CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PRT GROUP INC.
_________________________________________
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
_________________________________________
PRT Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
FIRST: Article FOURTH of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as set forth below:
FOURTH: (a) Authorized Capital Stock. The total number of shares
of stock which the Corporation shall have authority to issue is
61,000,000 shares of capital stock, consisting of (i) 50,000,000
shares of voting common stock, par value $.001 per share (the "Voting
Common Stock"), (ii) 1,000,000 shares of non-voting common stock, par
value $.001 per share (the "Non-Voting Common Stock" and, together
with the Voting Common Stock, the "Common Stock"), and (iii)
10,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"). The Preferred Stock shall consist of (1)
8,000,000 shares of Series A Convertible Preferred Stock, par value
$.001 per share (the "Series A Preferred Stock") with such rights as
are set forth below under "Description and Designation of Series A
Preferred Stock", and (2) 2,000,000 shares of such Preferred Stock,
par value $.001 per share, as may be established by the Board of
Directors as set forth under "Additional Series of Preferred Stock",
below.
Description and Designation of Series A Preferred Stock
Section 1. Designation and Number.
Section 1.1 Designation. There is hereby created out of the
authorized and unissued shares of Preferred Stock a series of preferred
stock designated as the "Series A Senior Participating Convertible
Preferred Stock" (the "Series A Preferred Stock"). The maximum number of
shares constituting the Series A Preferred Stock shall be 8,000,000 shares.
Section 2. Priority.
Section 2.1 Priority. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and other distributions, and
distribution of assets upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, and redemption whether now or hereafter
issued, senior to (a) the common stock, par value $.001 per share, of the
Corporation (the "Common Stock"), (b) the non-voting common stock, par
value $.001 per share, of the Corporation, (c) any other class or series of
preferred stock of the Corporation established by the Board of Directors
and (d) any other equity securities of the Corporation (all of such equity
securities of the Corporation to which the Series A Preferred Stock ranks
senior, including the Common Stock, are at all times collectively referred
to herein as the "Junior Securities").
Section 2.2 Parity Stock. "Parity Stock" shall mean any capital
stock of the Corporation ranking senior to or on a parity (either as to
dividends and other distributions, registration rights, or upon
liquidation, dissolution or winding up of the Corporation or on redemption
thereof) with the Series A Preferred Stock. So long as any Series A
Preferred Stock is outstanding, the Corporation shall not issue any capital
stock of the Corporation ranking senior to or on a parity (either as to
dividends and other distributions, registration rights, upon liquidation,
dissolution or winding up of the Corporation or in any other manner) with
the Series A Preferred Stock.
Section 3. Dividends and Distributions.
Section 3.1 Dividends.
(a) So long as any shares of Series A Preferred Stock are
outstanding, without the prior approval of the holders of 70% of the shares
of Series A Preferred Stock then outstanding (voting or consenting in
writing as a separate class), the Corporation shall not declare, pay or set
apart for payment any dividend on any of the Junior Securities or make any
payment on account of, or set apart for payment, money or establish a
sinking or other similar fund for, the purchase, redemption, retirement or
other acquisition of, or otherwise acquire for value, any of the Junior
Securities or any warrants, rights, calls or options exercisable for any of
the Junior Securities, or make any distribution in respect thereof, either
directly or indirectly, whether in cash, obligations or shares of the
Corporation or other property, and shall not purchase or redeem, or permit
any other entity directly or indirectly controlled by the Corporation to
purchase or redeem, any of the Junior Securities or any warrants, rights,
calls or options exercisable for any of the Junior Securities.
(b) In addition to the provisions of paragraph (a), above, in
case the Corporation shall at any time or from time to time declare, order,
pay or make a dividend or other distribution (including, without
limitation, any dividend or other distribution of stock or other securities
or property or rights, options or warrants to subscribe for or otherwise
acquire securities or other property of the Corporation or any of its
Subsidiaries) on or in respect of its Common Stock, then in each such case,
the holder of shares of Series A Preferred Stock shall be entitled to
receive from the Corporation, with respect to each share of Series A
Preferred Stock held, the same dividend or other distribution (in terms of
the kind and amount of shares of stock and other securities or property,
rights or assets, including cash) received by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock is
convertible on the record date for such dividend or other distribution.
Such dividends shall be payable at the earlier of (i) at the close of
business on the date specified as the payment date for such dividend or
distribution by the Board of Directors of the Corporation at the time any
such dividend or distribution is declared, (ii) the time any liquidating
distribution is made to the holders of the Series A Preferred Stock and
(iii) immediately prior to the time the shares of Series A Preferred Stock
are converted pursuant to Section 7 hereof.
Section 3.2 No Additional Dividends. The holders of shares of
Series A Preferred Stock shall not be entitled to receive any dividends or
other distributions, except as provided herein.
Section 4. Liquidation, Dissolution or Winding Up, etc.
Section 4.1 Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, or if the Corporation shall commence a
voluntary case under the Federal bankruptcy laws or any other applicable
bankruptcy, insolvency or similar law, or consent to the entry of an order
for relief in an involuntary case under any such law or to the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
other similar official) of the Corporation 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 Corporation 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 Corporation or 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 Corporation shall liquidate,
dissolve or wind up, no distribution shall be made to the holders of shares
of Junior Securities unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received the Liquidation Preference, with
respect to each share of Series A Preferred Stock. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation, or the proceeds thereof, distributable among the holders
of the shares of Series A Preferred Stock shall be insufficient to pay in
full the Liquidation Preference, then such assets, or the proceeds thereof,
shall be distributable ratably among the holders of shares of Series A
Preferred Stock in accordance with the respective amounts that would be
payable on such shares of Series A Preferred Stock if all amounts payable
thereon were paid in full. "Liquidation Preference" shall mean $1.00 per
share (as adjusted from time to time on the occurrence of an Adjustment
Event) of Series A Preferred Stock (the "Stated Value"), plus an amount
equal to all unpaid dividends or other distributions thereon.
(b) After any such payment pursuant to Section 4.1(a) shall have
been made in full to such holders of such securities, or funds necessary
for such payment shall have been set aside by the Corporation in trust for
the exclusive benefit of such holders of such securities so as to be
available for such payment, any assets remaining available for distribution
shall be distributed to the holders of Series A Preferred Stock and Common
Stock of the Corporation, pro rata based on the number of shares of Common
Stock to which the holders of the Series A Preferred Stock would then be
entitled upon conversion of such shares.
(c) Non-Cash Distributions. In the event of a liquidation,
dissolution, or winding-up of the Corporation resulting in the availability
of assets other than cash for distribution to the holders of shares of
Series A Preferred Stock, the holders of Series A Preferred Stock shall be
entitled to a distribution of cash and/or other assets equal in value to
the relative Liquidation Preference and other distribution rights stated in
Sections 4.1(a) and (b). If such distribution to the holders of shares of
Series A Preferred Stock shall include any assets other than cash, the
Board of Directors shall first determine in good faith and with due care
the value of such assets for such purpose, and shall notify all holders of
shares of Series A Preferred Stock of such determination. The value of
such assets for purposes of the distribution under this Section 4.1(c)
shall be the value as so determined by the Board of Directors, unless the
holders of a majority of the outstanding shares of Series A Preferred Stock
shall object thereto in writing within 15 days after the date of such
notice.
(d) Dispute Resolution Procedures. In the event of such
objection pursuant to the provisions of the last sentence of Section
4.1(c), above, the valuation of such assets for purposes of such
distribution shall be determined by an arbitrator mutually agreed upon and
selected by the objecting stockholders and the Board of Directors, or in
the event a single arbitrator cannot be agreed upon within 10 days after
the written objection sent by the objecting stockholders in accordance with
subsection (c), the valuation of such assets shall be determined by an
arbitration in which (i) the objecting stockholders shall name in their
notice of objection one arbitrator, (ii) the Board of Directors shall name
a second arbitrator within 15 days from the receipt of such notice,
(iii) the two arbitrators thus selected shall select a third arbitrator
within 15 days thereafter, and (iv) the three arbitrators thus selected
shall determine by majority vote the valuation of such assets within 15
days thereafter for purposes of such distribution. In the event the third
arbitrator is not selected as provided herein, then such arbitrator shall
be selected by the President of the American Arbitration Association
("AAA"). The costs of such arbitration shall be borne by the Corporation
or by the holders of Series A Preferred Stock (on a pro rata basis out of
the assets otherwise distributable to them) as follows: (i) if the
valuation as determined by the arbitrators is greater than 90% of the
valuation as determined by the Board of Directors, the holders of Series A
Preferred Stock shall pay the costs of the arbitration, and (ii) otherwise,
the Corporation shall bear the costs of the arbitration. The arbitration
shall be held in New York, New York, in accordance with the rules of the
AAA. The award made by the arbitrators shall be binding upon the
Corporation and the holders of all shares of Common Stock and Series A
Preferred Stock, no appeal may be taken from such award, and judgment
thereon may be entered in any court of competent jurisdiction.
Section 4.2 Deemed Liquidations by Holders of Series A Preferred
Stock. Upon the written election of the holders of seventy percent (70%)
of the outstanding shares of Series A Preferred Stock, (i) a consolidation
or merger of the Corporation with or into any other person(s) or
entity(ies) (other than a consolidation or merger in which the Corporation
is the surviving corporation and upon consummation of which the holders of
voting securities of the Corporation immediately prior to such transaction
continue to own, directly or indirectly, not less than a majority of the
voting securities of the Corporation, as the surviving corporation,
immediately following such transaction), (ii) a sale of all or
substantially all of the assets of the Corporation, (iii) a sale or other
disposition of more than 50% of the voting capital stock (in a single
transaction or series of related transactions) of the Corporation (whether
issued and outstanding, newly issued or from treasury, or any combination
thereof), or (iv) any other similar transaction, shall be regarded as a
liquidation, dissolution, or winding-up of the affairs of the Corporation
within the meaning of Section 4.1. Notwithstanding the foregoing, each
holder of Series A Preferred Stock shall have the right to elect the
benefits of the applicable provisions of Section 7 hereof in lieu of
receiving payment in liquidation, dissolution, or winding-up of the
Corporation pursuant to Section 4.1; and if the holders of seventy percent
(70%) of the outstanding shares of Series A Preferred Stock, as a class,
shall elect to avail themselves of the benefits of Section 4.1, such
holders may require that the holders of all outstanding shares of Series A
Preferred Stock shall be bound by the same election. For purposes of this
Section 4.2, a sale (whether in a single transaction or a series of related
transactions) of substantially all of the assets of the Corporation shall
mean the sale or other disposition, other than in the ordinary course of
business, of more than 50% of such assets, as determined by reference to
the fair market value of the Corporation.
Section 4.3 Deemed Partial Liquidations. The Corporation shall
give each holder of the Series A Preferred Stock at least ten (10) days
prior written notice of any sale, whether in a single transaction or in a
series of related transactions, of any asset or assets of the Corporation
(other than in the ordinary course of business) which constitute less than
all or substantially all of the assets of the Corporation (any such
transaction being a "Partial Liquidation"). Upon the written election of
the holders of seventy percent (70%) of the outstanding shares of Series A
Preferred Stock, the proceeds of any such Partial Liquidation shall be
distributed as provided in Section 4.1, above; provided, however, that (x)
the Liquidation Preference attributable to each share of Series A Preferred
Stock shall be reduced to the extent of any distributions to the holder
thereof by operation of this Section 4.3; and (y) except as set forth in
the immediately preceding clause (x), the provisions of this Section 4.3
shall not in any way impair the rights of the holders of shares of Series
Preferred Stock pursuant to the provisions of Section 4.1, above.
Section 5. Voting Rights.
The holder of each share of Series A Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the
regulations of the Corporation. In addition to any voting rights provided
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:
Section 5.1 With Common Stock. So long as the Series A
Preferred Stock is outstanding, each share of Series A Preferred Stock
shall entitle the holder thereof to vote on all matters voted on by holders
of Common Stock, voting together as a single class with all other shares
entitled to vote at all meetings of the stockholders of the Corporation.
With respect to any such vote, each share of Series A Preferred Stock shall
entitle the holder thereof to cast the number of votes equal to the number
of votes which could be cast in such vote by a holder of the number of
shares of Common Stock of the Corporation into which each such share of
Series A Preferred Stock is convertible on the record date for such vote.
Section 5.2 As a Class.
(a) The affirmative vote of the holders of at least 70% of
the outstanding shares of Series A Preferred Stock, voting as a separate
class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize,
increase the authorized number of shares of, or issue (including on
conversion or exchange of any convertible or exchangeable securities or by
reclassification), any shares of any class or series of capital stock of
the Corporation ranking senior to, or on a parity with (as to dividends or
other distributions or the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding up or redemption), the
Series A Preferred Stock; (ii) increase the authorized number of shares of,
or issue (including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any shares of Series A
Preferred Stock; (iii) authorize, adopt or approve an amendment to the
Amended and Restated Certificate of Incorporation of the Corporation which
would decrease the aggregate number of authorized shares of Series A
Preferred Stock, increase or decrease the par or Stated Value of the shares
of Series A Preferred Stock, or alter or change the powers, preferences or
special rights of the shares of Series A Preferred Stock so as to affect
such shares of Series A Preferred Stock adversely; or (iv) reclassify any
Junior Securities into shares having any preference or priority as to
dividends or other distributions, registration rights or distribution of
assets upon liquidation, dissolution or winding up or any similar
transaction or as to redemption senior to or on a parity with any such
preference or priority of the Series A Preferred Stock.
(b) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not do nor shall it cause any of its
subsidiaries, if any, to do any of the following, nor alter, amend, modify
or terminate any provision of this Section 5.2(b), without the affirmative
vote or written consent of the holders of seventy percent (70%) of the
shares of Series A Preferred Stock (on an as converted basis), in addition
to the right of any other class or classes of capital stock to vote on such
matters and any other vote required by law, and any attempt to do so will
be null and void:
(i) Create or authorize the creation of, or authorize the
issuance of, any additional class(es) or series or shares of capital
stock, or any shares of any existing class(es) or series of capital
stock, senior or pari passu to the Series A Preferred Stock as to any
one or more of liquidation, dividends, redemption or registration
rights ("Senior Shares"), or create or authorize any obligation or
security convertible into Senior Shares.
(ii) Amend the Corporation's Certificate of Incorporation or the
bylaws of the Corporation so as to adversely affect the rights and
preferences of the Series A Preferred Stock (it being understood that
the authorization and/or issuance of any shares of any series of stock
or securities of the Corporation with preference or priority senior to
or on a parity with the Series A Preferred Stock as to any one or more
of dividends, redemption or the distribution of assets on liquidation,
dissolution or winding-up of the Corporation (as provided in Section
4.1 hereof) shall be deemed to affect adversely the rights and
preferences of the Series A Preferred Stock).
(iii) Become subject to any agreement that would restrict the
Corporation's performance of its obligations under the terms of this
Certificate of Designation, its bylaws, the Securities Purchase
Agreement or under any of the other "Transaction Documents" (as such
term is defined in the Securities Purchase Agreement).
(iv) Obligate itself to do any of the foregoing.
Section 5.3 Exercise. The foregoing rights of holders of shares
of Series A Preferred Stock to take any actions as provided in this Section
5 may be exercised at any annual meeting of stockholders or at a special
meeting of stockholders held for such purpose as hereinafter provided or at
any adjournment thereof, or by the written consent, delivered to the
Secretary of the Corporation, of the holders of the minimum number of
shares required to take such action.
So long as such right to vote continues (and unless such right
has been exercised by written consent of the minimum number of shares
required to take such action), the Chairman of the Board of the Corporation
may call, and, upon the written request of holders of record of 20% of the
outstanding shares of Series A Preferred Stock addressed to the Secretary
of the Corporation at the principal office of the Corporation, shall call a
special meeting of the holders of shares entitled to vote as provided
herein. Such meeting shall be held within 30 days after delivery of such
request to the Secretary, at the place and upon the notice provided by law
and in the By-laws of the Corporation for the holding of meetings of
stockholders.
Section 5.4 Quorum. At each meeting of stockholders at which
the holders of shares of Series A Preferred Stock shall have the right,
voting separately as a single class, to take any action, the presence in
person or by proxy of the holders of record of seventy percent (70%) of the
total number of shares of Series A Preferred Stock then outstanding shall
be necessary and sufficient to constitute a quorum. In the absence of a
quorum of the holders of shares of Series A Preferred Stock, if the holders
of Series A Preferred Stock are to vote separately as a single class, a
majority of the holders of such shares present in person or by proxy shall
have the power to adjourn the meeting as to the actions to be taken by the
holders of shares of Series A Preferred Stock from time to time and place
to place without notice other than announcement at the meeting until a
quorum shall be present.
Section 5.5 Votes. For the taking of any action as provided in
Section 5.2 by the holders of shares of Series A Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his
name on the transfer books of the Corporation as of any record date fixed
for such purpose or, if no such date be fixed, at the close of business on
the Business Day (as defined in Section 11) next preceding the day on which
notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held or, if
such vote is by written consent, the date of such consent.
Section 6. Reacquired Shares. Any shares of Series A Preferred
Stock converted, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares of Series A Preferred Stock shall
upon their cancellation, and upon the filing of an appropriate certificate
with the Secretary of State of the State of Delaware, become authorized but
unissued shares of Preferred Stock of the Corporation, undesignated as to
series, and may be reissued as part of another series of Preferred Stock of
the Corporation subject to the conditions or restrictions on issuance set
forth herein.
Section 7. Conversion of Series A Preferred Stock.
Section 7.1 Right to Convert. Subject to and upon compliance
with the provisions of this Certificate of Designation, the holder of any
shares of Series A Preferred Stock shall have the right, at his option, at
any time (and from time to time) to convert each such share into a number
of fully paid and nonassessable shares of Common Stock (as such shares
shall then be constituted) determined by dividing the Stated Value for each
such share so converted by the Conversion Price (as hereinafter defined) in
effect at such time, by surrender of the shares so to be converted in the
manner provided in Section 7.2. Except as otherwise set forth herein, a
holder of Series A Preferred Stock is not entitled to any rights of a
holder of Common Stock until such holder has converted his Series A
Preferred Stock to Common Stock, and then only to the extent such Series A
Preferred Stock is deemed to have been converted to Common Stock under this
Section 7. Notwithstanding any other provisions hereof, no shares of Series
A Preferred Stock shall be converted into shares of Common Stock pursuant
to the provisions hereof without the consent of the holder thereof.
Section 7.2 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Dividends. In order to exercise the
conversion privilege with respect to any Series A Preferred Stock, the
holder of any such share of Series A Preferred Stock to be converted in
whole or in part shall surrender such share of Series A Preferred Stock (or
mutually satisfactory affidavit of loss thereof), duly endorsed, at the
principal office of the Corporation, and shall give written notice of
conversion in a form which is acceptable to the Corporation to the office
or agency that the holder elects to convert such shares specified in said
notice. Such notice shall also state the name or names (with address) in
which the certificate or certificates for shares of Common Stock which
shall be issuable on such conversion shall be issued and shall be
accompanied by transfer taxes, if required pursuant to Section 7.7. Each
such share surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such
share of Series A Preferred Stock, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to the Corporation duly
executed by, the holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements
for conversion set forth above, subject to compliance with any restrictions
on transfer if shares issuable on conversion are to be issued in a name
other than that of the shareholder (as if such transfer were a transfer of
the shares so converted), the Corporation shall issue and shall deliver to
such holder at the address designated in the notice of conversion, a
certificate or certificates for the number of full shares issuable upon the
conversion of such shares in accordance with the provisions of this
Section 7 and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, as
provided in Section 7. In case any certificate shall be surrendered for
partial conversion, the Corporation shall issue and deliver to the holder
of the certificate so surrendered, without charge to him, a new certificate
or certificates in an aggregate share amount equal to the unconverted
portion of the surrendered certificate.
Each conversion shall be deemed to have been effected as to any
such certificate on the date on which the requirements set forth above in
this Section 7.2 have been satisfied as to such certificate, and the person
in whose name any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock transfer books
of the Corporation shall be closed shall constitute the person in whose
name the certificates are to be issued as the record holder thereof for all
purposes on the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in effect on the
date upon which such Series A Preferred Stock shall have been surrendered.
Section 7.3 Cash Payments in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares
shall be issued upon conversion of Series A Preferred Stock. If more than
one certificate for shares of Series A Preferred Stock shall be surrendered
for conversion at one time by the same holder, the number of full shares
which shall be issuable upon conversion shall be computed on the basis of
the aggregate shares of Series A Preferred Stock (or specified portions
thereof to the extent permitted hereby) so surrendered. If any fractional
share of stock would be issuable upon the conversion of any Series A
Preferred Stock, the Corporation shall make an adjustment therefor in cash
at the current market value thereof. The current market value of a share
of Common Stock shall be the Closing Price on the first Trading Day
immediately preceding the day on which the Series A Preferred Stock is
deemed to have been converted and such Closing Price shall be determined as
provided in Section 7.5.3.
Section 7.4 Conversion Price. The conversion price shall be
$1.00 (herein called the "Conversion Price") subject to adjustment as
provided in this Section 7 and as adjusted from time to time on the
occurrence of an Adjustment Event.
Section 7.5 Adjustment of Conversion Price. The Conversion
Price shall be adjusted from time to time by the Corporation as follows:
Section 7.5.1 In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, or if there
shall be any dividend on the outstanding Common Stock of shares of Common
Stock, the Conversion Price in effect on the day upon which such
subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect on the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be,
to become effective immediately upon the effectiveness of such subdivision
or combination. The circumstances under which adjustments to the Conversion
Price are to be made under this Section 7.5.1 are referred to herein as
"Extraordinary Common Stock Events."
Section 7.5.2 Except for adjustments made pursuant to Section
7.5.1 in the case of a combination of the shares of Common Stock into a
smaller number of shares, notwithstanding any other provision of the terms
of the Series A Preferred Stock, no adjustment made pursuant to this
Section 7.5 shall have the effect of increasing the then current Conversion
Price of the Series A Preferred Stock or decreasing the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock.
Section 7.5.3 No adjustment to the Conversion Price need be made
for a change in the par value, or to or from no par value, of the Common
Stock.
Section 7.5.4 Adjustments for Dilutive Issues.
(i) (A) Except as otherwise provided below in this Section
7.5.4, and except with respect to an Extraordinary Common Stock Event,
adjustments in respect of which are provided for in Section 7.5.1, if at
any time while there are any shares of Series A Preferred Stock outstanding
the Company issues or is deemed to issue any additional shares of Common
Stock at a Net Consideration Per Share (as hereinafter defined) less than
the Conversion Price in effect immediately prior to such issuance or deemed
issuance, then, and in each such case, such Conversion Price will be
adjusted to equal the Net Consideration Per Share at which such additional
shares of Common Stock are issued and/or deemed issued.
(B) For the purposes of this Section 7.5.4, the
Corporation's issuance of shares of Common Stock upon exercise or
conversion of outstanding shares of Series A Preferred Stock, the Warrants
being issued pursuant to the Securities Purchase Agreement, or Derivative
Securities (as hereinafter defined) issued and outstanding as of the date
of filing of this Certificate of Designation (or Derivative Securities
which may hereinafter be issued with the unanimous approval of the holders
of the Series A Preferred Stock) shall not be deemed issuances of
additional shares of Common Stock.
For purposes of this Section 7.5.4, if a part or all of the
consideration received by the Corporation in connection with the issuance
or deemed issuance of shares of Common Stock or the issuance or deemed
issuance of any of the securities described below in paragraph (ii) of this
Section 7.5.4 consists of property other than cash, such consideration
shall be deemed to have the same value as is recorded on the books of the
Corporation with respect to receipt of such property so long as such
recorded value was determined reasonably and in good faith and with due
care by the Board of Directors of the Corporation, and shall otherwise be
deemed to have a value equal to its fair market value.
The Conversion Price, as so reduced, shall be further
reduced in the same manner upon the happening of any successive event or
events that cause reduction under this Section 7.5.4.
(ii) For purposes of this Section 7.5.4, the issuance of any
Derivative Securities shall be deemed an issuance of shares of Common Stock
if the Net Consideration Per Share that may be received by the Corporation
for such Common Stock is less than the Conversion Price in effect
immediately prior to the time of such issuance, and, except as hereinafter
provided, an adjustment in the Conversion Price shall be made upon each
such issuance of Derivative Securities as if such deemed issued shares of
Common Stock were issued for such Net Consideration Per Share. No
adjustment of the Conversion Price shall be made under this Section 7.5.4
upon the issuance of any additional shares of Common Stock that are issued
upon the exercise, conversion, or exchange of any Derivative Securities if
any such adjustment was previously made upon the issuance of such
Derivative Securities. Any adjustment of the Conversion Price with respect
to this Section 7.5.4 shall be disregarded if, as, and to the extent that
the Derivative Securities that gave rise to such adjustment expire or are
canceled without having been exercised, so that the Conversion Price
effective immediately upon such cancellation or expiration shall be equal
to the Conversion Price that otherwise would have been in effect
immediately prior to the time of the issuance of the expired or canceled
Derivative Securities, with such additional adjustments as subsequently
would have been made to that Conversion Price had the expired or canceled
Derivative Securities not been issued. In the event that the terms of any
Derivative Securities previously issued by the Corporation are changed
(whether by their terms or for any other reason, including without
limitation, as a result of the effects of any anti-dilution adjustments
contained therein) so as to lower the Net Consideration Per Share payable
with respect thereto (whether or not the issuance of such Derivative
Securities originally gave rise to an adjustment of the Conversion Price),
the Conversion Price shall be recomputed as of the date of such change, so
that the Conversion Price effective immediately upon such change shall be
equal to the Conversion Price in effect at the time of the issuance of the
Derivative Securities subject to such change, adjusted for the issuance
thereof in accordance with the terms thereof after giving effect to such
change, and with such additional adjustments as subsequently would have
been made to that Conversion Price had the Derivative Securities been
issued on such changed terms. For purposes of this Section 7.5.4, the Net
Consideration Per Share that may be received by the Corporation shall be
determined as follows:
(A) "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Corporation for
the issuance of such Derivative Securities or Common Stock, as the case may
be, plus, in the case of Derivative Securities, the minimum amount of
additional consideration, if any, payable to the Corporation upon exercise,
conversion, and/or exchange thereof for shares of Common Stock, divided by
the number of shares of Common Stock issued or the maximum number of shares
of Common Stock that would be issued if all such Derivative Securities were
exercised or converted, as the case may be.
(B) The Net Consideration Per Share that may be received by the
Corporation shall be determined in each instance as of the date of issuance
of Derivative Securities or Common Stock, as the case may be, without
giving effect to any possible future price adjustments or rate adjustments
that may be applicable with respect to such Derivative Securities and which
are contingent upon future events; provided, that in the case of an
adjustment to be made as a result of a change in terms of such Derivative
Securities, including such changes as may result from the effects of any
anti-dilution adjustments contained therein, the Net Consideration Per
Share shall be determined as of the date of such change.
For purposes of this Section 7.5.4, the term "Derivative
Securities" means (i) all shares of stock and other securities that are
convertible into or exchangeable for shares of Common Stock and (ii) all
options, warrants, and other rights to acquire shares of Common Stock or
securities convertible into or exchangeable for shares of Common Stock.
Section 7.6 Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any
reclassification or change of outstanding shares of Common Stock (other
than a change in par value, or to or from no par value, as a result of a
subdivision or combination), (ii) any consolidation, merger, or combination
of the Corporation with another corporation as a result of which holders of
Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock or (iii) any sale, lease or conveyance of the properties and
assets of the Corporation as, or substantially as, an entirety to any other
corporation as a result of which holders of Common Stock shall be entitled
to receive stock, securities or other property or assets (including cash)
with respect to or in exchange for such Common Stock, (each of the
foregoing being referred to as a "Transaction"), each share of Series A
Preferred Stock then outstanding shall thereafter be convertible into the
kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such Transaction by a holder of a
number of shares of Common Stock issuable upon conversion of such share of
Series A Preferred Stock (assuming, for such purposes, a sufficient number
of authorized shares of Common Stock available to convert all such Series A
Preferred Stock) immediately prior to such Transaction.
Notwithstanding anything contained herein to the contrary, the
Corporation will not enter into or effect any Transaction unless, prior to
the consummation thereof, (i) the Surviving Person (as defined herein)
thereof shall assume, by written instrument mailed to each holder of shares
of Series A Preferred Stock if such shares are held by 50 or fewer holders
or groups of affiliated holders or to each transfer agent for the shares of
Series A Preferred Stock if such shares are held by a greater number of
holders, the obligation to deliver to such holder such stock, securities or
other property or assets (including cash) with respect to or in exchange
for Common Stock to which, in accordance with the foregoing provisions,
such holder is entitled and (ii) proper provision is made to ensure that
the holders of shares of Series A Preferred Stock will be entitled to
receive the benefits afforded by this Section 7.6. Such written instrument
should provide for adjustments and other rights and provisions which shall
be equivalent to the adjustments and other rights and provisions provided
for in this Section 7.6.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers,
combinations, sales, leases and conveyances.
Section 7.7 Transfer or Similar Taxes on Shares Issued. The
issue of stock certificates on conversions of Series A Preferred Stock
shall be made without charge to the converting holder of Series A Preferred
Stock for any transfer or similar tax in respect of the issue thereof. The
Corporation shall not, however, be required to pay any such tax which may
be payable in respect of any transfer involved in the issue and delivery of
stock in any name other than that of the holder of any Series A Preferred
Stock converted, and the Corporation shall not be required to issue or
deliver any such stock certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
Section 7.8 Reservation of Shares; Shares to Be Fully Paid;
Registration and Listing of Common Stock. The Corporation shall provide,
free from preemptive rights, out of its authorized but unissued shares or
shares held in treasury, sufficient shares to provide for the conversion of
the Series A Preferred Stock from time to time as such Series A Preferred
Stock is presented for conversion.
Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock, the
Corporation will take all corporate action which may be necessary in order
that the Corporation may validly and legally issue shares of such Common
Stock at such adjusted Conversion Price.
The Corporation covenants that all shares of Common Stock which
may be issued upon conversion of Series A Preferred Stock will, upon issue,
be fully paid and nonassessable by the Corporation and free from all
transfer or similar taxes as described in Section 7.7 or liens and charges
with respect to the issue thereof.
The Corporation covenants that all shares of Common Stock which
may be issued upon conversion of Series A Preferred Stock constitute
"Registrable Securities" under Article VII of the Securities Purchase
Agreement. The Corporation further covenants that, if at any time the
Common Stock shall be listed on the Nasdaq National Market or any other
securities exchange, the Corporation will use its best efforts to list and
keep listed, so long as the Common Stock shall be so listed on such
exchange, all Common Stock issuable upon conversion of the Series A
Preferred Stock.
Section 7.9 Notice to Stockholders Prior to Certain Actions. In
case:
(a) the Corporation takes any action that would result in a
Transaction or declares any dividend or other distribution or takes any
other action that would result in an adjustment to the Conversion Price; or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation,
the Corporation shall cause to be mailed to each holder of Series A
Preferred Stock at his address appearing on the books of the Corporation,
as promptly as possible but in any event at least 15 days prior to the
record date with respect to such action, a notice stating the date on which
any Transaction, dividend or other distribution, or transaction requiring
such an adjustment or dissolution, liquidation or winding up, is expected
to become effective or occur and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
Transaction or dissolution, liquidation or winding up, or receive any such
dividend or other distribution or the date on which any such adjustment is
expected to become effective.
Section 8. Reports as to Adjustments. Upon any adjustment
of the Conversion Price then in effect and any increase or decrease in the
number of shares of Common Stock issuable upon the operation of the
conversion set forth in Section 7 then, and in each such case, the
Corporation shall promptly deliver to the transfer agent for the Series A
Preferred Stock and the transfer agent for the Common Stock, a certificate
signed by the President or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the Conversion Price then in effect following such adjustment
and the increased or decreased number of shares issuable upon the
conversion set forth in Section 7. The Corporation shall also promptly
after the making of such adjustment give written notice to the registered
holders of the Series A Preferred Stock at the address of each holder as
shown on the books of the Corporation maintained by the transfer agent
thereof, which notice shall state the Conversion Price then in effect, as
adjusted, and the increased or decreased number of shares issuable upon the
exercise of the right of conversion granted by Section 7, and shall set
forth in reasonable detail the method of calculation of each with a brief
statement of the facts requiring such adjustment. Where appropriate, such
notice to holders of the Series A Preferred Stock may be given in advance
and included as part of the notice required under the provisions of Section
7.9.
Section 9. Certain Covenants. Any registered holder of
Series A Preferred Stock may proceed to protect and enforce its rights and
the rights of such holders by any available remedy by proceeding at law or
in equity to protect and enforce any such rights, whether for the specific
enforcement of any provision in this Certificate of Designation or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
Section 10. Redemption.
(a) The Corporation shall not have the right to redeem any
shares of the Series A Preferred Stock without the prior written consent of
the holder thereof.
(b) On and after April 15, 2005, each holder of Series A
Preferred Stock shall have the right, at such holder's option, to require
the Corporation to redeem from time-to-time all or any part of such
holder's Series A Preferred Stock for cash at a price equal to the
Liquidation Preference (as adjusted from time to time on the occurrence of
an Adjustment Event and subject to reduction pursuant to Section 4.3
hereof) plus all accrued and unpaid dividends thereon (the "Optional
Redemption Rights"). In order for a holder of Series A Preferred Stock to
exercise the Optional Redemption Rights, such holder must deliver an
executed redemption notice, in a form reasonably acceptable to the
Corporation, together with certificates duly endorsed to the Corporation or
in blank of shares of Series A Preferred Stock with respect to which a
holder has exercised the Optional Redemption Right to the Corporation.
(c) Insufficient Funds. If the Corporation does not have
sufficient funds legally available to redeem the shares of Series A
Preferred Stock for which redemption is required pursuant to Section 10(b),
above, then it shall, prior to redeeming any other series or class of the
equity securities of the Corporation, to the maximum lawful extent redeem
such shares of Series A Preferred Stock on a pro rata basis among the
Series A Preferred stockholders in proportion to the number of shares held
by each of them, and shall redeem the remaining shares to be redeemed as
soon as sufficient funds are legally available.
(d) Mechanics of Redemption. Each holder of outstanding
shares of Series A Preferred Stock shall promptly surrender the certificate
or certificates (or affidavit(s) of loss thereof) representing such shares
to the Corporation at the Corporation's principal executive office, and
thereupon the Corporation shall pay the portion of the redemption price for
such shares to be paid as described in Section 10(b), above, in immediately
available funds, by wire transfer to an account designated by the holder of
such shares or by certified or bank check payable to the order of such
holder. Each stock certificate surrendered for redemption shall be
canceled and retired.
(e) Ranking. At no time shall the Corporation redeem shares
of any other series of equity securities (including without limitation any
shares of Preferred Stock, Junior Securities, or Parity Stock) of the
Corporation or pay the applicable redemption price for or make any other
payment on shares of any other series of equity securities of the
Corporation to holders of such other series of equity securities so long as
any shares of Series A Preferred Stock are outstanding and have not been
redeemed.
Section 11. Definitions. For the purposes of this
Certificate of Designation of Series A Preferred Stock, the following terms
shall have the meanings indicated:
Adjustment Event shall have the meaning ascribed to such term
in the Securities Purchase Agreement.
Business Day shall mean a day, other than a Saturday, a
Sunday or other day on which the banking institutions in the State of New
York or Delaware are authorized or obligated by law or executive order to
close or a day which is declared a national or New York, or Delaware state
holiday.
Corporation: The term "Corporation" shall mean PRT Group
Inc. a Delaware corporation.
Conversion Price: The term "Conversion Price" shall have the
meaning specified in Section 7.4.
Junior Securities: The term "Junior Securities" shall have
the meaning set forth in Section 2.1.
Parity Stock: The "Parity Stock" shall have the meaning set
forth in Section 2.2.
person: The terms "person" shall mean a corporation, an
association, a partnership, an individual, a joint venture, a joint stock
company, a trust, an unincorporated organization or a government or an
agency or a political subdivision thereof.
Securities Purchase Agreement shall mean the Securities
Purchase Agreement to be entered into between the Corporation and the
Investors named therein providing for, among other things, the issuance of
shares of the Series A Preferred Stock authorized hereby.
subsidiary: The term "subsidiary" of any specified person
shall mean (i) a corporation a majority of whose capital stock with voting
power under ordinary circumstances, to elect directors is at the time
directly or indirectly owned by such person or (ii) any other person (other
than a corporation) in which such person or a subsidiary or subsidiaries of
such person directly or indirectly, at the date of determination thereof,
has at least majority ownership.
Surviving Person shall mean the continuing or surviving
person of a merger, consolidation or other corporate combination, the
person receiving a transfer of all or substantially all of the properties
and assets of the Corporation, or the person consolidating with or merging
into the Corporation in a merger, consolidation or other combination in
which the Corporation is the continuing or surviving person, but in
connection with which Series A Preferred Stock or Common Stock of the
Corporation is exchanged, converted or reinstated into the securities of
any other person or cash or any other property.
SECOND: The foregoing amendment was duly adopted in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, PRT Group Inc. has caused this
Certificate to be duly executed in its corporate name this 12th day of
April, 2000.
PRT GROUP INC.
By: __________________________
Name: Dan S. Woodward
Title: Chief Executive Officer