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EXHIBIT 4.3
[STATE OF CALIFORNIA LOGO]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute
this certificate and affix
the Great Seal of the State
of California this
Sept. 08 1998
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/s/ BILL JONES
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[SEAL] Secretary of State
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A0513452
ENDORSED - FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
OF THE STATE OF CALIFORNIA
AUG 28 1998
BILL JONES, SECRETARY OF STATE
CERTIFICATE OF DETERMINATION OF
MUSTANG SOFTWARE, INC.
JAMES A. HARRER and DONALD M. LEONARD certify that:
1. They are the President and Chief Financial Officer of Mustang Software,
Inc., a California corporation (hereinafter referred to as "the Company").
2. The Company is authorized to issue 10,000,000 shares of Preferred Stock,
none of which has been issued. The Company is authorized to issue 15,246 shares
of Series A Preferred Stock, none of which has been issued.
3. The following resolution was duly adopted by the Board of Directors:
WHEREAS, the board of directors is authorized by the Articles of Incorporation
to divide the Preferred Stock into any number of series, and to fix the
designation and number of shares of such series, and to determine the rights,
preferences, privileges and restrictions of any wholly unissued series of
Preferred Stock,
BE IT RESOLVED, that the Board of Directors hereby establishes a series of
Preferred Stock, designated Series A Preferred Stock, and the number of shares
of such series shall be 15,246.
RESOLVED FURTHER, that the rights, preferences, privileges and restrictions of
the Series A Preferred Stock shall be as follows:
I. Dividends.
The Series A Preferred Stock shall not be entitled to receive dividends.
II. Liquidation, Dissolution or Winding Up
A. Treatment at Liquidation, Dissolution or Winding Up. In the event of
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, before any distribution may be made with respect to the Company's
Common Stock or any other series of capital stock, holders of each share of
Series A Preferred Stock shall be entitled to receive out of the assets
available for distribution to shareholders $100 plus 5 percent per annum thereon
from the Issuance Date (as defined below) to the Trading Day (as defined below)
immediately prior to such liquidation, dissolution or winding up of the Company
( the "Liquidation Amount").
B. If the assets of the Company available for distribution to shareholders
shall be insufficient to pay the holders of shares of Series A Preferred Stock
the full Liquidation Amount to which they shall be entitled, then the entire
assets and funds of the Company shall be distributed ratably to the holders of
shares of Series A Preferred Stock
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C. After the payment of the Liquidation Amount shall have been made in full
to the holders of the Series A Preferred Stock or funds necessary for such
payment shall have been set aside by the Company in trust for the account of
holders of the Series A Preferred Stock so as to be available for such payments,
the holders of the Series A Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Company, and the
remaining assets of the Company legally available for distribution to
shareholders shall be distributed among the holders of Common Stock and any
other classes or series of Preferred Stock of the Company in accordance with
their respective terms.
III. Voting. Holders of Series A Preferred Stock shall have no
voting rights except as expressly required by law or as expressly
provided herein.
IV. Conversion of Series A Preferred Stock. The holder of Series A Preferred
Stock shall have the right, at such holder's option, to convert the Series A
Preferred Stock into shares of Common Stock, on the following terms and
conditions:
A. Conversion. Subject to the provisions of Section IV. M hereof, at any
time or times from and after the ninetieth day after the Issuance Date, any
holder of the Series A Preferred Stock shall be entitled to convert any whole
number of shares of Series A Preferred Stock into fully paid and nonassessable
shares of Common Stock, which is determined by dividing (x) $100 plus five
percent per annum thereon from the Issuance Date (as defined below) to the
Trading Day immediately prior to the Conversion Date (as defined below), by (y)
the Conversion Price (as defined below) (the "Conversion Rate").
B. Certain Definitions. For purposes of this Certificate
of Determination, the following terms shall have the following
meanings:
A "Business Day" shall be any day other than a Saturday, Sunday,
national holiday or a day on which the New York Stock Exchange is closed.
The "Closing Bid Price" shall mean, for any security as of any date,
the last closing bid price for such security on the Nasdaq Stock Market as
reported by Bloomberg Financial Markets ("Bloomberg"), or, if the Nasdaq Stock
Market is not the principal trading market for such security, the last closing
bid price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price of such security in the
over-the-counter market on the OTC Electronic Bulletin board for such security
as reported by Bloomberg, or, the last closing trade price of such security as
reported by Bloomberg, or, if no last closing bid or trade price is reported for
such security by Bloomberg, the closing bid price shall be determined by
reference to the closing bid price as reported on the Principal Market, and if
not so reported shall be determined from the average of the bid prices of any
market makers for such security as reported in the "pink sheets" published by
the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as mutually
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agreed by the Company and the holders of two thirds of the outstanding shares of
Series A Preferred Stock.
The "Conversion Price" shall mean, as of any Conversion Date (as
defined below) the lesser of (i) one hundred (100%) percent of the Closing Bid
Price of the Common Stock on the Trading Day immediately preceding the Issuance
Date, or (ii) ninety percent (90%) of the average of the four lowest Closing Bid
Prices of the Common Stock during the ten (10) day trading period (the "Lookback
Period") immediately preceding the Conversion Date (the "Market Price"). The
Lookback Period shall be increased by two Trading Days every month commencing on
the first Trading Day of the fourth month after the Issuance Date, and continue
to increase by two Trading Days every month thereafter that the Series A
Preferred Stock is outstanding until the Lookback Period equals a maximum of
thirty Trading Days.
"Effective Date" shall mean the date on which the Securities and
Exchange Commission (the "SEC") first declares effective a Registration
Statement registering the resale of two hundred (200%) percent of the number of
shares of Common Stock issuable (irrespective of any shareholder approval
requirement) upon conversion of all of the Series A Preferred Stock outstanding
on the Trading Day immediately preceding the day such Registration Statement is
filed.
The "Issuance Date" shall mean, with respect to each share of Series
A Preferred Stock, the date of issuance of the applicable share of Series A
Preferred Stock.
A "Trading Day" shall mean a day on which the New York Stock Exchange
is open.
The "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small Cap Stock Market, the American Stock Exchange, the OTC Electronic
Bulletin Board operated by the National Association of Securities Dealers, Inc.,
the "pink sheets" published by the National Quotation Bureau, Inc., or the New
York Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
C. Accrual Deduction. In the event the Market Price is greater than
$2.8125, then the number of shares of Common Stock to be issued upon the
conversion of the Series A Preferred Stock shall be reduced by the number of
shares of Common Stock derived from the following formula:
((100 x Market Price) / $1.875) - 150) / (Market Price x 2)
D. Exercise of Conversion Rights. Holders of Series A Preferred Stock may
exercise their right to convert the Series A Preferred Stock by telecopying an
executed and completed notice of conversion (the "Notice of Conversion") to the
Company and delivering to Company the original Notice of Conversion and the
certificate representing the Series A Preferred Stock being converted by
reputable overnight courier. Each business date on which a Notice of Conversion
is telecopied to and received by the Company along with a copy of the originally
executed Series A Preferred Stock certificates in accordance with the provisions
hereof shall be deemed a "Conversion Date". The Company will
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transmit, or instruct its transfer agent to transmit, the certificates
representing shares of Common Stock issuable upon conversion of any share of
Series A Preferred Stock (together with the certificates representing the share
or shares of Series A Preferred Stock not so converted) to the holder thereof
via reputable overnight courier, by electronic transfer or otherwise within
three (3) Business Days after the Conversion Date, provided the Company has
received the original Notice of Conversion and Series A Preferred Stock
certificate being so converted on or before the close of business of the second
Business Day after the Conversion Date. In addition to any other remedies which
may be available to the holders of shares of Series A Preferred Stock, in the
event that the Company fails to deliver, such shares of Common Stock within such
three (3) Business Day period, the holder will be entitled to revoke the
relevant Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion.
The Notice of Conversion and Series A Preferred Stock certificates representing
the portion of the Series A Preferred Stock converted shall be delivered as
follows:
To the Company:
Mustang Software, Inc.
6200 Lake Ming Road
Bakersfield, California 93306
Attention: Don Leonard
Telephone: (805) 873-2580
Facsimile: (805) 873-2474
In the event that shares representing the Common Stock issuable upon
conversion of the Series A Preferred Stock (the "Conversion Shares") are not
delivered by the Company within three (3) Business Days after the Conversion
Date, the Company shall pay to the holders thereof, in immediately available
funds, upon demand, as liquidated damages for such failure and not as a penalty,
for each shares of Series A Preferred Stock sought to be converted, $0.50 for
each of the first ten (10) days and $1.00 for each day thereafter that the
Conversion Shares are not delivered.
Such liquidated damages shall run from the fourth (4th) Business Day
after the Conversion Date. Any and all payments required pursuant to this
paragraph shall be payable only in cash.
E. Capital Reorganization or Reclassification. If the Common Stock issuable
upon the conversion of the Series A Preferred Stock shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, then and in each such
event, the holders of Series A Preferred Stock shall have the right thereafter
to convert such shares into the kind and amount of shares of stock and other
securities and property receivable upon such capital reorganization,
reclassification or other change which such holders would have received had
their shares of Series A Preferred Stock been converted immediately prior to
such capital reorganization, reclassification or other change.
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F. Reorganization, Merger or Sale of Assets. If at any time or from time to
time there shall be a capital reorganization of the Common Stock (other than a
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section) or a merger or consolidation of the Company with or
into another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person (any of which events is
herein referred to as a "Reorganization"), then as a part of such
Reorganization, provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
Reorganization, to which such holder would have been entitled if such holder had
converted its shares of Series A Preferred Stock immediately prior to such
Reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section with respect to the rights of the
holders of the Series A Preferred Stock after the Reorganization, to the end
that the provisions of this Section (including adjustment of the number of
shares issuable upon conversion of the Series A Preferred Stock) shall be
applicable after that event in as nearly equivalent a manner as may be
practicable.
G. Adjustments. Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series A Preferred Stock, the Company, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of such Series A Preferred
Stock a certificate executed by the president and chief financial officer (or in
the absence of a person designated as the chief financial officer, by the
treasurer) setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment are based. The Company
shall, upon written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a certificate setting
forth (A) the Conversion Price at the time in effect, and (B) the number or
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
H. Lost or Stolen Certificates. Upon receipt by the Company of evidence of
the loss, theft, destruction or mutilation of any Series A Preferred Stock
certificate(s), and (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Company, and upon the cancellation of
the Series A Preferred Stock certificate(s), if mutilated, the Company shall
execute and deliver new certificates for Series A Preferred Stock of like tenure
and date. However, the Company shall not be obligated to reissue such lost or
stolen certificates for shares of Series A Preferred Stock if the holder
contemporaneously requests the Company to convert such shares of Series A
Preferred Stock into Common Stock.
I. Fractional Shares. The Company shall not issue any fraction of a share
of Common Stock upon any conversion. The Company shall round such fraction of a
share of Common Stock up to the nearest whole share.
J. Partial Conversion. In the event some but not all of
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the shares of Series A Preferred Stock represented by a certificate or
certificates surrendered by a holder are converted, the Company shall execute
and deliver to or on the order of the holder, at the expense of the Company, a
new certificate representing the number of shares of Series A Preferred Stock
which were not converted.
K. Automatic Conversion. Each share of Series A Preferred Stock outstanding
two years from the Issuance Date shall automatically be converted into Common
Stock on such date at the Conversion Price and such date shall be deemed the
Conversion Date with respect to such shares.
L. Taxes. The Company shall pay any and all original issue and/or transfer
taxes which may be imposed upon it with respect to the issuance and delivery of
Common Stock upon conversion of the Series A Preferred Stock.
M. Conversion Restrictions. Holders may not convert shares of Series A
Preferred Stock unless and until the Company receives shareholder approval for
the below market issuance of the Common Stock and the Common Stock issuable upon
the exercise of the Warrants and conversion of the Series A Preferred Stock, of
more than 20% of the outstanding shares of Common Stock on the initial Issuance
Date, provided, however, that the foregoing restriction shall not apply in the
event the Common Stock is not listed on The Nasdaq Stock Market or the rules of
the Principal Market do not otherwise require shareholder approval for the below
market issuance of the Common Stock and the Common Stock issuable upon the
exercise of the Warrants and conversion of the Series A Preferred Stock, of more
than 20% of the outstanding shares of Common Stock immediately prior to the
initial Issuance Date. Subject to the provisions of the foregoing sentence each
holder may convert no more than one third of the number of shares of Series A
Preferred Stock originally issued to it for each 30 calendar day period, which
shall be cumulative such that if a holder does not convert any shares of Series
A Preferred Stock in one 30 calendar day period, it may then convert up to two
thirds during the subsequent 30 day period.
V. No Reissuance of Series A Preferred Stock. No share or shares of Series A
Preferred Stock acquired by the Company by reason of purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of the Series A Preferred
Stock accordingly.
VI. Reservation of Shares. The Company shall, so long as any of the Series A
Preferred Stock are outstanding reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all of the Series A
Preferred Stock then outstanding; provided that the number of shares of Common
Stock so reserved shall at no time be less than 200% of the number of shares of
Common Stock for which the Series A Preferred Stock are at any time convertible
and if at any time the number of authorized but
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unissued shares of Common Stock shall not be sufficient to maintain such number
of shares of Common Stock, the Company shall take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
VII. Restrictions and Limitations.
A. Corporate Action. Except as expressly provided herein or as required
by law, so long as any shares of Series A Preferred Stock remain outstanding,
the Company shall not, without the approval by vote or written consent by the
holders of at least two thirds of the then outstanding shares of Series A
Preferred Stock, voting as a separate class take any action that would adversely
affect the rights, preferences or privileges of the holders of Series A
Preferred Stock.
B. Protective Provisions. Without limiting the generality of the
preceding paragraph, the Company shall not so long as any shares of Series A
Preferred Stock remain outstanding amend its Articles of Incorporation without
the approval by the holders of at least two thirds of the then outstanding
shares of Series A Preferred Stock if such amendment would:
1. create any other class or series of capital stock entitled to
seniority as to the payment of dividends in relation to the holders of
Series A Preferred Stock;
2. reduce the amount payable to the holders of Series A Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the relative seniority of the
liquidation preferences of the holders of Series A Preferred Stock to
the rights upon liquidation of the holders of other capital stock of
the Company,
3. cancel or modify the conversion rights of the holders of Series
A Preferred Stock provided for in Section IV herein;
4. cancel or modify the rights of the holders of the Series A
Preferred Stock provided for in this Section.
VIII. No Dilution or Impairment. The Company shall not, by amendment of its
Articles 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 of this Certificate of Determination set forth herein, but shall at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the holders of the Series A Preferred Stock against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) shall not establish a par value of any shares of stock
receivable on the conversion of the Series A Preferred Stock above the amount
payable therefor on such conversion, (b) shall 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 stock on the conversion of all Series A
Preferred Stock from time to time outstanding, and (c) shall not consolidate
with or merge into any other person or entity, or permit any such person or
entity to consolidate with or merge into the Company (if the Company is not the
surviving person), unless such other person or entity shall
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expressly assume in writing and will be bound by all of the terms of the Series
A Preferred Stock set forth herein.
IX. Notices of Record Date. In the event of:
1. any taking by the Company 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 or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
2. any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger of the Company,
or any transfer of all or substantially all of the assets of the Company to any
other corporation, or any other entity or person, or
3. any voluntary or involuntary dissolution, liquidation or winding up
of the Company, then and in each such event the Company shall mail or cause to
be mailed to each holder of Series A Preferred Stock a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, merger, dissolution, liquidation or winding up is
expected to become effective and (iii) the time, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least ten (10) Business Days prior
to the date specified in such notice on which such action is to be taken.
We declare under penalty of perjury under the laws of the State of California
that the matters set forth in this certificate are true and correct of own
knowledge.
Dated: August 27, 1998
/s/ JAMES A HARRER
___________________________________
James A. Harrer
/S/ DONALD M. LEONARD
___________________________________
Donald M. Leonard