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EXHIBIT 4.7
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF SERIES E CONVERTIBLE PREFERRED STOCK
OF
THE PRODUCERS ENTERTAINMENT GROUP LTD.
THE PRODUCERS ENTERTAINMENT GROUP LTD., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that the following resolutions were adopted
by the Board of Directors of the Corporation (the "Board of Directors") pursuant
to authority conferred upon the Board of Directors in the Restated Certificate
of Incorporation and pursuant to the provisions of Section 151 of the Delaware
General Corporation Law:
RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors, in accordance with the provisions of the Certificate of
Incorporation (as amended from time to time) of the Corporation, the Board of
Directors hereby creates out of the Corporation's previously authorized
preferred stock, $.001 par value per share, of the Corporation a series of
preferred stock to consist of not more than 500,000 shares, and the Board of
Directors hereby fixes the designation and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the shares of such series
as follows:
1. DESIGNATION. This resolution shall provide for a single series of
convertible preferred stock, the designation of which shall be the Series E
Convertible Preferred Stock (hereinafter the "Series E Preferred Stock") and the
number of authorized shares constituting the Series E Preferred Stock is
500,000. The stated value of each share of Series E Preferred Stock is ten
dollars ($10.00). The number of authorized shares of Series E Preferred Stock
may be reduced or increased by a further resolution duly adopted by the Board of
Directors of the Corporation and by the filing of an amendment to the
Corporation's Certificate of Incorporation pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such reduction or
increase has been so authorized.
2. VOTING. Except as expressly required by the laws of the State of
Delaware or as set forth herein, the holders of the Series E Preferred Stock
shall have no voting rights. Any corporate action that may require a vote of the
holders of the Series E Preferred Stock as a class shall be deemed to have been
approved by that class upon the affirmative vote by the holders of a majority of
the issued and outstanding Series E Preferred Stock unless a higher voting
requirement is imposed by the Delaware General Corporation Law. If any corporate
action shall require a vote of the holders of the Series E Preferred Stock other
than as a class, the Series E Preferred Stock shall vote as a group with the the
Corporation's Common Stock, $.001 par value per share (the "Common Stock") as if
the Series E Preferred Stock had been fully converted three (3) business days
prior to the date of the vote.
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3. DIVIDENDS.
3.1 RATE. Holders of Series E Preferred Stock shall be
entitled to receive, out of any funds of the Corporation legally available for
that purpose, cumulative dividends from the date of issuance at the rate of $.60
per year per Preferred Share, payable quarterly (pro-rated for partial quarters)
in arrears in cash, or, at the option of the Corporation, in shares of its
Free-Trading Common Stock (as defined herein) at the applicable Conversion Rate
(as defined in Section 5.2 below), on the first day of April, July, October and
January of each year commencing January 1, 1999 (each such date being
hereinafter individually referred to as the "Dividend Payment Date" and
collectively as the "Dividend Payment Dates"). Notwithstanding the preceding
sentence, should the Corporation in its discretion determine to pay said
dividends in shares of Free Trading Common Stock, then all accumulated and
unpaid dividends shall be paid at the time of each conversion of the Series E
Preferred Stock, such that upon each conversion of the Series E Preferred Stock
by the holder thereof, the Corporation shall pay all accumulated and unpaid
dividends owed as of the date of such conversion. Each such dividend shall be
paid to the holders of record of the Series E Preferred Stock as they appear on
the books of the Corporation on the record date which shall be not less than 30
days prior to the related Dividend Payment Date. Dividends on the Series E
Preferred Stock shall be declared and paid to the extent the Corporation is
legally able to do so and shall be cumulative to the extent not declared and
paid. Holders of Series E Preferred Stock shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
dividends as herein provided on the Series E Preferred Stock. "Free-Trading
Common Stock" shall mean shares of Common Stock that are either "restricted
securities" as defined in Rule 144 under the Securities Act of 1933 (the
"Securities Act"), but the resales of such shares have been registered under a
registration statement filed with the United States Securities and Exchange
Commission or otherwise are freely tradable without restriction.
3.2 DIVIDENDS ON COMMON STOCK. No dividends (other than those
payable solely in Common Stock) shall be paid with respect to the Common Stock
during any fiscal year of the Corporation unless all accumulated and unpaid
dividends and the quarterly dividend on the shares of Preferred Stock for the
then current dividend period shall have been declared and a sum sufficient for
the payment thereof set apart. No shares of Common Stock shall be purchased,
redeemed or acquired by the Corporation, and no funds shall be paid into or set
aside or made available for a sinking fund for the purchase, redemption or
acquisition thereof except (A) in transactions aggregating not more than
$100,000.00 per year, (B) in transactions resulting from a legal obligation of
the Corporation to redeem, purchase or otherwise acquire its securities arising
prior to the date hereof, or (C) pursuant to Section 5.1 herein.
4. REDEMPTION. Except as provided in Section 3.2 herein, the Series E
Preferred Stock shall not be redeemable at any time prior to September 30, 2000.
Thereafter, the Corporation, on the sole authority of its Board of Directors,
may, at its option and at any time prior to notice of conversion of the Series E
Preferred Stock by the holder thereof as hereinafter provided, redeem all or any
part of the Series E Preferred Stock at the time issued and outstanding for an
amount in cash equal to $11.75 per share plus any accumulated and unpaid
dividends. Except as provided in Section 3.2 herein, if less than all the Series
E Preferred Stock are to be redeemed, then such redemption shall be pro rata
based on the number of Series E Preferred Stock
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owned of record by each Preferred Shareholder. Written notice of redemption
stating the date and place of redemption and the amount of the redemption price
shall be mailed by the Corporation not less than 30 days nor more than 60 days
prior to the redemption date to the record holders of the shares to be redeemed
directed to their last known address as shown by the Corporation records. If
notice of redemption is given as provided above and if on the redemption date
the Corporation has set apart in trust for the purpose sufficient funds for such
redemption, then from and after the redemption date, notwithstanding that any
certificate for such shares has not been surrendered for cancellation, the
Series E Preferred Stock called for redemption shall no longer be deemed to be
outstanding and all rights with respect to such shares shall forthwith cease and
terminate, except only the right of the holders thereof to receive the
redemption price without interest upon surrender of certificates representing
the shares called for redemption. Any monies remaining in trust after one year
from the redemption date shall be returned to the Corporation and thereafter
holders of certificates for such shares shall look only to the Corporation for
the redemption price thereof. Upon conversion of any Series E Preferred Stock
called for redemption into Common Stock, then the portion of the monies held in
trust for redemption of such shares shall forthwith be returned to the
Corporation.
5. CONVERSION.
5.1 PROHIBITION AGAINST SHORT SALES. No holder of Series E
Preferred Stock shall directly or indirectly effect a short sale of the
Corporation's Common Stock for the holder's own account or for the account of a
Related Person. "Short sale" shall mean any sale of a security which the seller
does not beneficially own or any sale which is consummated by the delivery of a
security borrowed by, or for the account of, the seller, in either case whether
or not the seller is the owner of Common Stock at the time of such sale.
"Related Person" shall mean (A) any member of the holder's immediate family; (B)
any entity of which the holder is an officer, director, or holder of a position
having comparable duties or responsibilities; (C) any entity in which the holder
is the owner of an equity interest; and (D) any person which would be deemed to
be an "affiliate" of the holder as that term is defined in the Securities Act of
1933 or the rules and regulations promulgated thereunder.
5.2 CONVERSION RATE. So long as a holder of Series E Preferred
Stock is not in breach of Section 5 herein and subject to Section 5.8 herein,
such holder shall have the right, exercisable at any time after issuance, and on
or before the close of business on the second full business day preceding the
date, if any, fixed for the redemption of such shares as provided herein, to
surrender the certificate or certificates evidencing such shares and receive in
lieu and in conversion thereof, and in lieu of accumulated and unpaid dividends
thereon, that number of shares of the Corporation's Common Stock as equals
$10.00 per share of Preferred Stock tendered for conversion, plus accumulated
and unpaid dividends thereon, divided by the lesser of (A) 82.5% of the average
of the closing bid prices per share of the Corporation's Common Stock on the
Nasdaq Stock Market, any national securities exchange, the OTC Bulletin Board or
any other market on which the Common Stock is listed or eligible for trading for
the five trading days preceding the date such conversion is deemed to have been
made, as subsequently defined herein; or (B) the post adjustment exercise price
per share of Common Stock purchasable pursuant to the Repriced Warrant (defined
in the next sentence). The Company issued, during the month of June,
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1996, a warrant to purchase 500,000 shares of Common Stock at a split-adjusted
exercise price equal to $5.50 per share (the "Repriced Warrant"). The Company
has agreed under certain conditions to adjust the exercise price for the
Repriced Warrant, so that such exercise price may become a price below the
market price for the Common Stock at the time of such re-pricing.
5.3 MECHANICS OF CONVERSION.
(a) HOLDER'S DELIVERY REQUIREMENTS. To convert Series
E Preferred Stock into full shares of Common Stock, the holder thereof shall (A)
deliver or transmit by facsimile, for receipt on or prior to 5:00 p.m., New York
time (the "Conversion Notice Deadline") on the date of conversion, a copy of the
fully executed notice of conversion ("Notice of Conversion") to the Corporation
at the office of the Corporation or its designated transfer agent (the "Transfer
Agent") with a copy delivered to the Corporation, and (B) surrender to a common
carrier for delivery to the office of the Corporation or the Transfer Agent, the
original certificates representing the Series E Preferred Stock being converted
(the "Preferred Stock Certificates"), duly endorsed for cancellation. The holder
of the Series E Preferred Stock shall have the right to convert fewer than the
full number of shares of Series E Preferred Stock held at any given time.
(b) CORPORATION'S RESPONSE. Upon receipt by the
Corporation or the Transfer Agent of the Preferred Stock Certificates to be
converted pursuant to a Notice of Conversion (or an indemnification undertaking
reasonably satisfactory to the Corporation and the posting of a bond if and as
reasonably required by the Company's transfer agent with respect to such shares
in the case of their loss, theft or destruction) together with the originally
executed Notice of Conversion, the Corporation shall, within two business days
after the date of receipt (the "Deadline"), instruct the Transfer Agent to issue
and surrender to a common carrier for either overnight or (if delivery is
outside the United States) two (2) day delivery to the address as specified in
the Notice of Conversion, a certificate for the number of shares of Common Stock
to which the holder shall be entitled as aforesaid, and the Corporation shall
take all reasonable steps to ensure that the Transfer Agent has complied with
such instructions. In the case of a dispute as to the calculation of the
conversion rate, the Corporation shall promptly issue to the holder the number
of shares of Common Stock that is not disputed and shall submit the disputed
calculations to its outside accountant via facsimile within one (1) day of
receipt of such holder's Notice of Conversion. The Corporation shall cause the
accountant to perform the calculations and notify the Corporation and the holder
of the results no later than twenty-four (24) hours from the time it receives
the disputed calculations. Such accountant's calculation shall be deemed
conclusive absent manifest error. Should the Notice of Conversion specify a
smaller number of Series E Preferred Stock to be converted than are represented
by the Preferred Stock Certificate surrendered to the Corporation, then the
Corporation shall immediately issue a new Preferred Stock Certificate
representing the number of Series E Preferred Stock not yet converted, and
deliver the same to the holder thereof along with the Common Stock as stated
above.
(c) DATE OF CONVERSION. The date on which conversion
occurs (the "Date of Conversion") shall be deemed to be the date set forth in
such Notice of Conversion, provided (A) that the advance copy of the Notice of
Conversion is faxed to the Corporation before 5:00 p.m., New York time, on the
Date of Conversion, and (B) that the original Preferred Stock
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Certificates representing the Series E Preferred Stock to be converted, together
with the originally executed Notice of Conversion, are surrendered by depositing
such certificates and Notice with a common carrier, as provided above, and
received by the Transfer Agent or the Corporation on or prior to the second
(2nd) business day following the date Set forth in the Notice of Conversion. In
the event the Preferred Stock Certificates and the originally executed Notice of
Conversion are not received on or prior to the second (2nd) business day after
the date of the Notice of Conversion, the Notice of Conversion shall be deemed
null and void and no conversion of Series E Preferred Stock shall be effected
thereby. The person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated, as of the Date of Conversion,
for all purposes as the record holder or holders of such shares of Common Stock
on the Date of Conversion.
(d) Notwithstanding anything contained herein to the
contrary, if any action is required herein to be taken by the Corporation or the
Transfer Agent on a day which is not a business day, then such action shall be
deemed to be timely if taken on the next following business day.
5.4 OPTIONAL CONVERSION. At the option of the Corporation, if
any Series E Preferred Stock remain outstanding on September 30, 2001, then all
or any part of such Series E Preferred Stock as the Corporation elects shall be
converted in accordance with Section 5.3 as if the holders of such Series E
Preferred Stock had given the Notice of Conversion effective as of that date,
and the Date of Conversion had been fixed as of September 30, 2001 for all
purposes of Paragraph 5.3. Following notice by the Corporation to the holders,
all holders of Preferred Stock certificates shall within five (5) business days
after receipt of such notice surrender all Preferred Stock certificates, duly
endorsed for cancellation, to the Corporation or the Transfer Agent, as the
Corporation may direct. No person shall thereafter have any rights in respect of
Series E Preferred Stock, except the right to receive shares of Common Stock on
conversion thereof as provided in this Section 5.
5.5 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION.
If the Common Stock issuable upon the conversion of Series E Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a reorganization, merger, consolidation or sale of assets
provided for below), then and in each such event, the holder of each Preferred
Share shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change by holders of the number of
shares of Common Stock into which such Series E Preferred Stock might have been
converted immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
5.6 MERGER OR OTHER TRANSACTIONS. In the event the
Corporation, at any time while any of the Series E Preferred Stock are
outstanding, shall be consolidated with or merged into any other corporation or
corporations or shall sell or lease all or substantially all of its property and
business as an entirety, then lawful provisions shall be made as part of the
terms of such consolidation, merger, sale or lease so that the holder of any
Series E Preferred Stock may
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thereafter receive in lieu of such Common Stock otherwise issuable to him upon
conversion of his Series E Preferred Stock, but at the conversion rate which
would otherwise be in effect at the time of conversion, as hereinbefore
provided, the same kind and amount of securities or assets as may be issuable,
distributable or payable upon such consolidation, merger, sale or lease with
respect to Common Stock of the Corporation.
5.7 FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon conversion of Series E
Preferred Stock. If more than one certificate shall be surrendered for
conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares so surrendered. In lieu of any fractional shares
of Common Stock which would otherwise be issuable upon conversion of any shares
of Series D Preferred Stock;, the number of shares issuable upon conversion
shall be rounded up to the nearest whole share.
5.8 RESERVATION OF COMMON SHARES. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common Stock
the number of shares of Common Stock deliverable upon conversion of all the
issued and outstanding Series E Preferred Stock and shall take such action to
obtain such permits or orders as may be necessary to enable the Corporation
lawfully to issue such Common Stock upon the conversion of the Series E
Preferred Stock.
6. RIGHTS ON LIQUIDATION. In the event of the liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, resulting in
any distribution of its assets to its shareholders, the holders of the Series E
Preferred Stock then issued and outstanding shall be entitled to receive out of
the assets of the Corporation available for distribution to its shareholders, an
amount equal to $10.00 per Preferred Share plus any accumulated but unpaid
dividends, and no more, before any payment or distribution of the assets of the
Corporation is made to or set apart for the holders of Common Stock. If the
assets of the Corporation distributable to the holders of Series E Preferred
Stock are insufficient for the payment to them of the full preferential amount
described above, such assets shall be distributed ratably among the holders of
the Series E Preferred Stock. The holders of the Common Stock shall be entitled
to the exclusion of the holders of the Series E Preferred Stock to share in all
remaining assets of the Corporation in accordance with their respective
interests. For purposes of this paragraph, a consolidation or merger of the
Corporation with any other corporation or corporations shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation. Notwithstanding
anything in these Articles of Amendment to the contrary, all shares of Series E
Preferred Stock shall (i) rank pari passu with the Series D Preferred Stock of
the Corporation to be issued pursuant to that certain Securities Purchase
Agreement dated July __, 1998 (the "Purchase Agreement"), (ii) shall rank senior
to any class or series of capital stock of the Corporation hereafter created
(unless otherwise agreed to by a majority of the holders of the Series E
Preferred Stock then outstanding), and (iii) shall rank junior to all of the
preferred stock of the Corporation issued and outstanding as of the date of
execution of the Purchase Agreement.
7. NOTICE. Any notice required to be given to the holders of Series E
Preferred Stock or any securities issued upon conversion thereof shall be deemed
to have been given upon the
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earlier of personal delivery or three days after deposit in the United States
mails by registered or certified mail, return receipt requested, with postage
fully prepaid, and addressed to each holder of record at his address as it
appears on the stock transfer records of the Corporation. Any notice to the
Corporation shall be in writing and shall be deemed to have been given only upon
actual receipt thereof.
8. LEGEND. All certificates representing the Series E Preferred Stock,
all shares of Common Stock issued upon conversion thereof and any and all
securities issued in replacement thereof or in exchange therefor shall bear such
legends (or not) as shall be required by law or contract.
IN WITNESS WHEREOF, THE PRODUCERS ENTERTAINMENT GROUP LTD. has caused
this Certificate to be signed by Arthur Bernstein, its Secretary this 30th day
of July, 1998.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
By: /S/ ARTHUR H. BERNSTEIN
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Arthur H. Bernstein, Secretary
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