EXHIBIT 4.9
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CERTIFICATE OF DESIGNATIONS
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF 8% SERIES C CUMULATIVE CONVERTIBLE
PREFERRED STOCK BY RESOLUTION OF
THE BOARD OF DIRECTORS OF
EXECUTIVE TELECARD, LTD.
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
8% SERIES C CUMULATIVE CONVERTIBLE
PREFERRED STOCK
I, Christopher J. Vizas, Chairman of the Board of Executive TeleCard,
Ltd. (the "Corporation"), a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware ("DGCL"), DO
HEREBY CERTIFY that, pursuant to authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation, as amended, of the Corporation
(the "Certificate of Incorporation"), the Board of Directors, in accordance with
the provisions of Section 151 of the DGCL, adopted the following resolution,
effective as of October 22, 1998, providing for the creation of the 8% Series C
Cumulative Convertible Preferred Stock:
RESOLVED that, pursuant to Article IV of the Certificate of
Incorporation of the Corporation, there be and hereby is authorized and created
a series of Cumulative Convertible Preferred Stock consisting of 275 shares
having a par value of $.001 per share, which series shall be titled "8% Series C
Cumulative Convertible Preferred Stock."
The designations, rights, preferences, privileges and restrictions of
the 8% Series C Cumulative Convertible Preferred Stock shall be made as follows:
1. Designation and Amount. This series of Preferred Stock shall be
designated and known as "8% Series C Cumulative Convertible Preferred Stock"
(the "Series C Preferred Stock") and shall consist of 275 shares. The shares of
the Series C Preferred Stock may be issued in different series if more than one
Closing shall occur. All the series of the Series C Preferred Stock shall have
identical rights, preferences, privileges and restrictions as set forth below,
except with respect to the date of the Closing, the First Conversion Date and
the Conversion Price. The par value of the Series C Preferred Stock shall be
$.001 per share. Certain defined terms used herein are defined in paragraph 11
below.
2. Voting. (a) Except as may be otherwise provided by these terms of
the Series C Preferred Stock or by law, the holders of Series C Preferred Stock
shall
have no voting rights unless dividends payable on the shares of Series C
Preferred Stock are in arrears for six quarterly periods, in which case the
holders of Series C Preferred Stock voting separately as a class with the shares
of any other Preferred Stock having similar voting rights, will be entitled at
the next regular or special meeting of stockholders of the Corporation to elect
one director (such voting rights will continue until such time as the dividend
arrearage on Series C Preferred Stock has been paid in full). The affirmative
vote or consent of holders of at least 66 2/3% of the outstanding shares of
Series C Preferred Stock will be required for the issuance of any class or
series of stock of the Corporation ranking senior to or pari passu with the
shares of Series C Convertible Preferred Stock (other than the Series A
Preferred Stock), each par value $.001 per share, authorized as of the date
hereof) as to dividends or rights on liquidation, winding up and dissolution.
(b) Whenever holders of Series C Preferred Stock are required or
permitted to take any action by vote as a single class or series, such action
may be taken without a meeting by written consent, setting forth the action so
taken and signed by the holders of the Series C Preferred Stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
3. Dividends. (a) The holders of the Series C Preferred Stock shall be
entitled to receive, out of funds legally available therefor, when, as and if
declared by the Board of Directors, cumulative annual dividends of 8.0% of the
Liquidation Amount (as defined below) per share of Series C Preferred Stock
outstanding (the "Accruing Dividends"). Accruing Dividends shall accrue from the
Issue Date (whether or not the Corporation has earnings, there are funds legally
available therefor or such dividends are declared) and shall be fully
cumulative. Accruing Dividends shall be payable quarterly out of assets legally
available therefor on March 31, June 30, September 30 and December 31 (each of
such dates being hereinafter referred to as a "Dividend Payment Date"),
commencing September 30, 2000, when, as and if declared by the Board of
Directors.
(b) On each Dividend Payment Date commencing September 30, 2000,
Accruing Dividends, may at the option of the Corporation, be payable (i) in
cash, (ii) in kind in additional fully paid nonassessable shares of Series C
Preferred Stock (including fractional shares, as necessary) at the rate of .01
share of Series C Preferred Stock for each $1,000 of such dividend not made in
cash, or (iii) a combination thereof.
(c) All shares of Series C Preferred Stock which may be issued as a
dividend will thereupon be duly authorized, validly issued, fully paid and
nonassessable.
(d) The record date for the payment of Accruing Dividends shall, unless
otherwise altered by the Corporation's Board of Directors, be the fifteenth day
of the
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month immediately preceding the month in which the Dividend Payment Date occurs,
but in no event more than sixty (60) days nor less than ten (10) days prior to
the Dividend Payment Date
(e) No dividends shall be granted on any Common Stock or Preferred
Stock junior to Series C Preferred Stock unless and until all accrued but unpaid
dividends with respect to the Series C Preferred Stock have been paid in full.
4. Liquidation. (a) (i) Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holder(s) of each
outstanding share of Series C Preferred Stock shall first be entitled, before
any distribution or payment is made upon any Junior Stock (as herein defined),
to be paid, in the case of each such share, an amount equal to $100,000 per
share of Series C Preferred Stock (the "Liquidation Amount"), plus accrued and
unpaid dividends thereon (collectively, the "Liquidation Preference"). If upon
such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Series C Preferred Stock shall be insufficient to permit payment in full to all
holders of Series C Preferred Stock of the aggregate Liquidation Preference and
the amount of any payment to all holders of any other class or series of
Preferred Stock ranking on parity with the Series C Preferred Stock as to
liquidation, then the entire assets of the Corporation to be so distributed
shall be distributed ratably among the holders of Series C Preferred Stock and
the holders of any other class or series of Preferred Stock ranking on parity
with the Series C Preferred Stock as to liquidation, in accordance with the
respective amounts payable on liquidation upon the shares of Series C Preferred
Stock and such Preferred Stock ranking on parity with the Series C Preferred
Stock as to liquidation. After payment in full to the holders of Series C
Preferred Stock of the aggregate Liquidation Preference as aforesaid, holders of
the Series C Preferred Stock shall, as such, have no right or claim to any of
the remaining assets of the Corporation.
(ii) Written notice of any such liquidation, dissolution or winding up,
stating a payment date and the place where said payments shall be made, shall be
given (A) by certified or registered mail, postage prepaid, (B) by a nationally
known overnight delivery service or (C) by hand, not less than 45 days prior to
the payment date stated therein, to each holder of record of Series C Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation.
(b) None of the merger or the consolidation of the Corporation, or the
sale, lease or conveyance of all or substantially all of its property and
business as an entirety, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this paragraph 4, unless
such sale, lease, or conveyance shall be in connection with a plan of
liquidation, dissolution or winding up of the Corporation.
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5. Conversion. The holders of shares of Series C Preferred Stock shall
have the following conversion rights:
5A. Right to Convert. Subject to the terms and conditions of this
paragraph 5, the holder of any share or shares of Series C Preferred Stock shall
have the right at the option of the holder to convert any such share or shares
of Series C Preferred Stock, at any time following the 180th day following the
relevant Closing (the "First Conversion Date"), into such number of fully paid
and nonassessable shares of Common Stock (the "Conversion Rate") as is obtained
by (i) multiplying the number of shares of Series C Preferred Stock by the
Liquidation Amount and (ii) dividing the result by the initial conversion price
equal to the greater of (x) 90% of the average of the last reported sales price
of the Common Stock on Nasdaq for the ten trading days prior to the First
Conversion Date, provided, however, that the Conversion Price shall for the
purposes of this clause (x) neither be less than $4 nor greater than $6 per
share, and (y) the last reported sales price of the Common Stock on Nasdaq on
the trading day prior to the relevant Closing (such conversion price, as it may
have last been adjusted pursuant to the terms hereof, is referred to herein as
the "Conversion Price").
Upon any Change of Control, however, each holder of Series C Preferred
Stock shall, in the event that the last reported sale price of the Common Stock
on Nasdaq on the date immediately preceding the date of the Change of Control
(the "Market Price") is less than the Conversion Price, have a one time right to
convert such holder's shares of Series C Preferred Stock into shares of the
Common Stock at a conversion price equal to the Market Price. In lieu of issuing
the shares of Common Stock issuable upon conversion in the event of a Change of
Control, the Corporation may, at its option, make a cash payment equal to the
number of shares of Common Stock to be converted multiplied by the Market Price.
Such rights of conversion shall be exercised by the holder thereof by
giving written notice that the holder elects to convert a stated number of
shares of Series C Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares to be so converted, duly endorsed to
the Corporation or in blank, to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Series C Preferred Stock) at any time
during its usual business hours on the date or dates set forth in such notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued;
provided, however, that the Corporation shall not be obligated to issue
certificates for shares of Common Stock in any name other than the name or names
set forth on the certificates for the shares of Series C Preferred Stock being
converted unless all requirements for transfer of Series C Preferred Stock have
been complied with. Conversion shall be effective upon receipt by the
Corporation of the notice and the share certificate or certificates contemplated
by
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the preceding sentence; provided, that the holder may, but shall not be required
to deliver such notice and such certificate or certificates on the same date.
In case of (i) the redemption of any shares of Series C Preferred Stock
pursuant to paragraph 6, such right of conversion shall cease and terminate, as
to the shares to be redeemed, at the close of business on the second business
day preceding the date fixed for such redemption, unless the Corporation shall
thereafter default in the payment of the Redemption Price for the shares to be
so redeemed or (ii) any liquidation of the Corporation, such right shall cease
and terminate at the close of business on the business day preceding the date
fixed for payment of the amount to be distributed to the holders of the Series C
Preferred Stock pursuant to paragraph 4.
The number of shares into which the Series C Preferred Stock is
convertible will be determined without giving effect to any Accruing Dividends
on the Series C Preferred Stock, no consideration will be payable in respect of
any Accrued Dividends that may exist with respect to any Series C Preferred
Stock that the holder elects to convert into Common Stock and the exercise by a
holder of Series C Preferred Stock into Common Stock shall constitute a waiver
in all respects of any and all rights that the holder may have to such Accruing
Dividends.
Common Stock issued upon conversion will include rights to purchase
Series A Participating Preferred Stock of the Company (the "Rights") in
accordance with the terms of the Corporation's Rights Agreement, if such
conversion occurs prior to the distribution of such Rights or the redemption or
expiration thereof.
5B. Issuance of Certificates; Time Conversion Effected. Promptly after
the receipt of the written notice referred to in subparagraph 5A and surrender
of the certificate or certificates for the share or shares of Series C Preferred
Stock to be converted, the Corporation shall issue and deliver or cause to be
issued and delivered, to such holder of Series C Preferred Stock or to such
holder's nominee or nominees, registered in such name or names as such holder
may direct, a certificate or certificates for the number of shares of Common
Stock, including, subject to subparagraph 5C below, fractional shares, as
necessary, issuable upon the conversion of such share or shares of Series C
Preferred Stock. Such conversion shall be deemed to have been effected as of the
close of business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates for such share
or shares of Series C Preferred Stock to be so converted shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
share or shares of Series C Preferred Stock shall cease, and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.
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5C. Fractional Shares; Partial Conversion. In the event that the
computation pursuant to subparagraph 5A of the number of shares of Common Stock
issuable upon conversion of shares of Series C Preferred Stock results in any
fractional share of Common Stock, the Corporation may, at its option, issue
fractional shares or scrip representing fractional shares of Common Stock or pay
in cash the value of such fractional shares of Common Stock upon such
conversion, which for this purpose shall be deemed to equal the last reported
sales price of the Common Stock prior to the First Conversion Date. In case the
number of shares of Series C Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 5A exceeds the number of
shares converted, the Corporation shall, upon such conversion, issue and deliver
to the holder of the Certificate or Certificates so surrendered, at the expense
of the Corporation, a new certificate or certificates for the number of shares
of Series C Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted, and which new certificate or
certificates shall entitle the holder thereof to the rights of the shares of
Series C Preferred Stock represented thereby to the same extent as if the
Certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
5D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 5M below or in the case of any Permitted Issuance, if
and whenever the Corporation shall issue or sell, or is, in accordance with
subparagraphs 5D(1) through 5D(4), deemed to have issued or sold, any shares of
Common Stock for a consideration per share less than the Conversion Price,
forthwith upon such issue or sale, the Conversion Price shall be reduced to the
price determined by multiplying the Conversion Price by a fraction (i) the
numerator of which shall be equal to the sum of (A) the number of shares of
Common Stock outstanding (on a fully diluted basis as provided in subparagraph
5D(5) below) immediately prior to such issue or sale and (B) the number of
shares of Common Stock that the consideration, if any, received by the
Corporation upon such issuance or sale would have purchased at the Conversion
Price divided by the Conversion Price and (ii) the denominator of which shall be
equal to the total number of shares of Common Stock outstanding (on a fully
diluted basis as provided in subparagraph 5D(5)) immediately after such issue or
sale.
For purposes hereof, "Permitted Issuances" means the issue or sale of
(i) shares of Common Stock by the Corporation pursuant to the exercise or
conversion, as the case may be, of Convertible Securities outstanding, or
issuable under a binding contract existing, immediately prior to the first
Closing (as adjusted pursuant to the terms of such securities to give effect to
stock dividends or stock splits or a combination of shares in connection with a
recapitalization, merger, consolidation or other reorganization occurring after
the Closing), and (ii) options to acquire Common Stock by the Corporation
pursuant to a resolution of, or a stock option plan approved by a resolution of,
the Board of Directors of the Corporation (or the compensation committee
thereof) to the Corporation's employees or directors,
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and (iii) shares of Series B Convertible Preferred Stock of the Corporation
which may be designated and issued in connection with the acquisition of IDX
International, Inc.
For purposes of this subparagraph 5D, the following subparagraphs 5D(1)
to 5D(5) shall also be applicable:
5D(1). Issuance of Rights or Options. Except in the event of any
Permitted Issuance, in case at any time the Corporation shall in any manner
grant or sell (whether directly or by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or security convertible into or
exchangeable (with or without further consideration) for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale by the Corporation of all such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Conversion Price, then the
total maximum number of shares of Common Stock issuable upon the exercise of all
such Options or upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been issued
for such price per share as of the date of granting of such Options and
thereafter shall be deemed to be outstanding when computing the Conversion
Price. Except as otherwise provided in subparagraph 5D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of Common Stock or
Convertible Securities upon exercise of such Options or upon the actual issue of
Common Stock upon conversion or exchange of such Convertible Securities.
5D(2). Issuance of Convertible Securities. Except in the event of any
Permitted Issuance, in case at any time the Corporation shall in any manner
issue (whether directly or upon assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the total amount received or receivable by the Corporation as
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consideration for the issue or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding when computing the
Conversion Price; provided, that (A) except as otherwise provided in
subparagraph 5D(3), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (B) if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this subparagraph 5D, no further adjustment
of the Conversion Price shall be made by reason of such issue or sale.
5D(3). Change in Option Price or Conversion Rate. If (i) the exercise
price provided for in any Option referred to in subparagraph 5D(1), (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 5D(1) or 5D(2), (iii) the
additional consideration, if any, payable upon the issuance of any Convertible
Securities issuable upon the exercise of any Options referred to in subparagraph
5D(1), (iv) the number of shares of Common Stock issuable upon the exercise of
Options referred to in subparagraph 5D(1), or (v) the rate at which Convertible
Securities referred to in subparagraph 5D(1) or 5D(2) are convertible into or
exchangeable for Common Stock, shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect against
dilution), then upon the happening of such event the Conversion Price shall
forthwith be readjusted to the Conversion Price which would have been in effect
had such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration, number of shares or conversion
rate, as the case may be, at the time initially granted, issued or sold. Upon
the expiration of any Option referred to in subparagraph 5D(1) or the expiration
or termination of any right to convert or exchange Convertible Securities
referred to in subparagraphs 5D(1) or (2), the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued;
5D(4). Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any amounts paid or
receivable for accrued interest
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or accrued dividends and any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Corporation in connection therewith. In
case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration at the time of such issuance or sale as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any amounts paid or receivable for accrued interest or accrued
dividends and any expenses incurred or any underwriting commissions or
concessions therewith. In case any Options shall be issued in connection with
the issue and sale of other securities of the Corporation, together comprising
one integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the Board of Directors of
the Corporation. If the Board of Directors of the Corporation shall not make any
determination, the consideration for the options shall be deemed to be zero.
5D(5). Treasury Shares: Full Dilution. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this
subparagraph 5D. The number of shares outstanding at any given time shall
include, in addition to shares of Common Stock then issued and outstanding, all
shares of Common Stock issuable upon the exercise of all Options or Convertible
Securities outstanding.
5E. Subdivision or Combination of Common Stock or Series C Preferred
Stock. In case the Corporation shall at any time subdivide (by any stock split,
stock dividend or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price shall be proportionately reduced,
and, conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Conversion Price shall be
proportionately increased. Any dividend or other distribution made upon any
capital stock of the Corporation payable in Common Stock or in any security
convertible into or exercisable for Common Stock (other than the Series C
Preferred Stock) without or for de minimus consideration shall be deemed to be a
subdivision for purposes of this subparagraph 5E. In the event of a subdivision
or combination of the Series C Preferred Stock, the Liquidation Amount shall be
proportionately reduced or increased, as the case may be.
5F. Reorganization. Reclassification. Merger or Distribution. If any of
the following shall occur: (i) any distribution on the capital stock of the
Corporation or capital reorganization or reclassification of such capital stock
which is effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, evidence of indebtedness or other assets (other
than cash dividends out of
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current or retained earnings) with respect to or in exchange for Common Stock,
(ii) any consolidation or merger to which the Corporation is a party other than
a merger in which the Corporation is the continuing corporation and which does
not result in any reclassification of, or change (other than a change in name,
or par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) in, the outstanding
shares of Common Stock, or (iii) any sale or conveyance of all or substantially
all of the property or business of the Corporation as an entirety, then, as a
condition of such distribution, reorganization, classification, consolidation,
merger, sale or conveyance, lawful and adequate provisions shall be made whereby
each holder of a share or shares of Series C Preferred Stock shall thereupon
have the right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore receivable upon the conversion of such share or shares of Series C
Preferred Stock, such shares of stock, securities, evidence of indebtedness or
assets as may be issued or payable in such transaction with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore receivable upon
such conversion had such distribution, reorganization, reclassification,
consolidation, merger, sale or conveyance not already taken place, and in such
case appropriate provisions shall be made with respect to the right and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities, evidence of indebtedness or assets thereafter deliverable
upon the exercise of such conversion rights. Anything herein to the contrary
notwithstanding, if the provisions of this subparagraph 5F shall be deemed to
apply to any distribution, reorganization, reclassification, consolidation,
merger, sale or conveyance in respect of the Corporation or its capital stock,
no duplicative adjustments shall be made to the Conversion Price pursuant to
subparagraph 5D or 5E upon the occurrence of such distribution, reorganization,
reclassification, consolidation, merger, sale or conveyance.
5G. Notice of Adjustment. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof,
(i) by certified or registered mail, postage prepaid, (ii) by a nationally known
overnight delivery service or (iii) delivered by hand, addressed to each holder
of shares of Series C Preferred Stock at the address of such holder as shown on
the books of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
5H. Other Notices. In case at any time:
(i) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
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(ii) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any distribution (other than a cash
dividend) on the capital stock of the Corporation or capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give (A) by
certified or registered mail, return receipt requested, postage prepaid, (B) by
a nationally known overnight delivery service or (C) delivered by hand,
addressed to each holder of any shares of Series C Preferred Stock at the
address of such holder as shown on the books of the Corporation at least 30
days' prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and the date when the same shall take place. Such
notice in accordance with the foregoing sentence shall also specify, in the case
of any such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
5I. Stock to be Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued Common Stock, solely for
the purpose of issuance upon the conversion of Series C Preferred Stock as
herein provided, such number of shares of Common Stock as shall then be issuable
upon the conversion of all outstanding shares of Series C Preferred Stock. The
Corporation covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued and fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be required to assure that the par
value per share of the Common Stock is at all times equal to or less than the
lowest Conversion Price in effect at the time. The Corporation will take all
such action as may be necessary to assure that all such shares of Common Stock
may be so issued without violation of any applicable law or regulation, or of
any requirement of any national securities exchange upon which the Common Stock
may be listed. The Corporation will not
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take any action which results in any adjustment of the Conversion Price if the
total number of shares of Common Stock issued and issuable after such action
upon conversion of the Series C Preferred Stock would exceed the total number of
shares of Common Stock then authorized by the Certificate of Incorporation.
5J. Reissuance of Preferred Stock. Shares of Series C Preferred Stock
which are converted into shares of Common Stock as provided herein shall resume
the status of authorized and unissued shares of Preferred Stock without
designation as to series or class until shares are once more designated as part
of a particular series or class by the Board of Directors of the Corporation.
5K. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series C Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof; provided. that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Series C Preferred Stock which is
being converted.
5L. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series C Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series C Preferred Stock in any manner which interferes with the timely
conversion of such Series C Preferred Stock, except as may otherwise be required
to comply with applicable securities laws.
5M. Limitations on Adjustments. Anything herein to the contrary
notwithstanding, no adjustment in the Conversion Price shall be required unless
such adjustment, either by itself or with other adjustments not previously made,
would require a change of at least $0.01 (one cent) in such Conversion Price;
provided, that any adjustment which by reason of this subparagraph 5M is not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations of shares of Common Stock or Series C
Preferred Stock under this paragraph 5 shall be rounded to the nearest three
decimal points.
6. Redemption. The shares of Series C Preferred Stock shall be subject
to redemption, at the option of the Corporation, as follows:
6A. Optional Redemption. The shares of Series C Preferred Stock may not
be redeemed prior to two years from the Issue Date. On or after the second
anniversary of the Issue Date, the shares of the Series C Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation, (i) in cash,
(ii) by delivery of such number of fully paid shares of Common Stock, valued at
the average of the last reported sales price of the Common Stock on Nasdaq for
ten
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trading days before the Redemption Date or (iii) a combination thereof, at the
redemption price set forth below:
Years After Percentage of Liquidation
Issue Date Preference
during Year 3 105%
during Year 4 104%
during Year 5 103%
during Year 6 102%
during Year 7 101%
Year 8 and beyond 100%
6B. Redemption Mechanics. The Corporation shall give a redemption
notice (the "Redemption Notice") not less than thirty (30) and not more than
sixty (60) days prior to the Redemption Date (i) by certified mail, postage
prepaid, (ii) by a nationally known overnight delivery service or (iii)
delivered by hand, addressed to each holder of record of shares of Series C
Preferred Stock, notifying such holder of the redemption and specifying the
Redemption Price applicable to the Series C Preferred Stock, the Redemption Date
and the place where said Redemption Price shall be payable. The Redemption
Notice shall be addressed to each holder at his address as shown by the records
of the Corporation. Except as provided in paragraph 8 below, on or after the
Redemption Date fixed in such Redemption Notice, each holder of shares of Series
C Preferred Stock to be so redeemed shall present and surrender the certificate
or certificates for such shares to the Corporation at the place designated in
said notice and thereupon the Redemption Price of such shares shall be paid to,
or to the order of, the Person whose name appears on such certificate or
certificates as the owner thereof. From and after the close of business on the
Redemption Date, unless (i) there shall have been a default in the payment of
the Redemption Price upon surrender of a certificate or certificates
representing shares of Series C Preferred Stock to be redeemed or (ii) the
provisions of paragraph 8 below shall be applicable, all rights of holders of
shares of Series C Preferred Stock subject to redemption on the Redemption Date
(except the right to receive the Redemption Price upon surrender of a
certificate or certificates representing shares of Series C Preferred Stock to
be redeemed, but without interest) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the Corporation
or be deemed to be outstanding for any purpose whatsoever.
7. Certain Approvals. The Corporation acknowledges that as a
prerequisite to the conversion of Series C Preferred Stock as contemplated
hereby it may be necessary for a holder of Series C Preferred Stock to comply
with the filing and notice requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the filing fee for which shall be paid by
the Corporation; provided, that all reasonable efforts shall be made by the
holders of Series C Preferred Stock to require only one such filing), the
requirements of any exchange or market on which
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the Common Stock may be listed (including, without limitation, the requirement
of shareholder approval prior to the issuance of Common Stock upon conversion)
or other laws, rules or regulations applicable to such conversion. The
Corporation will, at its expense, fully cooperate with the holders of Series C
Preferred Stock and use its best efforts to cause any such prerequisite to be
met. In the event such prerequisite has not been met on the applicable
conversion date, then such date shall, as to such holder of Series C Preferred
Stock, be extended until such prerequisite is met, and during such time Accruing
Dividends shall continue to accrue as contemplated by paragraph 3 above and such
shares of Series C Preferred Stock shall remain outstanding and be entitled to
all rights and preferences provided herein; provided, however, that if such
prerequisite has not been met by the end of the six months following the
Redemption Date at which time the Series C Preferred Stock may be redeemed at
the Redemption Price, if applicable, then in effect in any manner in accordance
with applicable law, rule or regulation and the provisions of paragraph 6 above.
8. Registration. The holders of Series C Preferred Stock shall be
entitled to the benefit of the Registration Rights Agreement to be entered into
between each holder and the Corporation at each Closing.
9. Warrant. In the event the Corporation does not achieve for the four
calendar quarters beginning July 1, 1999 an aggregate amount of gross revenues
in excess of 150% of the aggregate amount of gross revenues achieved by the
Corporation in the four calendar quarters ended June 30, 1998 as reported in the
Corporation's publicly filed financial statements, the Corporation will issue,
for no additional consideration, to the holders of outstanding Series C
Preferred Stock, a warrant (the "Warrant") to purchase 5,000 shares of Common
Stock for each share of Series C Preferred Stock of which the holder is the
record owner as of June 30, 2000, appropriately adjusted for stock splits, stock
dividends and reclassifications as therein provided. The Warrants will have an
exercise price of $0.01 per share and shall be issuable and exercisable only
insofar as the last reported sales price of the Common Stock on Nasdaq has not
exceeded for 20 consecutive trading days or is not trading June 30, 2000 at a
price per share equal to 125% of the Conversion Price. The form of Warrant will
be as attached hereto as Annex A.
10. Information Rights. Each holder of Series C Preferred Stock will be
entitled to copies of all material provided to holders of Common Stock and
copies of all filings made with the Securities and Exchange Commission pursuant
to rules and regulations thereof upon request by such holder.
11. Definitions.
(a) "Affiliate" of a Person shall mean someone that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
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(b) "Board of Directors" shall mean the Board of Directors of the
Corporation.
(c) "Change of Control" shall mean the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Corporation to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof; (ii) the approval by the holders of the capital stock of the
Corporation of any plan or proposal for the liquidation or dissolution of the
Corporation; (iii) any Person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50.0% of
the aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Corporation; or (iv) the replacement of a majority of the
Board of Directors of the Corporation over a two-year period, and such
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors of the Corporation then still in office who either were
members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
(d) "Closing" shall mean the date of closing of a purchase and sale of
shares of Series C Preferred Stock, which may occur on one or more dates.
(e) "Common Stock" shall mean the common stock, $.001 par value, of the
Corporation.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(g) "Issue Date" shall mean the date of original issuance of any share
of Series C Preferred Stock.
(h) "Junior Stock" shall mean any class or series of capital stock of
the Corporation other than Series A Convertible Preferred Stock of the
Corporation which may be issued which, at the time of issuance, is not declared
to be on a parity with or senior to the Series C Preferred Stock as to dividends
and rights upon liquidation and which has received the consent required by
Section 2(a) hereto.
(i) "Nasdaq" shall mean the Nasdaq Stock Market.
(j) "Person" shall mean an individual, corporation, trust partnership,
limited liability company, joint venture, unincorporated organization,
government agency or any agency or political subdivision thereof, or other
entity.
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(k) "Preferred Stock" shall mean any class or series of preferred stock
of the Corporation.
(l) "Redemption Date" shall mean the date fixed for redemption of
Series C Preferred Stock at any time two years from the Issue Date.
(m) "Registration Rights Agreement" shall mean the Registration Rights
Agreement dated the date of the Closing entered into between each holder of the
shares of Series C Preferred Stock and the Corporation.
IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made herein are true under the penalties of perjury
this _____ day of _______________, 1998.
---------------------------------------
Christopher J. Vizas
Chairman of the Board and President
[SEAL]
ATTEST:
- - -----------------------------------
W.P. Colin Smith
Secretary
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