EXHIBIT 4.11
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CERTIFICATE OF DESIGNATIONS
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF 8% SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE
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 E CUMULATIVE CONVERTIBLE
REDEEMABLE 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 January 10, 1999 providing for the creation of the 8% Series E
Cumulative Convertible Redeemable 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 Redeemable Preferred Stock consisting of 125
shares having a par value of $.001 per share, which series shall be titled "8%
Series E Cumulative Convertible Redeemable Preferred Stock."
The designations, rights, preferences, privileges and restrictions of
the 8% Series E Cumulative Convertible Redeemable Preferred Stock shall be made
as follows:
1. Designation and Amount. This series of Preferred Stock shall be
designated and known as "8% Series E Cumulative Convertible Redeemable Preferred
Stock" (the "Series E Preferred Stock") and shall consist of 125 shares. The par
value of the Series E Preferred Stock shall be $.001 per share. Certain defined
terms used herein are defined in paragraph 10 below.
2. Voting. 2(a) Except as may be otherwise provided by these terms of
the Series E Preferred Stock or by law, the holders of Series E Preferred Stock
shall have no voting rights unless dividends payable on the shares of Series E
Preferred Stock are in arrears for six quarterly periods, in which case the
holders of Series E 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
E 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 E 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 E
Convertible Preferred Stock (other than the Series A Preferred Stock, Series C
Preferred Stock and Series D 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.
2(b) Whenever holders of Series E 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 E 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. 3(a) The holders of the Series E 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 E 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 December 31, 2000, when, as and if declared by the Board of
Directors. All dividends that would accrue through December 31, 2000 on each
share of Series E Preferred Stock (whether or not then accrued) shall be payable
in full upon conversion of such share (when, as and if declared by the Board of
Directors).
3(b) On each Dividend Payment Date commencing December 31, 2000, or
upon conversion of Series E Preferred Stock (subject to Section 5(a)(viii)),
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 E
Preferred Stock (including fractional shares, as necessary) at the rate of .01
share of Series E Preferred Stock for each $1,000 of such dividend not made in
cash, or (iii) a combination thereof; provided, however that the Corporation may
pay Accruing Dividends in kind only to the extent that such payment would not
require shareholder approvals (including under rules of the Nasdaq Stock Market)
or such shareholder approvals shall have been obtained.
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3(c) All shares of Series E Preferred Stock which may be issued as a
dividend will thereupon be duly authorized, validly issued, fully paid and
nonassessable.
3(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 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
3(e) No dividends shall be granted on any Common Stock or other Junior
Stock unless and until all accrued but unpaid dividends with respect to the
Series E Preferred Stock have been paid in full. Accruing Dividends shall not be
payable unless and until all accrued but unpaid dividends with respect to any
Senior Stock then outstanding have been paid in full. All dividends with respect
to the Series E Preferred Stock shall be payable on a parity basis with
dividends (including accrued but unpaid dividends) on Parity Stock.
4. Liquidation. 4(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 E Preferred Stock shall first be entitled, before
any distribution or payment is made upon any Junior Stock but after the full
liquidation preference has been paid with respect to all Senior Stock, and on a
parity basis with all Parity Stock, to be paid, in the case of each such share,
an amount equal to $100,000 per share of Series E 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 E Preferred Stock shall be insufficient
to permit payment in full to all holders of Series E 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 E
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 E
Preferred Stock and the holders of any other class or series of Preferred Stock
ranking on parity with the Series E Preferred Stock as to liquidation, in
accordance with the respective amounts payable on liquidation upon the shares of
Series E Preferred Stock and such Preferred Stock ranking on parity with the
Series E Preferred Stock as to liquidation. After payment in full to the holders
of Series E Preferred Stock of the aggregate Liquidation Preference as
aforesaid, holders of the Series E 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
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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 E Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation.
4(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.
5. Conversion. The holders of shares of Series E Preferred Stock shall
have the following conversion rights:
5(a). Right to Convert. (i) Subject to the terms and conditions of
paragraph 5, including this paragraph 5(a)(i), from and after the Convertibility
Date (as defined below), any share or shares of Series E Preferred Stock shall
be convertible into such number of fully paid and nonassessable shares of Common
Stock (the "Conversion Rate") as is obtained by (1) multiplying the number of
shares of Series E Preferred Stock by the Liquidation Amount and (2) dividing
the result by an initial conversion price equal to $2.125 (such conversion
price, as it may have last been adjusted pursuant to the terms hereof, is
referred to herein as the "Conversion Price"). The Convertibility Date shall
mean the earliest to occur of (1) an election by the holder (a "Convertibility
Election"), by written notice to the Corporation to make such share or shares
convertible (which election may be made at any time following the Issue Date of
such shares), (2) an election by the Corporation, by written notice to the
holders, to make all such shares of Series E Preferred Stock convertible (which
election may be made at any time in the event (and only in the event) that the
Corporation has positive EBITDA for at least one of the first, second or third
fiscal quarters of the Corporation's 1999 fiscal year or the Corporation
completes a public offering of equity securities at a price of at least $3.00
per share and with gross proceeds to the Corporation of at least $20 million on
or prior to the end of the third fiscal quarter of the Corporation's 1999 fiscal
year), or (3) immediately prior to the automatic conversion of the Series E
Preferred Stock into Common Stock pursuant to Section 5(a)(ii).
(ii) Each share of Series E Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Conversion
Rate, on the earliest to occur of (1) the first date as of which the last
reported sales price of the Common Stock on Nasdaq is $5.00 or more for any 20
consecutive trading days during any period in which Series E Preferred Stock is
outstanding, (2) the date that 80% or more of the Series E Preferred Stock
issued by the Corporation, cumulatively from and after the date hereof, whether
or not such Series E Preferred Stock is then outstanding, has been converted
into Common Stock, the holders
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thereof have agreed with the Corporation in writing to convert such Series E
Preferred Stock into Common Stock or a combination of the foregoing, or (3) the
Corporation closes a public offering of equity securities of the Corporation at
a price of at least $3.00 per share and with gross proceeds to the Corporation
of at least $20 million.
(iii) Upon any Change of Control, however, each holder of Series E
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 "Change of Control Price") is less than the Conversion Price,
have a one time right to convert such holder's shares of Series E Preferred
Stock into shares of the Common Stock at a conversion price equal to the Change
of Control 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 Change of Control Price.
(iv) A holder's 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 E Preferred Stock into Common Stock. Such written
notice may be given by telecopying a written and executed notice of conversion
to the Corporation at its main telecopier number at its principal office and
delivering within five (5) business days thereafter, 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 E
Preferred Stock), together with a copy to the Corporation's transfer agent, the
original notice of conversion by express courier, together with a certificate or
certificates for the shares to be so converted, duly endorsed to the Corporation
or in blank, and 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 E Preferred Stock being
converted unless all requirements for transfer of Series E Preferred Stock have
been complied with. Conversion shall be effective upon receipt by the
Corporation and the transfer agent of the telecopied notice (provided that the
original notice and the share certificate or certificates are sent to the
Corporation and the transfer agent as contemplated above).
(v) The Corporation's rights of conversion shall be exercised by the
Corporation by giving written notice to all holders of Series E Preferred Stock
that the Corporation elects to convert a stated number of shares of Series E
Preferred Stock into Common Stock. If the Corporation elects to convert less
than all of the then outstanding Series E Preferred Stock into Common Stock,
such conversion shall be effected ratably among the holders of Series E
Preferred Stock. Such written notice may be given by mailing to such holders, at
their addresses on the
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records of the Corporation, together with a copy to the Corporation's transfer
agent. Upon receipt of such notice of conversion, the holders shall surrender to
the Corporation the certificate or certificates for the shares to be so
converted, duly endorsed to the Corporation or in blank, and 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 E Preferred Stock being converted unless all requirements for transfer
of Series E Preferred Stock have been complied with. Conversion shall be
effective five days after mailing by the Corporation, to the holders of Series E
Preferred Stock Corporation and the transfer agent, of the notice of conversion.
(vi) In the case of automatic conversion, the outstanding shares of
Series E Preferred Stock shall be converted into Common Stock automatically
without any further action by the holders of such shares or by the Corporation
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent.
(vii) In case of any liquidation of the Corporation, all rights of
conversion 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 E Preferred Stock pursuant to paragraph 4.
(viii) The number of shares into which the Series E Preferred Stock is
convertible will be determined without giving effect to any Accruing Dividends
on the Series E Preferred Stock. No consideration will be payable in respect of
any Accrued Dividends that may exist with respect to any Series E Preferred
Stock that the holder elects to convert into Common Stock and the exercise by a
holder of Series E 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, except for Accruing Dividends which accrue through December 31, 2000,
which shall be payable in full upon conversion, as provided in the last sentence
of paragraph 3(a).
(ix) Common Stock issued upon conversion will include rights to
purchase Series A Preferred Stock (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.
5(b). Issuance of Certificates; Time Conversion Effected. (i) Promptly
after the receipt of the written notice referred to in subparagraph 5(a)(iv) or
5(a)(v), or upon automatic conversion as referred to in subparagraph 5(a)(vi),
as applicable, and surrender of the certificate or certificates for the share or
shares of Series E Preferred Stock to be converted, the Corporation shall issue
and deliver or cause to
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be issued and delivered, to such holder of Series E 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 5(c) below, fractional shares, as
necessary, issuable upon the conversion of such share or shares of Series E
Preferred Stock. Upon the effectiveness of conversion the rights of the holder
of such share or shares of Series E Preferred Stock being converted 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.
(ii) The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series E Preferred Stock are either
delivered to the Corporation or its transfer agent as provided below, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon surrender by any holder of the
certificates formerly representing shares of Series E Preferred Stock at the
office of the Corporation or any transfer agent for the Series E Preferred
Stock, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series E Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred. Until surrendered as provided
above, each certificate formerly representing shares of Series E Preferred Stock
shall be deemed for all corporate purposes to represent the number of shares of
Common Stock resulting from such automatic conversion.
5(c). Fractional Shares; Partial Conversion. In the event that the
computation pursuant to subparagraph 5(a) of the number of shares of Common
Stock issuable upon conversion of shares of Series E 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 E Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 5(a) 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 E 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 E Preferred Stock represented thereby to the
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same extent as if the Certificate theretofore covering such unconverted shares
had not been surrendered for conversion.
5(d). Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 5(m) below or in the case of any Permitted Issuance, if
and whenever the Corporation shall issue or sell, or is, in accordance with
subparagraphs 5(d)(1) through 5(d)(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
5(d)(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 5(d)(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
issuance date of the Series E Preferred Stock (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 first issuance date of
the Series E Preferred Stock), 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.
For purposes of this subparagraph 5(d), the following subparagraphs
5(d)(1) to 5(d)(5) shall also be applicable:
5(d)(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
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(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
5(d)(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.
5(d)(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
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 5(d)(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 5(d), no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
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5(d)(3). Change in Option Price or Conversion Rate. If (i) the exercise
price provided for in any Option referred to in subparagraph 5(d)(1), (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 5(d)(1) or 5(d)(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
5(d)(1), (iv) the number of shares of Common Stock issuable upon the exercise of
Options referred to in subparagraph 5(d)(1), or (v) the rate at which
Convertible Securities referred to in subparagraph 5(d)(1) or 5(d)(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 5(d)(1) or the expiration or termination of any right to convert or
exchange Convertible Securities referred to in subparagraphs 5(d)(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;
5(d)(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 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.
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5(d)(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 5(d). 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.
5(e). Subdivision or Combination of Common Stock or Series E 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 E
Preferred Stock) without or for de minimus consideration shall be deemed to be a
subdivision for purposes of this subparagraph 5(e). In the event of a
subdivision or combination of the Series E Preferred Stock, the Liquidation
Amount (and the public offering price referred to in paragraph 5(a)) shall be
proportionately reduced or increased, as the case may be.
5(f). 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 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 E 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 E 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
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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 5(f) 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 5(d) or 5(e) upon the occurrence of such distribution,
reorganization, reclassification, consolidation, merger, sale or conveyance.
5(g). 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 E 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.
5(h). 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;
(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
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of any shares of Series E 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.
5(i). 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 E Preferred Stock as
herein provided, including any dividends that accrue on the Series E Preferred
Stock, as specified in paragraph 3 above, such number of shares of Common Stock
as shall then be issuable upon the conversion of all outstanding shares of
Series E 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 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 E Preferred Stock would exceed the total number of
shares of Common Stock then authorized by the Certificate of Incorporation.
5(j). Reissuance of Preferred Stock. Shares of Series E 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.
5(k). Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Series E Preferred Stock shall be made without charge
to the holders thereof for any issuance tax in respect thereof; provided. that
the
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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 E Preferred Stock which is
being converted.
5(l). Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series E Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series E Preferred Stock in any manner which interferes with the timely
conversion of such Series E Preferred Stock, except as may otherwise be required
to comply with applicable securities laws.
5(m). 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 5(m) 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 E
Preferred Stock under this paragraph 5 shall be rounded to the nearest three
decimal points.
6. Redemption. The shares of Series E Preferred Stock shall be subject
to redemption, as follows.
6(a). Redemption Rights. The shares of Series E Preferred Stock shall
be subject to redemption, at any time following the date that is five years
after the Issue Date, either (i) at the option of the Corporation, or (ii) at
the option of any holder, provided that the holder has not previously made a
Conversion Election. The shares of the Series E 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
trading days before the Redemption Date or (iii) a combination thereof, at a
redemption price equal to the Liquidation Preference.
6(b). 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 E
Preferred Stock, notifying such holder of the redemption and specifying the
Redemption Price applicable to the Series E 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 7 below, on or after the
Redemption Date fixed in such Redemption
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Notice, each holder of shares of Series E 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 E Preferred Stock
to be redeemed or (ii) the provisions of paragraph 7 below shall be applicable,
all rights of holders of shares of Series E 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 E 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 E Preferred Stock as contemplated
hereby it may be necessary for a holder of Series E 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 E Preferred Stock to require only one such filing), the
requirements of any exchange or market on which 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 E 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 E 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 E Preferred Stock
shall remain outstanding and be entitled to all rights and preferences provided
herein.
8. Registration. Each holder of Series E Preferred Stock will be
entitled to the benefit of the Registration Rights Agreement to be entered into
between each holder and the Corporation.
9. Information Rights. Each holder of Series E 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.
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10. Definitions.
"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.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"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.
"Common Stock" shall mean the common stock, $.001 par value, of the
Corporation.
"EBITDA" means the earnings before interest, taxes, depreciation and
amortization of the Corporation, determined in accordance with applicable
generally accepted accounting principles, applied in a manner consistent with
the Corporation's publicly filed financial statements.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Issue Date" shall mean the date of original issuance of any share of
Series E Preferred Stock.
"Junior Stock" shall mean any class or series of capital stock
(including Common Stock) of the Corporation (other than Series A Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock) which may be
issued which, at the time of issuance, is not declared to be on a parity with or
senior to the Series E Preferred Stock as to dividends and rights upon
liquidation (or in the case of
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Preferred Stock issued after the date hereof which has not received the consent
required by paragraph 2(a) hereto).
"Nasdaq" shall mean the Nasdaq Stock Market.
"Parity Stock" shall mean any class or series of Preferred Stock of the
Corporation (including Series D Preferred Stock) which, at the time of issuance,
is declared to be on a parity with the Series E Preferred Stock as to dividends
and rights upon liquidation and (in the case of Preferred Stock issued after the
date hereof) which has received the consent required by paragraph 2(a) hereto.
"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.
"Preferred Stock" shall mean any class or series of preferred stock of
the Corporation.
"Senior Stock" shall mean any class or series of Preferred Stock of the
Corporation (including Series A Preferred Stock and Series C Preferred Stock)
which, at the time of issuance, is declared to be senior to the Series E
Preferred Stock as to dividends and rights upon liquidation and (in the case of
Preferred Stock issued after the date hereof) which has received the consent
required by paragraph 2(a) hereto.
"Series A Preferred Stock" shall mean the Series A Participating
Preferred Stock, par value $.001 per share, of the Corporation.
"Series C Preferred Stock" shall mean the 8% Series C Cumulative
Convertible Preferred Stock, par value $.001 per share, of the Corporation.
"Series D Preferred Stock" shall mean the 8% Series D Cumulative
Convertible Preferred Stock, par value $.001 per share, of the Corporation.
"Warrants" shall have the meaning set forth in the Stock Purchase
Agreement dated February 16, 1999.
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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 5th day of February, 1999.
---------------------------------------
Christopher J. Vizas
Chairman of the Board and President
[SEAL]
ATTEST:
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John E. Koonce
Assistant Secretary
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