into a greater number of shares;
combines its outstanding shares of Common
Stock into a smaller number of shares;
makes a distribution on its Common Stock in
shares of its capital stock other than Common
Stock; or
issues by reclassification of its Common
Stock any other securities;
then the conversion privilege and the Conversion Price in effect immediately
prior to such action shall be adjusted so that the Holder may receive the number
of shares of capital stock of the Company that it would have owned immediately
following such action if it had converted the Series A Preferred Stock
immediately prior to such action.
This adjustment shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the effective date in
the case of a subdivision, combination or reclassification.
If after an adjustment the Holder upon conversion of such shares may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Conversion Price between the classes of
capital stock. After such allocation, the conversion privilege and the
Conversion Price of each class of capital stock thereafter shall be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
In case the Company shall declare, order, pay or make a dividend or other
distribution other than (A) a dividend payable in shares of Common Stock or in
Options or (B) a regular periodic dividend payable in cash then, and in each
such case, the Company shall pay over to the Holder of Series A Preferred Stock,
on the date on which such dividend or other distribution is paid to the holders
of Common Stock, the securities and other property (including cash) which such
Holder would have received if such Holder had converted such Series A Preferred
Stock to Common Stock immediately prior to the record date fixed in connection
with such dividend or other distribution.
Treatment of Options and Convertible Securities. In case
the Company, at any time or from time to time after the date
hereof, shall issue, sell, grant or assume, any Options or
Convertible Securities, whether or not such Options or the right
to convert or exchange any such Convertible Securities are
immediately exercisable, then, and in each such case, the shares
of Common Stock (as set forth in the instrument relating thereto,
without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and
Options therefor, issuable upon the conversion or exchange of
such Convertible Securities (or the exercise of such Options for
Convertible Securities and subsequent conversion or exchange of
the Convertible Securities issued), shall be
15
deemed to be Additional Shares of Common Stock issued as of the
time of such issue, sale, grant or assumption, PROVIDED, that
such Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined
pursuant to clause (iv) below) of such shares would be less than
the Conversion Price in effect on the date of and immediately
prior to such issue, sale, grant or assumption, and PROVIDED,
FURTHER, that in any such case in which Additional Shares of
Common Stock are deemed to be issued,
no further adjustment of the Conversion Price shall
be made upon the subsequent issue or sale of Additional
Shares of Common Stock or Convertible Securities upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities;
if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any change in the consideration payable to the Company, or
change in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof (by change of rate or otherwise), the Conversion
Price computed upon the original issue, sale, grant or
assumption thereof, and any subsequent adjustments based
thereon, shall, upon any such change becoming effective,
be recomputed to reflect such change insofar as it affects
such Options, or the rights of conversion or exchange
under such Convertible Securities, which are outstanding
at such time;
upon the expiration of all such Options or of all
of the rights of conversion or exchange under any such
Convertible Securities which shall not have been exercised
(or upon purchase by the Company and cancellation or
retirement of all such Options which shall not have been
exercised or of any such Convertible Securities the rights
of conversion or exchange under which shall not have been
exercised), the Conversion Price computed upon the
original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon
such expiration (or such cancellation or retirement, as
the case may be), be recomputed as if such Options or
Convertible Securities had never been issued, sold,
granted or assumed; and
no recomputation pursuant to subclauses (B) or (C)
above shall have the effect of increasing the Conversion
Price then in effect by an amount in excess of the amount
of the adjustment thereof originally made in respect of
the issue, sale, grant or assumption of such Options or
Convertible Securities.
Computation of Consideration. For the purposes of this
Section 11:
The consideration for the issue or sale of any
Additional Shares of Common Stock or for the issue, sale,
grant or assumption of any Options or Convertible
Securities, irrespective of the accounting treatment of
such consideration,
insofar as it consists of cash, shall be
computed as the amount of cash received by the
Company, and insofar as it consists of securities
or other property, shall be computed as of the date
immediately preceding such issue, sale, grant or
assumption as the Fair Value of such consideration
(or, if such consideration is received for the
issue or sale of Additional Shares of Common Stock
and the Market Price thereof is less than the Fair
Value of such consideration, then such
consideration shall be computed as the Market Price
of such Additional Shares of Common Stock), in each
case without deducting any expenses paid or
incurred by the Company, any commissions or
compensation paid or concessions or discounts
allowed to underwriters, dealers or others
performing similar services and any accrued
interest or dividends in connection with such issue
or sale, and
16
in case Additional Shares of Common Stock are
issued or sold or Options or Convertible Securities
are issued, sold, granted or assumed together with
other stock or securities or other assets of the
Company for a consideration which covers both,
shall be the proportion of such consideration so
received, computed as provided in subclause (1)
above, allocable to such Additional Shares of
Common Stock or Options or Convertible Securities,
as the case may be, all as determined in good faith
by the Board of Directors of the Company.
Additional Shares of Common Stock deemed to have
been issued for consideration pursuant to clause (iii)
above, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration
per share determined by dividing
the total amount, if any, received and
receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or
Convertible Securities in question, 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 Company upon the
exercise in full 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, in each case computing such
consideration as provided in the foregoing
subclause (A),
by
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.
Minimum Adjustment of the Conversion Price. If the amount
of any adjustment of the Conversion Price required hereunder
would be less than one percent of the Conversion Price in effect
at the time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate at least one
percent of such Conversion Price; PROVIDED, THAT upon the
conversion of any Series A Preferred Stock, all adjustments
carried forward and not theretofore made up to and including the
date of such conversion shall, with respect to the shares of
Series A Preferred Stock then converted, be made to the nearest
.001 of a cent.
Changes in Common Stock. In case at any time the Company
shall be a party to any transaction (including, without
limitation, a merger, consolidation, sale of all or substantially
all of the Company's assets, liquidation or recapitalization of
the Common Stock) in which the previously outstanding Common
Stock shall be changed into or exchanged for different securities
of the Company or common stock or other securities of another
company or interests in a noncorporate entity or other property
(including cash) or any combination of any of the foregoing then,
as a condition of the consummation of such transaction, lawful
and adequate provisions (in form reasonably satisfactory to the
Holder) shall be made so that the Holder, upon the conversion
thereof at any time on or after the consummation date of the
subject transaction shall be entitled to receive, and each share
of Series A Preferred Stock shall thereafter represent the right
to receive, in lieu of the Common Stock previously issuable upon
such conversion the same consideration as the Holder would have
received had the Holder converted its Series A Preferred Stock
into Common Stock immediately prior to the transaction.
17
Notwithstanding anything contained herein to the contrary, the Company shall
not effect any transaction described in the immediately preceding paragraph
unless prior to the consummation thereof each corporation or entity (other
than the Company) which may be required to deliver any securities or other
property upon the conversion of Series A Preferred Stock shall assume, by
written instrument delivered to the Holder, the obligation to deliver to the
Holder such securities or other property as to which, in accordance with the
foregoing provisions, the Holder may be entitled, and such corporation or
entity shall have similarly delivered to the Holder an opinion of counsel
for such corporation or entity, satisfactory to the Holder, which opinion
shall state that the conversion rights of the Holder shall thereafter
continue in full force and effect and shall be enforceable against such
corporation or entity in accordance with the terms hereof and thereof,
together with such other matters as the Holder may reasonably request.
Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any
adjustment of the Conversion Price in the case of (i) the
issuance of the Series A Preferred Stock, (ii) the issuance of
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, (iii) the issuance of Common Stock concurrently
with the transaction in which the Series A Preferred Stock was
issued (iv) the exercise by the Holder of any Options owned by
it, (v) the issuance of any Common Stock in connection with the
Mortensen Agreement, and (vi) the exercise of the Toboroff
Options or Options granted to management of the Company.
Dilution in Case of Other Securities. In case any other
securities shall be issued or sold or shall become subject to
issue or sale upon the conversion or exchange of any stock of the
Company (or any other issuer or Person) or become subject to
subscription, purchase or other acquisition pursuant to any
Options issued or granted by the Company (or any other issuer or
Person), in each case for a consideration such as to dilute, on a
basis to which the standards established in the other provisions
of this Section 11 do not apply, the conversion rights of the
Holder, then in each such case the computations, adjustments and
readjustments provided for in this Section 11 with respect to the
Conversion Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of other
securities from time to time receivable upon the conversion of
the Series A Preferred Stock, so as to protect the Holder against
the effect of such dilution.
Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Conversion Price, then and in each
such case the Company shall promptly deliver to the Holder an
Officer's Certificate stating the Conversion Price resulting from
such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock issuable upon conversion of each
share of Series A Preferred Stock, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based. Within 90 days after each fiscal year in
which any such adjustment shall have occurred, or within 30 days
after any request therefor by the Holder stating that the Holder
contemplates conversion of any Series A Preferred Stock, the
Company will obtain and deliver to such Holder the opinion of its
regular independent auditors or another firm of independent
public accountants of recognized national standing selected by
the Company's Board of Directors, which opinion shall confirm the
statements in the most recent Officer's Certificate delivered
under this clause.
Other Notices. In case at any time:
the Company shall declare to the holders of Common
Stock any dividend;
the Company shall declare or pay any dividend upon
its Common Stock payable in stock or make any special
dividend or other distribution (other than regular cash
dividends) to the holders of its Common Stock;
the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares
of stock of any class or other rights;
18
there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with or sale of all
or substantially all of its assets to, another corporation
or other entity;
there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
there shall be made any tender offer for any shares
of capital stock of the Company;
then, in any one or more of such cases, the Company shall give to the Holder
of Series A Preferred Stock (1) at least 10 days prior to any event referred
to in subclause (A) or (B) above, at least 20 days prior to any event
referred to in subclause (C), (D) or (E) above, and within five days after
it has knowledge of any pending tender offer or other transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or similar transaction or the date by which shareholders must
tender shares in any tender offer and (2) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or tender offer known to the Company, at least 20
days prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (1) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date
on which the holders of Common Stock shall be entitled thereto, and such
notice in accordance with the foregoing clause (2) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or tender offer, as the case may be. Such notice
shall also state that the action in question or the record date is subject
to the effectiveness of a registration statement under the Securities Act or
to a favorable vote of security holders, if either is required.
Certain Events. If any event occurs as to which, in the
good faith judgment of the Board of Directors of the Company, the
other provisions of this Section 11 are not strictly applicable
or if strictly applicable would not fairly protect the conversion
rights of the Holder in accordance with the essential intent and
principles of such provisions, then the Board of Directors of the
Company shall appoint its regular independent auditors or another
firm of independent public accountants of recognized national
standing which shall give their opinion upon the adjustment, if
any, on a basis consistent with such essential intent and
principles, necessary to preserve, without dilution, the rights
of the Holder. Upon receipt of such opinion, the Board of
Directors of the Company shall forthwith make the adjustments
described therein; PROVIDED, THAT no such adjustment shall have
the effect of increasing the Conversion Price as otherwise
determined pursuant to this Section 11. The Company may make such
reductions in the Conversion Price as it deems advisable,
including any reductions intended to ensure that any event
treated for Federal income tax purposes as a distribution of
stock or stock rights not be taxable to recipients.
Prohibition of Certain Actions. The Company will 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
Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 11 and in the
taking of all such action as may reasonably be requested by the
Holder in order to protect the conversion privilege of such
Holder against dilution or other impairment, consistent with the
tenor and purpose of this Section 11. Without limiting the
generality of the foregoing, the Company (A) will not increase
the par value of any shares of Common Stock receivable upon the
conversion of Series A Preferred Stock above the Conversion Price
then in effect, (and before taking any action which would cause
an adjustment reducing the Conversion Price below the then par
value (if any) of the Common Stock deliverable upon conversion of
the Series A Preferred Stock, will take any corporate action
which may, in the opinion of its counsel, be necessary in order
that the Company may validly
19
and legally issue fully paid and non-assessable Common Stock at
such adjusted Conversion Price), (B) will take all such action as
may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of
Common Stock upon the conversion of all Series A Preferred Stock
from time to time outstanding, (C) will not take any action which
results in any adjustment of the Conversion Price if the total
number of shares of Common Stock or Other Securities issuable
after the action upon the conversion of all shares of Series A
Preferred Stock would exceed the total number of shares of Common
Stock or Other Securities then authorized by the Company's
Certificate of Incorporation and available for the purpose of
issue upon such conversion, and (D) will not issue any capital
stock of any class which has the right to more than one vote per
share or any capital stock of any class which is preferred as to
dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or
percentage (or floating rate related to market yields) of par
value or stated value in respect of participation in dividends
and a fixed sum or percentage of par value or stated value in any
such distribution of assets.
Surrender of Certificates. The Holder may exercise such Holder's
right to convert shares of Series A Preferred Stock into shares of
Common Stock by surrendering for such purpose to the Company, at its
principal office or at such other office or agency maintained by the
Company for that purpose, a certificate or certificates representing the
shares of Series A Preferred Stock to be converted accompanied by a
written notice stating that such Holder elects to convert all or a
specified whole number of such shares in accordance with the provisions
of this Section 11 and specifying the name or names in which such Holder
wishes the certificate or certificates for shares of Common Stock to be
issued. As promptly as practicable, and in any event within five
Business Days after the surrender of such certificate or certificates
and the receipt of such notice relating thereto, the Company shall
deliver or cause to be delivered (i) certificates representing the
number of validly issued, fully paid and nonassessable full shares of
Common Stock to which the holder of shares of Series A Preferred Stock
so converted shall be entitled and (ii) if less than the full number of
shares of Series A Preferred Stock evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares
converted. Such conversion shall be deemed to have been made at the
close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
Series A Preferred Stock to be converted so that the rights of the
Holder thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance herewith, and
the person entitled to receive the shares of Common Stock shall be
treated for all purposes as having become the record holder of such
shares of Common Stock at such time.
Time for Conversion. Shares of Series A Preferred Stock may be
converted at any time up to the close of business on the Business Day
preceding the date fixed for redemption of such shares pursuant to
Sections 7 or 8 hereof.
Dividends in Respect of Converted Shares. Upon conversion of any
shares of Series A Preferred Stock, the Holder thereof shall not be
entitled to receive any accumulated, accrued or unpaid dividends in
respect of the shares so converted; provided, that such Holder shall be
entitled to receive any dividends on such shares of Series A Preferred
Stock declared prior to such conversion if such Holder held such shares
on the record date fixed for the determination of the Holder to receive
payment of such dividend.
Fractional Shares. In connection with the conversion of any
shares of Series A Preferred Stock, no fractions of shares of Common
Stock shall be issued, but in lieu thereof the Company shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Market Price per share of the
Common Stock on the day on which such shares of Series A Preferred Stock
are deemed to have been converted.
Stock to be Reserved. The Company will at all times reserve and
keep available out of the authorized Common Stock, solely for the
purpose of issue upon conversion of Series A Preferred Stock as herein
provided, such number of shares of the Common Stock as shall then be
issuable upon the conversion of all outstanding Series A Preferred
Stock, and the Company will maintain at all times all other rights and
20
privileges sufficient to enable it to fulfill all its obligations
hereunder. The Company covenants that all shares of the Common Stock
which shall be so issuable shall, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable, free from preemptive or
similar rights on the part of the holders of any shares of capital stock
or securities of the Company or any other Person, and free from all
taxes, liens and charges with respect to the issue thereof (not
including any income taxes payable by the holders of Series A Preferred
Stock being converted in respect of gains thereon). The Company will
take all such action as may be necessary to assure that such shares of
the Common Stock may be so issued without violation of any applicable
law or regulation, or of any applicable requirements of the National
Association of Securities Dealers, Inc. and of any domestic securities
exchange upon which the Common Stock may be listed.
Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of the conversion of Series A
Preferred Stock require registration with or approval of any
governmental authority under any Federal or State law, before such
shares may be issued upon the conversion thereof, the Company will, at
its expense and as expeditiously as possible, use its best efforts to
cause such shares to be duly registered or approved, as the case may be.
At any such time as the Common Stock is listed on any national
securities exchange or quoted by the Nasdaq National Market or any
successor thereto or any comparable system, the Company will, at its
expense, obtain promptly and maintain the approval for listing on each
such exchange or quoting by the Nasdaq National Market or such successor
thereto or comparable system, upon official notice of issuance, the
shares of the Common Stock issuable upon conversion of the then
outstanding Series A Preferred Stock and maintain the listing or quoting
of such shares after their issuance so long as the Common Stock is so
listed or quoted; and the Company will also cause to be so listed or
quoted, will register under the Exchange Act and will maintain such
listing or quoting of, any Other Securities that at any time are
issuable upon conversion of the Series A Preferred Stock, if and at the
time that any securities of the same class shall be listed on such
national securities exchange by the Company.
Issue Tax. The issuance of certificates for shares of the Common
Stock upon conversion of any shares of Series A Preferred Stock shall be
made without charge to the Holder thereof for any issuance tax in
respect thereto.
Closing of Books. The Company will at no time close its transfer
books against the transfer of any shares of Series A Preferred Stock or
of any share of the Common Stock issued or issuable upon the conversion
of Series A Preferred Stock in any manner which interferes with the
timely conversion of such Series A Preferred Stock.
Ranking. For purposes of the Certificate of Designation,
Preferences and Rights embodying this resolution, any stock of any class or
series of the Company shall be deemed to rank:
prior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, if the holders of stock of such class or
series shall be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the Holder
of shares of the Series A Preferred Stock;
on a parity basis with shares of the Series A Preferred Stock,
either as to dividends or upon liquidation, whether or not the dividend
rates or redemption or liquidation prices per share thereof be different
from those of the Series A Preferred Stock, if the holders of stock of
such class or series shall be entitled by the terms thereof to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or
priority of one over the other as between the holders of such stock and
the Holder of shares of the Series A Preferred Stock; and
junior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, if such class or series shall be the
Common Stock of the Company or if the Holder of the Series A Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of stock of such class
or series.
21
Headings of Subdivisions. The headings of the various Sections
and other subdivisions hereof are for convenience of reference only and shall
not affect the interpretation of any of the provisions hereof.
Severability of Provisions. If any voting powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Stock and qualifications, limitations and restrictions thereon set
forth in the Certificate of Designation, Preferences and Rights embodying this
resolution is invalid, unlawful or incapable of being enforced by reason of any
rule of law or public policy, all other powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereon set forth therein which can
be given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Stock and qualifications, limitations and restrictions
thereon shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of Series A Preferred Stock and qualifications, limitations and
restrictions thereon herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Series A Preferred Stock and qualifications, limitations and
restrictions thereon unless so expressed herein.
IN WITNESS WHEREOF, said Allis-Chalmers Corporation has caused this
Certificate of Designation, Preferences and Rights of Series A10% Cumulative
Convertible Preferred Stock, to be duly executed by its Chief Executive Officer
and attested to by its Secretary this ______ day of ______________, 2002.
ALLIS-CHALMERS CORPORATION
By:
Chief Executive Officer
ATTEST:
_______________________________
Secretary
22