EXHIBIT 4.9
KARTS INTERNATIONAL INCORPORATED
(a Nevada corporation)
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
9% CUMULATIVE CONVERTIBLE PREFERRED STOCK
($0.001 Par Value)
Pursuant to the provisions of Section 78.195, 78.1955 and 78.196 of the
Nevada General Corporation Law (the "Act"), the undersigned corporation, KARTS
INTERNATIONAL INCORPORATED (the "Corporation), hereby submits the following
statement for the purpose of establishing and designating a series of shares of
preferred stock to be known as 9% Cumulative Convertible Preferred Stock and
fixing and determining the relative rights and preferences thereof:
ARTICLE ONE
NAME
1. The name of the Corporation is KARTS INTERNATIONAL INCORPORATED.
ARTICLE TWO
CORPORATE RESOLUTIONS
2. The following resolution establishing and designating a series of
preferred stock, to-wit: the 9% Cumulative Convertible Preferred Stock (the
"Convertible Preferred Stock"), and fixing and determining the relative rights
and preferences thereof was duly adopted by the Board of Directors of the
Corporation on March 25, 1999:
BE IT RESOLVED that, pursuant to the authority expressly
granted and vested in the Board of Directors of the Corporation in
accordance with Article Fourth of the Corporation's Articles of
Incorporation, authorizing 10,000,000 shares of Preferred Stock (the
"Preferred Stock"), $0.001 par value per share, approved and adopted on
February 21, 1996, in accordance with and pursuant to the provisions of
Sections 78.195, 78.1955 and 78.196 of the Act, the Board of Directors
of the Corporation does hereby approve and adopt the following
resolutions designating and authorizing for issuance, in accordance
with the provisions of the Act, the Convertible Preferred Stock of the
Corporation, said resolutions hereby effected being prior to the
issuance of any shares of Convertible Preferred Stock, such shares of
Convertible Preferred Stock to consist of 2,500,000 shares, each having
a par value of $0.001 per share, and each of which shares of
Convertible Preferred Stock shall have the dividend rights, voting
powers, redemption provisions, liquidation preferences and the
relative, optional or other special rights, and shall be subject to the
qualifications, limitations or restrictions set forth below and the
remaining 7,500,000 authorized shares of the Convertible Preferred
Stock shall remain undesignated and reserved for future issuance
subject to the future action of the Board of Directors of the
Corporation.
-1-
Rights and Preferences of Convertible Preferred Stock
1. Dividends.
(a) Amount and Payment of Dividend. Subject to the limitations hereinafter
set forth, the holders of Convertible Preferred Stock shall be entitled to
receive, but only when, if and as declared by the Board of Directors, dividends
at the rate of nine percent (9%) per annum of the original issue price thereof
of One and No/100 Dollars ($1.00) per share, and no more, payable in semiannual
installments out of the funds of the Corporation legally available therefor on
June 30 and December 31 of each year (the "Dividend Payment Date") commencing
June 30, 1999, (or, if any such Dividend Payment Date shall be a weekend or a
bank holiday, on the next business day thereafter). Such dividends may be paid
in cash or in shares of Common Stock of the Corporation, or partly in cash and
partly in shares of Common Stock of the Corporation as determined by the
Corporation's Board of Directors in its sole discretion; provided, however, (i)
no fractional shares of Common Stock may be issued for dividends, and (ii) the
amount of any dividends represented by such fractional shares will be payable by
rounding up to the next whole number for such stock dividend, and provided
further that if any such dividend is paid in whole or in part by shares of
Common Stock, the number of shares of Common Stock to be issued as a stock
dividend shall be determined by the current market price of a share of Common
Stock on the record date for such stock dividend. The current market price of a
share of Common Stock on the record date shall be the closing sale price on such
day as reported by the NASDAQ Small Cap Market or any other exchange on which
the shares of Common Stock may be traded. Any shares of Convertible Preferred
Stock issued after the date hereof shall accrue dividends from the date of
issuance. Dividends will be payable to holders of record as they appear on the
stock books of the Company on such record dates, not more than 60 days nor less
than 10 days preceding the payment dates, as shall be fixed by the Corporation's
Board of Directors.
(b) Cumulative Rights. To the extent, if any, that dividends at the rate
set forth in Section 1(a) above shall not be paid or set apart in full for the
Convertible Preferred Stock, the aggregate deficiency shall be cumulated and
must be fully paid or set apart for payment before any dividends may be paid
upon or set apart for the Common Stock of the Corporation or before the
Corporation may purchase, redeem or otherwise acquire for any consideration (or
any payment made to or available for a sinking fund for the redemption of any of
its Common Stock or any other stock of the Company ranking junior to or on a
parity with the Convertible Preferred Stock as to dividends) any of its Common
Stock or any other stock of the Company ranking junior to or on a parity with
the Convertible Preferred Stock as to dividends or otherwise make any
distribution on account of its Common Stock or any other class of capital stock
now or hereafter authorized or issued by the Corporation which ranks on a parity
with or junior to the Convertible Preferred Stock (other than (i) a dividend
payable in Common Stock, or (ii) by conversion into or exchange for capital
stock of the Corporation ranking junior to the Convertible Preferred Stock as to
dividends).
(c) No Interest on Accrued Dividends. Any accumulations of dividends on the
Convertible Preferred Stock shall not bear interest.
(d) Declaration. Dividends on the Convertible Preferred Stock shall be
declared if, when and as the Board of Directors of the Corporation shall in its
sole discretion deem advisable, and only from the surplus of the Corporation as
such shall be fixed and determined by the said Board of Directors. The
-2-
determination of the Board of Directors at any time of the amount of surplus
available for the payment of dividends shall be binding and conclusive on the
holders of the shares of Convertible Preferred Stock then outstanding. If
dividends are not paid in full upon the Convertible Preferred Stock and any
other Preferred Stock ranking on a parity as to dividends with the Convertible
Preferred Stock, all dividends declared upon shares of Convertible Preferred
Stock and upon such other shares of Preferred Stock will be declared pro rata so
that in all cases the amount of dividends declared per share on the Convertible
Preferred Stock and such other Preferred Stock shall bear the same ratio to each
other that the accumulated dividends per share on the shares of the Convertible
Preferred Stock and such other shares of Preferred Stock bear to each other. The
holders of the Convertible Preferred Stock shall not be entitled to receive any
dividends thereon other than the dividends provided for in the preceding
provisions of this Section.
2. Voting Rights and Notice of Meetings. Except as otherwise provided in
Paragraphs (a) and (b) of this Section, the holders of the Common Stock shall
have the exclusive right and power to vote on any matter submitted to a vote of
the stockholders of the Corporation, and the holders of the Convertible
Preferred Stock shall have no right or power whether authorized by the Act or
otherwise to vote on any matter or in any proceeding or to be represented at or
to receive notice of any meeting of the stockholders.
(a) Protective Voting Rights. The holders of Convertible Preferred Stock
and any other Preferred Stock ranking on a parity as to dividends or upon
liquidation with the Convertible Preferred Stock shall be entitled to vote
separately as a class upon any proposed amendment(s) to the Corporation's
Articles of Incorporation which would (i) create, or increase the authorized
number of shares of, any series or class of stock ranking prior to the
Convertible Preferred Stock either as to dividends or upon liquidation; (ii)
amend, alter or repeal any of the rights and preferences of the Convertible
Preferred Stock; or (iii) authorize any reclassification of the Preferred Stock.
Such a proposed amendment must be approved by the holders of at least a majority
of the number of then outstanding shares of the Convertible Preferred Stock and
any other Preferred Stock ranking on a parity as to dividends or upon
liquidation with the Preferred Stock.
(b) Contingent Right to Elect Directors.
(1) Preferred Stockholders' Right to Elect Directors When Dividends Not
Paid and Divestment of Such Right. If at any time declared and accrued dividends
on the Convertible Preferred Stock or any other Preferred Stock shall not have
been paid in an amount equivalent to two (2) consecutive full semiannual
dividends on all Convertible Preferred Stock or any other Preferred Stock at the
time outstanding, the number of Directors of the Corporation shall be increased
by two (2) and the holders of the Convertible Preferred Stock and the holders of
any other Preferred Stock ranking on a parity as to dividends or upon
liquidation with the Convertible Preferred Stock, voting as a single class
without regard to series, shall be entitled to elect two (2) Directors and the
holders of the Common Stock, voting separately as a class, shall be entitled to
elect the remaining Directors of the Corporation. Such right of the holders of
the Convertible Preferred Stock to elect two (2) Directors may be exercised
until all such declared and accrued dividends on the Convertible Preferred Stock
shall have been paid in full and until any noncumulative dividends payable on
all shares of Preferred Stock then outstanding have been paid regularly for at
least one (1) year or funds sufficient therefor deposited in trust, at which
-3-
time the holders of the Convertible Preferred Stock shall be divested of such
voting rights, but subject always to the same provisions for the vesting of such
voting rights in the holders of the Convertible Preferred Stock in the case of
any future dividend default or defaults.
(2) Procedure for Election of Such Directors. The foregoing right of the
holders of the Convertible Preferred Stock with respect to the election of
Directors of the Corporation may be exercised at any annual meeting of
stockholders or, within the limitations hereinafter provided, at a special
meeting of stockholders held for such purpose. If the date on which such right
of the holders of the Convertible Preferred Stock shall become vested shall be
more than ninety (90) days preceding the date of the next annual meeting of
stockholders as fixed by the bylaws of the Corporation, the President of the
Corporation shall, within ten (10) days after delivery to the Corporation at its
principal office of a request to such effect signed by the holders of at least
ten percent (10%) of the Convertible Preferred Stock then outstanding, call a
special meeting of the holders of the Convertible Preferred Stock to be held
within sixty (60) days after the delivery of such request for the purpose of
electing two (2) Directors to serve until the next annual meeting and until
their successors shall be elected and shall qualify. Notice of such meeting
shall be mailed to each holder of the Convertible Preferred Stock not less than
ten (10) nor more than sixty (60) days prior to the date of such meeting.
Whenever the holders of the Convertible Preferred Stock shall be entitled to
elect two (2) Directors, any such holder shall have the right, during regular
business hours, in person or by a duly authorized representative, to examine and
to make transcripts of the stock records of the Corporation for the Convertible
Preferred Stock for the purpose of communicating with other holders of such
Convertible Preferred Stock with respect to the exercise of such right of
election.
(3) Term of Office. Each Director elected by the holders of the Convertible
Preferred Stock shall serve until the next annual meeting of the stockholders or
until his successor shall be elected and shall qualify; provided, however, that
whenever the holders of the Convertible Preferred Stock shall be divested of
voting power as provided in Section 2(b)(1) above, the term of office of the
persons elected as Directors by the holders of the Convertible Preferred Stock
shall terminate, and the number of Directors comprising the Board of Directors
shall be reduced accordingly.
(4) Quorum. At any annual or special meeting of stockholders held for the
purpose of electing Directors when the holders of the Convertible Preferred
Stock shall be entitled to elect two (2) Directors, the presence in person or by
proxy of the holders of a majority of the outstanding Convertible Preferred
Stock shall be required to constitute a quorum for the election by such class of
such Directors, and the presence in person or by proxy of the holders of a
majority of the outstanding Common Stock shall be required to constitute a
quorum for the election by such class of the remaining Directors; provided,
however, that the majority of the holders of any such class of shares who are
present in person or by proxy shall have power to adjourn such meeting for the
election of Directors by such class from time to time, for a period of less than
thirty (30) days, without notice other than announcement at the meeting. No
delay or failure by the holders of either such class of shares to elect the
members of the Board of Directors whom such holders are entitled to elect shall
-4-
invalidate the election of the remaining members of the Board of Directors by
the holders of the other such class of shares.
(5) Filling Vacancies in Board of Directors. If, during any interval
between annual meetings of stockholders for the election of Directors and while
the holders of the Convertible Preferred Stock shall be entitled to elect two
(2) Directors, the number of Directors in office who have been elected by the
holders of the Convertible Preferred Stock or the Common Stock, as the case may
be, shall, by reason of resignation, death, or removal, be less than the total
number of Directors subject to election by the holders of shares of such class:
(i) The vacancy or vacancies in the Directors elected by the holders
of such class shall be filled by a majority vote of the remaining Directors
then in office, although less than a quorum, on nomination by a majority of
the remaining Directors elected by the holders of such class or their
successors, or by the sole remaining Director elected by the holders of
such class or succeeding a Director so elected; and
(ii) If not so filled within sixty (60) days after the creation
thereof, the President of the Corporation shall call a special meeting of
the holders of the shares of such class and such vacancy or vacancies shall
be filled at such special meeting.
(6) Removal of Directors. During such time that the holders of the
Convertible Preferred Stock shall have members of the Board of Directors sitting
on their behalf, any Director may be removed from office by vote of the holders
of a majority of the shares of the class of shares by which his successor would
be elected. A special meeting of the holders of shares of such class may be
called by a majority vote of the Board of Directors for the purpose of removing
a Director in accordance with the provisions of this subparagraph. The President
of the Corporation shall, in any event, within ten (10) days after delivery to
the Corporation at its principal office of a request to such effect signed by
the holders of at least ten percent (10%) of the outstanding shares of such
class, call a special meeting for such purpose to be held within sixty (60) days
after the delivery of such request.
As to the foregoing matters only, each holder of the
Convertible Preferred Stock shall be entitled to one (1)
vote for each share thereof standing in his name on the
books of the Corporation on the record date fixed for a
stockholders' meeting to vote on such transaction.
3. Redemption.
(a) Selection of Shares for Redemption. At any time on or after March 31,
2000, the Corporation may purchase or redeem all, or from time to time any part
of, the shares of Convertible Preferred Stock then issued and outstanding;
provided, however, no shares of Convertible Preferred Stock may be redeemed
until all accrued and unpaid dividends, if any, on all outstanding shares of
Convertible Preferred Stock have been paid in full. If less than all of the
shares of Convertible Preferred Stock then issued and outstanding are to be
redeemed at one time, the shares of Convertible Preferred Stock to be redeemed
shall be selected pro rata or by lot in such manner as may be prescribed by the
-5-
resolution of the Board of Directors of the Corporation. The Corporation shall
on the redemption date pay the holders of the shares of Convertible Preferred
Stock so purchased or redeemed the Redemption Price (as hereinafter defined) for
such shares out of the funds of the Corporation legally available therefor. Such
redemption shall be effected by call and written or printed notice (the
"Redemption Notice") shall be given to each holder of record of Convertible
Preferred Stock shares being called, either personally or by mail to such
holders last known address as shown on the records of the Corporation, not less
than twenty (20) nor more than sixty (60) days before the date fixed for
redemption. The Redemption Notice shall set forth (i) the shares of Convertible
Preferred Stock, or part thereof, to be redeemed, (ii) the date fixed for
redemption, (iii) the Redemption Price, and (iv) the place at which the holders
of Convertible Preferred Stock may obtain payment of the Redemption Price upon
surrender of their respective share certificates. The redemption price (the
"Redemption Price") for the shares of Convertible Preferred Stock being redeemed
shall be One and 09/100 Dollars ($1.09) per share. There is no mandatory
redemption or sinking fund obligation with respect to the Convertible Preferred
Stock.
(b) Surrender of Shares. On or after the date fixed for redemption, each
holder of Convertible Preferred Stock called for redemption shall, unless such
holder shall have previously exercised such holder's option to convert the
Convertible Preferred Stock into Common Stock in the manner set forth in Section
4 below, surrender such holder's certificates for such shares of Convertible
Preferred Stock to the Corporation at the place designated in the Redemption
Notice and shall thereupon be entitled to receive the Redemption Price. Should
less than all the shares of Convertible Preferred Stock represented by any
surrendered certificate be redeemed, a new certificate for the unredeemed shares
shall be issued to the holder of record of such unredeemed shares.
(c) Cessation of Rights as Stockholder. From and after the redemption date
(unless default shall be made by the Corporation in duly paying the Redemption
Price in which case all rights of the holders of Convertible Preferred Stock
shall continue), the holders of the shares of the Convertible Preferred Stock
called for redemption shall cease to have any rights as stockholders of the
Corporation except the right to receive, without interest, the Redemption Price
thereof upon surrender of the certificate(s) representing the shares of
Convertible Preferred Stock being redeemed, and such shares shall not thereafter
be transferred (except with the consent of the Corporation) on the books of the
Corporation and shall not be deemed outstanding for any purpose whatsoever.
(d) Cancellation of Redeemed Shares. All shares of Convertible Preferred
Stock that are redeemed shall be cancelled and such shares shall be restored to
the status of authorized but unissued shares of Preferred Stock.
(e) Deposit of Redemption Price into Trust. If, on or prior to any date
fixed for redemption of shares of Convertible Preferred Stock as provided in
this Section, the Corporation deposits with any bank or trust company, or any
bank or trust company in the United States duly appointed and acting as transfer
agent for the Corporation, as a trust fund, a sum sufficient to redeem, on the
date fixed for redemption, the shares called for redemption, with irrevocable
instructions and authority to the bank or trust company to publish the notice of
redemption, or to complete such publication if already commenced, and to pay, on
and after the date fixed for redemption or prior to such date, the Redemption
-6-
Price of the shares to their respective holders on surrender of their share
certificates, then from and after the date of the deposit, even though such date
may be prior to the date fixed for redemption, the shares so called shall be
deemed to be redeemed and dividends on those shares shall cease to accrue after
the date fixed for redemption. The deposit shall be deemed to constitute full
payment of the shares to their holders and from and after the date of the
deposit the shares shall be deemed to be no longer outstanding, and the holders
of the shares shall cease to be stockholders with respect to such shares and
shall have no rights with respect to such shares, except the right to receive
from the bank or trust company payment of the Redemption Price of the shares,
without interest, on surrender of their certificates, or the right to convert
said shares to Common Stock as provided in Section 4 below. Any money so
deposited on account of the Redemption Price of Convertible Preferred Stock
shares converted after the making of the deposit shall be repaid immediately to
the Corporation on the conversion of such preferred shares. Money so deposited
and unclaimed at the end of three (3) years shall be repaid to the Corporation
and thereafter the holders of such shares of Convertible Preferred Stock called
for redemption shall look only to the Corporation for payment.
4. Conversion of Convertible Preferred Stock.
(a) Conversion Right of Holder. Each share of the Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of initial issuance of such share of Convertible Preferred Stock
(or, if such share is called for redemption, at any time up to and including,
but not after, the close of business on the fifth full business day prior to the
date fixed for such redemption, unless default shall be made by the Corporation
in providing funds for the payment of the Redemption Price) and until the fourth
anniversary of such date (the "Conversion Period") into fully-paid and
nonassessable whole shares of Common Stock upon the terms and conditions set
forth in the following paragraphs of this Section. If the shares of Convertible
Preferred Stock are not voluntarily converted prior to the expiration of the
Conversion Period, each share of Convertible Preferred Stock then outstanding
shall be automatically converted at the Conversion Rate (as defined below),
subject to adjustment as provided in Section 4(d) hereof.
(b) Exercise of Conversion Right. Any holder of the Convertible Preferred
Stock electing to convert such stock into Common Stock pursuant to Section 4(a)
hereof shall deposit the certificates for the Convertible Preferred Stock at the
Corporation's principal office, with the form of written notice to the
Corporation endorsed on such certificate(s) of his election to convert such
Convertible Preferred Stock into Common Stock duly filled out and executed. The
conversion right in respect of any such Convertible Preferred Stock shall be
deemed to have been exercised at the date on which the certificates therefor and
such notice of election duly filled out and executed shall have been so
deposited with the Corporation. The person entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such Common Stock on such date; provided, however, that the conversion
right in respect of any certificate(s) so deposited after the close of business
on any day shall not be deemed to have been exercised until the next succeeding
business day. As soon as practicable, and in any event within thirty (30)
business days after the date of conversion of any Convertible Preferred Stock
into Common Stock pursuant to Section 4(a) hereof, the Corporation shall deliver
to the person entitled thereto, certificate(s) representing the shares of Common
Stock to which such person shall be entitled on such conversion. The
Corporation, as a condition to the exercise of such rights of conversion, may
-7-
require the payment of a sum equal to any transfer tax or other governmental
charge (but not including any tax payable upon the issue of stock deliverable
upon such conversion) that may be imposed or required by law, upon any transfer
incidental or prior thereto, or the submission of proper proof that the same has
been paid. The Company shall pay all accrued but unpaid dividends due and owing
to the then converting holder of the Convertible Preferred Stock as of either
the conversion date or the expiration of the Conversion Period, as applicable.
(c) Conversion Rate. Each share of Convertible Preferred Stock, converted
as provided in Section 4(a) hereof, shall entitle the holder to receive upon
conversion for each $.25 in face amount of Convertible Preferred Stock one share
of Common Stock (the "Conversion Rate"), subject to adjustment as provided in
Section 4(d) below. "Face Amount" meaning for all purposes herein the price of
$1.00 per share of Convertible Preferred Stock. The Conversion Rate will
initially allow a holder of Convertible Preferred Stock to receive four shares
of Common Stock for each share of Convertible Preferred Stock converted. The
Corporation shall not be required, in connection with any such conversion, to
issue a fraction of a share of its Common Stock nor to deliver any stock
certificate representing a fraction thereof. In lieu thereof, the Company shall
round up such fractional share and issue such full share accordingly.
(d) Adjustment of Conversion Rate. The Conversion Rate shall be subject to
adjustment from time to time in certain instances, as follows:
(1) On Recapitalization. On any recapitalization of the Corporation
through a stock split or any subdivision or combination of its outstanding
Common Stock into a greater or smaller number of shares, the number of
shares of Common Stock into which the shares of Convertible Preferred Stock
may be converted shall be increased or reduced in the same proportion,
which shall have a corresponding effect upon the Conversion Rate.
(2) On Sale of Additional Common Stock at Less Than $.25 Per Share or
the then Applicable Conversion Rate. Except in those circumstances set
forth in paragraph (4) of this Section 4(d), if the Corporation sells or
otherwise issues shares of its Common Stock on payment of an amount less
than the Conversion Rate, as applicable at the time of such sale or
issuance, the Conversion Rate, at the time of such sale or issuance, shall
be adjusted such that the Conversion Rate shall equal the price at which
the shares of Common Stock were sold in the transaction resulting in the
adjustment to the Conversion Rate required by this paragraph (2).
(3) On Capital Reorganization, Reclassification, Consolidation,
Merger, or Sale of Corporate Assets. On any capital reorganization,
reclassification of the capital stock, consolidation, merger, sale or
conveyance of all or substantially all of the assets of the Corporation to
another corporation, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash, or other property, each
share of Convertible Preferred Stock shall be convertible into the same
kind and amounts of securities, including share or other assets, or both,
to which the number of common shares of the Corporation which would have
been deliverable on conversion of such shares of Convertible Preferred
Stock immediately prior to such reorganization, reclassification,
consolidation, merger, sale, or conveyance would have been entitled.
-8-
Appropriate adjustments, as determined by the Board of Directors of the
Corporation, shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders of
the Convertible Preferred Stock so that said provisions, including the
provisions with respect to changes in, and other adjustments of, the
Conversion Rate, shall thereafter be applicable, as nearly as reasonably
may be, in relation to any securities or other assets thereafter
deliverable on conversion of the shares of Convertible Preferred Stock.
(4) Events Not Requiring Adjustment to the Conversion Rate. The occurrence
of any of the following events shall not require an adjustment to the Conversion
Rate as contemplated by paragraph (2) above:
(i) the issuance of Common Stock as dividends on either the
outstanding Common Stock, the Convertible Preferred Stock or
other duly issued security of the Company;
(ii) the issuance of shares of Common Stock upon the exercise of
outstanding options or warrants;
(iii)the issuance of shares of Common Stock upon the exercise of
options granted under the Corporation's 1998 Stock Compensation
Plan;
(iv)any issuance of shares of Common Stock to Charles Brister, Chief
Executive Officer and President of the Corporation or any other
executive officer of the Corporation, in lieu of compensation
during calendar year 1999; and
(v)the distribution or issuance of Common Stock, rights or warrants to
subscribe for or purchase Common Stock or any other security, or
other securities or debt instruments convertible into Common
Stock, subject only to the requirement that such securities be
sold at a price per share or be convertible into Common Stock at
a rate in excess of the then applicable Conversion Rate.
(e) Statement of Adjusted Amount. Whenever the amount of shares of Common
Stock or other securities deliverable on the conversion of Convertible Preferred
Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall
forthwith maintain at its office and deliver to each holder of the Convertible
Preferred Stock, a statement signed by the President or a Vice President of the
Corporation and by its Chief Financial Officer, stating the adjusted amount of
the Common Stock or other securities deliverable for each share of Convertible
Preferred Stock, calculated to the nearest one hundredth (1/100) share, and
setting forth in reasonable detail the method of calculation and the facts
requiring such adjustment and on which the calculation is based. Each adjustment
shall remain in effect until a subsequent adjustment hereunder is required.
(f) Payment of Taxes on Conversion of Convertible Preferred Stock. The
Corporation shall not pay any issue or other taxes that may be payable in
-9-
respect of any issue or delivery of Common Stock on conversion of shares of
Convertible Preferred Stock pursuant hereto.
(g) Reservation of Sufficient Common Stock. So long as any shares of
Convertible Preferred Stock shall remain outstanding and the holders thereof
shall have the right to convert said shares in accordance with the provisions of
this Section 4, the Corporation will at all times reserve from the authorized
and unissued shares of its Common Stock a sufficient number of shares to provide
for such conversions, and will take such other corporate action as may be
necessary from time to time in order that it may validly and legally issue
fully-paid and non-assessable shares of such Common Stock upon conversion of the
Convertible Preferred Stock.
(h) Definition of Common Stock. In each case where reference is made to the
Common Stock of the Corporation in this Section, unless a different intention is
expressed, such reference is to the class of Common Stock of the Corporation as
such class of stock exists at the date of the adoption of these provisions, or
stock into which the same may be changed from time to time.
(i) Status of Converted Preferred Shares. All shares of Convertible
Preferred Stock so converted shall be cancelled and such shares shall be
restored to the status of authorized but unissued shares of Preferred Stock.
5. Liquidation Rights.
(a) Liquidation Preference Amount. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the business or affairs of
the Corporation, and after payment of, or adequate provision for payment of, the
debts, liabilities and other claims of the Corporation as determined by its
Board of Directors, each holder of the Convertible Preferred Stock shall be
entitled to receive, out of the remaining net assets of the Corporation legally
available for distribution to its stockholders, before any payment or
distribution shall be made on the Common Stock, or on any other class of stock
of the Corporation ranking junior to the shares of Convertible Preferred Stock
upon liquidation, the amount of One and No/100 Dollar ($1.00) per share of
Convertible Preferred Stock, plus all accrued and unpaid dividends on each such
share up to the date fixed for distribution.
(b) Proportionate Distribution Where Assets Insufficient. In the event the
assets of the Corporation available for distribution to the holders of shares of
Convertible Preferred Stock upon dissolution, liquidation or winding up of the
Corporation whether voluntary or involuntary, shall be insufficient to pay in
full all amounts to which such holders are entitled pursuant to paragraph (a) of
this Section, no such distribution shall be made on account of any shares of any
class of capital stock of the Corporation ranking on a parity with the shares of
Convertible Preferred Stock upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the shares
of Convertible Preferred Stock, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(c) Nonparticipation Right. After the payment to the holders of the shares
of Convertible Preferred Stock of the full preferential amounts provided for in
either paragraph (a) or (b) of this Section, as applicable, the holders of
Convertible Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
-10-
(d) Excluded Transactions. Neither the consolidation nor merger of the
Corporation with or into any other corporation, nor the sale, mortgage, exchange
or conveyance of all or substantially all of the properties, assets or business
of the Corporation, nor any liquidation, dissolution or winding up of the
Corporation occurring substantially concurrently with any such transaction shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning hereof, unless otherwise determined by the Board of Directors
of the Corporation.
6. No Preemptive Rights. No holder of shares of the Convertible Preferred
Stock shall, as such holder, have any preemptive right to subscribe to or
purchase any shares of any class of capital stock of the Corporation now or
hereafter authorized or issued, whether or not exchangeable for any capital
stock of the Corporation of any class or classes now or hereafter authorized or
issued; nor shall any holder of shares of the Convertible Preferred Stock, as
such holder, have any right to purchase, acquire or subscribe for any securities
which the Corporation may issue or sell whether or not convertible into or
exchangeable for shares of capital stock of the Corporation of any class or
classes, and whether or not any such securities have attached or appurtenant
thereto warrants, options or other instruments which entitle the holders thereof
to purchase, acquire or subscribe for shares of capital stock of any class or
classes of the Corporation.
7. Covenants of the Corporation. The Corporation will not, by amendment to
its Articles of Incorporation, as amended, or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the preferences and limitations of
Convertible Preferred Stock to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions set forth herein relating to Convertible Preferred Stock and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of the Convertible Preferred Stock against
dilution or other impairment.
IN WITNESS WHEREOF, KARTS INTERNATIONAL INCORPORATED has caused this
Certificate of Designation, Preferences and Rights to be signed by Charles
Brister, its President and Chief Executive Officer, and attested by Timothy P.
Halter, its Secretary, this 29th day of April, 1999.
KARTS INTERNATIONAL INCORPORATED
By: /s/ Charles Brister
-------------------------------------
CHARLES BRISTER
President and Chief Executive Officer
By: /s/ Timothy P. Halter
-------------------------------------
TIMOTHY P. HALTER
Secretary
-11-
STATE OF LOUISIANA
PARISH OF ____________________
The foregoing instrument was acknowledged before me this day of
____________, 1999, by Charles Brister, as President and Chief Executive Officer
of Karts International Incorporated, a Nevada corporation, on behalf of the
corporation.
[SEAL]
Print Name:
Notary Public
Commission No.
My Commission Expires:
STATE OF TEXAS
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this day of
____________, 1999, by Timothy P. Halter, as Secretary of Karts International
Incorporated, a Nevada corporation, on behalf of the corporation.
[SEAL]
Print Name:
Notary Public
Commission No.
My Commission Expires:
-12-