18
SERIES E CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
FOR
AFGL INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
AFGL INTERNATIONAL, INC.
Pursuant to Section 78.195 of the
Nevada Revised Statues
AFGL INTERNATIONAL, INC. a corporation organized and
existing under the laws of the State of Nevada (the
"Corporation"), in accordance with Section 78.195 of the Nevada
Revised Statutes, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), fixes the total
number of shares of all classes of capital stock which the
Corporation shall have the authority to issue at Twenty-Five
Million (25,000,000) shares, of which Five Million (5,000,000)
shares shall be shares of Preferred Stock, par value $.001 per
share (herein referred to as "Preferred Stock"), and Twenty
Million (20,000,000) shares shall be shares of Common Stock, par
value $.01 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, full or limited but not to exceed one
vote per share, or without voting powers, and with such
designations, preferences and relative, participating, optional
or other special rights and qualifications limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and
expressed in the Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on May 24, 1996, (by unanimous written consent), duly
authorized and adopted the following resolutions providing for an
issue of a series of its Preferred Stock to be designated "Series
E Convertible Preferred Stock.
"RESOLVED, that an issue of a series of Preferred Stock,
$.001 par value per share, of the Corporation (the Preferred
Stock of the Corporation being herein referred to as
"Preferred Stock", which term shall include any additional
shares of Preferred Stock of the same class hereafter
authorized to be issued by the Corporation), consisting of
Five Hundred Seventy Five Thousand (575,000) shares is
hereby provided for, and the voting power, designation,
preferences and relative participating, optional or other
special rights, and the qualifications, limitations or
restrictions thereof, of such series shall be as set forth
below:
Designation: Number of Shares.
(a) The designation of such series of Preferred Stock shall
be "Series E Convertible Preferred Stock" (hereinafter referred
to as the "Series E Stock") and the number of authorized shares
constituting the Series E Stock is Five Hundred Seventy Five
Thousand (575,000). The Series E Stock shall be deemed a
separate class of Preferred Stock, and shall be apart from any
other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series E Stock will be entitled to be
paid, after any distribution or payment is made upon any Senior
Securities and before any distribution or payment is made upon
Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all shares of Series E Stock outstanding,
and the holders of Series E Stock will not be entitled to any
further payment. If upon any such liquidation, dissolution, or
winding up of the Corporation, the Corporation's assets to be
distributed among the holders of Series E Stock are insufficient
to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be
distributed will be distributed ratably among such holders based
upon the aggregate Liquidation Value of the Series E Stock held
by each such holder. The Corporation will mail written notice of
such liquidation, dissolution, or winding up not less then 30
days prior to the payment date stated therein, to each record
holder of Series E Stock. Neither the consolidation or merger of
the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of this Part 1.
Part 2. Conversion Rights.
2A. Conversion Procedure. Subject to the provisions
set forth below, each share of Series E Stock shall be
convertible at the option of the holder thereof, in the manner
hereinafter set forth, into that number of fully paid and
nonassessable shares of Common Stock determined as set forth
below. Any holder of Series E Stock desiring to convert such
shares into shares of Common Stock shall surrender the
certificate or certificates for the shares being converted, duly
endorsed or assigned to the Corporation or in blank, at the
principal office of the Corporation or at the bank or trust
company appointed by the Corporation for that purpose,
accompanied by a written notice of conversion specifying the
number of shares of Series E Stock to be converted and the name
or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued; in case
such notice shall specify a name or names other then that of such
transfer taxes payable upon the issue of shares of Common Stock
in such name or names. After the receipt of such notice of
conversion, the Corporation shall, within thirty (30) days after
receipt of such notice, issue and deliver or cause to be issued
and delivered to such holder a certificate or certificates for
shares of Common Stock resulting from such conversion. In case
less than all of the shares of Series E Stock represented by a
certificate are to be converted by a holder, upon such conversion
the Corporation shall also deliver or cause to be delivered to
such holder a certificate or certificates for the shares of
Series E stock not so converted.
2B. Conversion Privilege and Rate. The right to
convert the Series E Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series E Stock. Each
share of Series E Stock is convertible into One (1) newly issued
share of Common Stock of the Corporation (the "Conversion Rate"),
which is subject to adjustment as provided in part 2C, below;
provided, however, that shares of Series E Stock may be converted
into shares of Common Stock only after the holder of such shares
of Series E Stock shall have certified to the Corporation that it
is not a "bank holding company" or a "subsidiary" of a "bank
holding company" within the meaning of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder, or one of the following shall have
occurred: (1) the bona fide sale to any purchaser (including,
without limitation, any underwriter) of such shares of Series E
Stock (x) pursuant to a registration statement declared effective
by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), covering the offer and sale
of the Corporation's common stock in a bona fide public offering,
or (y) pursuant to Rules 144 and 144A promulgated under the Act,
or in a public distribution pursuant to Regulation A of the
General Rules and Regulations under the Act; (2) the bona fide
sale to any purchaser of such shares of Series E Stock in a
transaction not involving a sale of the Corporation's common
stock to the public, provided that such purchaser does not
immediately after such transaction hold shares of Common Stock
(including any shares converting to Common Stock in accordance
herewith) equaling two percent (2%) or more of the then-
outstanding shares of Common Stock; or (3) the receipt by the
Corporation of (y) a staff opinion, ruling or other written
advice from the Board of Governors of the Federal Reserve System,
or from the appropriate Federal Reserve Bank, or (z) an opinion
of counsel experienced in bank regulatory matters, in each case
to the effect that such shares of Series E Stock may be converted
into shares of Common Stock without violation of Section 4 of the
Bank Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder.
2C. Adjustment of Conversion Rate. The Conversion
Rate is subject to adjustment from time to time upon the
occurrence of any of the events enumerated in this Part 2C. Such
adjustments shall be made in respect of any such events occurring
from and after the date on which any warrants to purchase shares
of Series E Stock are first issued and shall be applicable to all
authorized shares of Series E Stock whether or not any such
shares are issued and outstanding.
a. Adjustment for Change in Capital Stock of the
Corporation. If the Corporation (i) pays a dividend or makes
a distribution on any class of its Common Stock in shares of
any class of its Common Stock, (ii) subdivides its
outstanding shares of any class of Common Stock into a
greater number of shares, (iii) combines its outstanding
shares of any class of Common Stock into a smaller number of
shares, (iv) makes a distribution on any class of its Common
Stock in shares of its Stock other than Common Stock, or (v)
issues by reclassification of any class of its Common Stock
any shares of its Stock, then the Conversion Rate in effect
immediately prior to such action shall be proportionately
adjusted so that any holder of any Series E Stock (a
"Holder") thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the
Corporation which it would have owned immediately following
such action if such Series E Stock had been issued and
outstanding (if not then issued and outstanding) and
converted immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above
shall occur, and shall become effective immediately after
the record date in the case of a dividend or distribution
and immediately after the effective date in the case of a
subdivision, combination or reclassification. If after an
adjustment a Holder may receive shares of two or more
classes of capital stock of the Corporation, the Board of
Directors of the Corporation shall determine in the good
faith exercise of its reasonable business judgment the
allocation of the adjusted Conversion Rate between the
classes of capital stock. After such allocation, the
exercise privilege and the Conversion Rate of each class of
capital stock shall thereafter be subject to adjustment on
terms comparable to those in this Part 2C.
b. Adjustment for Common Stock Issues. If the
Corporation issues shares of Common Stock for a
consideration per share less than the Fair Market Value per
Share (as defined in paragraph (1) of this Part 2C) on the
date the Corporation fixes the offering price of such
additional shares, the Conversion Rate shall be adjusted in
accordance with the following formula:
E' = E x A
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such additional shares;
P = the aggregate consideration received for the
issuance of such additional shares;
M = the Fair Market Value per Share on the date
the Corporation fixes the offering price of
such additional shares; and
A = the number of shares of Common Stock
outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately
after such issuance. The provisions of this subsection (b)
do not apply (i) to of the transactions described in
subsection (a) of this Part 2C or (ii) any transaction for
which an adjustment has been made pursuant to the provisions
of paragraphs (c) or (d) of this Part 2C or (iii) the
issuance of any Excluded Shares (as defined in paragraph (l)
of this Part 2C).
c. Adjustment for Convertible Securities Issues.
If the Corporation issues any evidences of indebtedness,
shares of stock or other securities which are convertible
into or exchangeable, with or without payment of additional
consideration in cash or property, for shares of Stock,
either immediately or upon the occurrence of a specifie date
or a specified event ("Convertible Securities"), other than
shares of Series E Stock for which an adjustment has been
made pursuant to the provisions of subsection (d) of this
Part 2C, whether or not the right to convert or exchange
thereunder is immediately exercisable or is conditioned upon
the passage of time, the occurrence or non-occurrence of
some other event, or both, for a consideration per share of
Stock initially deliverable upon conversion or exchange of
such Convertible Securities less than the Fair Market Value
per Share on the date of issuance of such Convertible
Securities, the Conversion Rate shall be adjusted in
accordance with this formula:
E' = E x O + D
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such Convertible Securities;
P = the aggregate consideration received for the
issuance of such Convertible Securities; and
M = the Fair Market Value per Share on the date
of issuance of such Convertible Securities;
and
D = the maximum number of shares
of Common Stock deliverable upon exercise,
conversion or in exchange of such Convertible
Securities at the Minimum Price.
In this subsection (c), the term "Minimum Price" means the
lowest price at which the Convertible Securities can be
converted into or exchanged for Common Stock, regardless of
whether that is the initial rate or is conditioned upon the
passage of time, the occurrence or non-occurrence of some
other event, or both. The adjustment shall be made
successively whenever any such issuance is made, and shall
become effective immediately after such issuance. If all of
the Stock deliverable upon conversion or exchange of such
Convertible Securities has not been issued when such
Convertible Securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Convertible Securities
been made on the basis of the actual number of shares of
Stock issued upon conversion or exchange of such Convertible
Securities.
d. Adjustment for Right, Option and Warrant
Issues. If the Corporation issues any rights, options or
warrants to subscribe for or purchase or otherwise acquire
Stock, whether or not the right to exercise such rights,
options or warrants is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-
occurrence of some other event, or both (the "Option
Securities"), for a consideration per share of Stock
initially deliverable upon exercise of such Option
Securities less than the Fair Market Value per Share on the
date of issuance of such Option Securities, the Conversion
Rate shall be adjusted in accordance with this formula:
E' = E x O + D
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such Option Securities;
P = the aggregate consideration received for
the issuance of such Option Securities;
M = the Fair Market Value per Share on the
date of issuance of such Option Securities;
and
D = the maximum number of shares of Common
Stock deliverable upon exercise, conversion
or in exchange of such Option Securities at
the Minimum Price.
As used in this subsection (d), the term "Minimum Price"
means the lowest price at which the Option Securities may be
exercised to purchase or otherwise acquire Common Stock,
regardless of whether that is the initial price or is
conditioned upon the passage of time, the occurrence or non-
occurrence of some other event, or both. The adjustment
shall be made successively whenever any such issuance is
made, and shall become effective immediately after such
issuance. If all of the Common Stock deliverable upon
exercise of such Option Securities has not been issued when
such Option Securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Option Securities been
made on the basis of the actual number of shares of Common
Stock issued upon such exercise of such Option Securities.
e. Consideration Received. For purposes of any
computation respecting consideration received pursuant to
any subsection of this Part 2C, the following shall apply:
(1) in the case of the issuance of shares of
Common Stock for cash, the consideration received shall
be the amount of cash received by the Corporation
therefor, without deduction therefrom of any reasonable
expenses incurred by the Corporation in connection
therewith or any reasonable underwriters' discounts,
fees and commissions paid or allowed by the Corporation
in connection therewith.
(2) in the case of the issuance of shares of
Common Stock for a consideration consisting in whole or
in part of other than cash, the consideration other
than cash shall be deemed to be the fair market value
thereof as determined by the Board of Directors of the
Corporation in the good faith exercise of its business
judgment, without deduction therefrom of any reasonable
expenses incurred by the Corporation in connection
therewith. In any circumstances in which the fair
market value of any such consideration is to be
determined pursuant to this paragraph (2), the
Corporation shall give to the Holders (or, if such
determination affects less than all of the Holders, to
the Holders so affected) written notice of the proposed
fair market value, as determined in good faith by the
Board of Directors of the Corporation. If, within
thirty (30) days after the date such notice is given,
the Corporation and such Holders agree upon the fair
market value then the fair market value for purposes of
this paragraph (2) shall be as so agreed. If such
Holders and the Corporation do not agree upon such fair
market value within such 30-day period, then the
Required Holders (as defined in paragraph (l) of this
Part 2C) and the Corporation shall appoint a recognized
investment banking firm of national reputation,
reasonably acceptable to the Required Holders and the
Corporation. If the Corporation and the Required
Holders cannot agree on the appointment of a mutually
acceptable investment banking firm, or if the firm so
appointed declines or fails to serve, then the Required
Holders and the Corporation shall each choose one such
investment banking firm and the respective firms so
chosen shall appoint another recognized investment
banking firm of national reputation. The investment
banking firm so selected shall appraise the fair market
value for the purposes of this paragraph (2), and such
investment banking firm shall make such appraisal
(which shall be in the form of a written report signed
by such investment banking firm) and, for the purposes
of determining the fair market value pursuant to this
paragraph (2), such appraised fair market value
determined as herein provided shall be final and
conclusive on the Corporation and the Holders. If the
fair market value of the consideration as determined by
such investment banking firm is equal to or less than
that determined by the Board of Directors of the
Corporation in accordance with this paragraph (2), then
all fees and expenses of such investment banking firm
shall be paid by the Required Holders requesting such
appraisal. If the appraised fair market value of the
consideration as determined by such investment banking
firm is greater than that determined by the Board of
Directors in accordance with this paragraph (2), then
all fees and expenses of such investment banking firm
shall be paid by the Corporation.
(3) in the case of the issuance of
Convertible Securities or securities issuable upon the
exercise of Option Securities, the aggregate
consideration received therefor shall be deemed to be
the consideration received by the Corporation for the
issuance of such Convertible Securities, plus the
consideration, if any, received by the Corporation for
the issuance of such Option Securities, plus the
additional minimum consideration, if any, to be
received by the Corporation upon the conversion,
exchange or exercise thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (1) and (2) of this subsection (e)).
f. Special Adjustments. If the purchase price
provided for in any Option Securities, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or
exchangeable for Stock shall change, the Conversion Rate in
effect at the time of such event shall forthwith be
readjusted. The Conversion Rate shall be adjusted to those
amounts which would have been in effect at such time had
such Option Securities or Convertible Securities outstanding
at such time initially been granted, issued or sold and the
Conversion Rate initially adjusted as provided in the
applicable subsection of this Part 2C, whichever was
applicable, except that the minimum amount of additional
consideration payable and the total maximum number of shares
issuable shall be determined after giving effect to such
event (and any prior event or events).
g. When No Adjustment Required. No adjustment
need be made for a change in the par value or absence of par
value of any Common Stock. No adjustment in the Conversion
Rate need be made unless adjustment would require an
increase or decrease of at least 1% of the Conversion Rate.
Any adjustments that are not made but deferred pursuant to
this subsection shall be carried forward and taken into
account in any subsequent adjustment.
h. Determination of Fair Market Value per
Share; Notice of Adjustment. Prior to issuing any shares of
Common Stock, any Convertible Securities or any Option
Securities, the Corporation shall cause the Board of
Directors of the Corporation to determine in good faith the
Fair Market Value per Share, as of the date on which the
Corporation fixes the offering price of such shares or as of
the date of issuance of such Convertible Securities or
Option Securities, as the case may be. Within five (5) days
of such determination by the Board of Directors of the
Corporation, but in no event later than thirty (30) days
prior to issuance of such Common Stock, Convertible
Securities or Option Securities, the Corporation shall give
the Holders written notice of the proposed Fair Market Value
per Share. If within such thirty (30) day period, the
Corporation and such Holders agree upon the Fair Market
Value per Share, then the Fair Market Value per Share shall
be as so agreed. If, within such thirty (30) day period,
the Corporation and the Required Holders (as defined in
paragraph (l) of this Part 2C) do not agree upon such Fair
Market Value per Share, then the Fair Market Value per Share
shall be determined as provided in clause (b) of the
definition thereof.
i. When Issuance or Payment May Be Deferred. In
any case in which this Part 2C shall require that an
adjustment in the Conversion Rate be made effective as of a
record date for a specified event, the Corporation may elect
to defer until the occurrence of such event (i) issuing to
the Holder of any Series E Stock converted after such record
date the shares of Stock issuable upon such conversion over
and above the shares of Stock issuable upon such conversion
on the basis of the Conversion Rate prior to such adjustment
and (ii) paying to such Holder any amount in cash in lieu of
a fractional share pursuant to paragraph (j), provided,
however, that the Corporation shall deliver to such Holder a
bill or other appropriate instrument evidencing such
Holder's right to receive such additional shares of stock
and cash upon the occurrence of the event requiring such
adjustment.
j. Fractional Interests. The Corporation shall
not be required to issue fractional shares of Common Stock
on the conversion of the Series E Stock. If more than one
share certificate shall be presented for conversion in full
at the same time by the same Holder, the number of full
shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the
aggregate number of shares issuable on conversion of the
Series E Stock evidenced by all share certificates so
presented. If any fraction of the shares of Common Stock
would, except for the provisions of this Part 2C, be
issuable on conversion of any shares of Series E Stock (or
specified portion thereof), the Corporation shall pay an
amount in cash equal to the Fair Market Value per Share on
the day immediately preceding the date the share certificate
evidencing such Series E Stock is presented for conversion,
multiplied by such fraction.
k. Par Value of Common Stock. Before taking any
action which (i) would cause an adjustment in the Conversion
Rate pursuant to Part 2C such that the aggregate par value
of the shares of Common Stock (including fractional shares)
into which a share of Series E Stock is convertible is
greater than $0.02 per share or (ii) would otherwise result
in the par value of the Common Stock increasing to greater
than $0.02 per share, the Corporation shall receive the
consent of the Required Holders to such adjustment or change
in the par value of the Common Stock and shall take any
corporate action necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable
shares of Common Stock on the basis of the Conversion Rate
as so adjusted.
l. Definitions. For purposes of this Part 2C,
the following terms shall have the following meanings:
(1) "Excluded Shares" means (i) shares of
Common Stock to be issued upon exercise or conversion
of the Corporation's Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Stock, and warrants to
purchase Series E Stock, (ii) shares of Stock issued on
exercise of warrants to purchase Common Stock which the
Board of Directors has, by resolution duly adopted
prior to May 31, 1996, authorized to be granted or
issued, not to exceed 809,711 shares, and (iii) shares
of Stock issued to officers, directors, or employees
of, or consultants to, the Corporation upon exercise of
any stock option granted on or prior to May 31, 1996,
not in excess of 1,151,113 shares, plus shares issued
or options granted to employees pursuant to a stock
option plan approved in good faith by the Board of
Directors of the Corporation after May 31, 1996, not
exceeding 500,000 shares.
(2) "Fair Market Value per Share" means the
fair market value of a share of Common Stock of the
Corporation, and shall be equal to the quotient of (i)
the fair market value of the Corporation and its
subsidiaries taken as a whole on the date of
determination, taking into account all the factors
relevant thereto, including, without limitation, the
highest of the prices that could be obtained from an
arms' length sale without time constraints of (A) all
or substantially all of the assets of the Corporation
and the subsidiaries subject to or after satisfaction
of all liabilities of the Corporation and the
subsidiaries or (B) all of the Fully Diluted Shares of
Common Stock of the Corporation, whether by stock sale,
merger, consolidation or otherwise, divided by (ii) the
number of Fully Diluted Shares of Common Stock on the
date of determination. In no event shall the Fair
Market Value per Share be reduced or discounted on the
basis that any securities to be valued on the basis of
such Fair Market Value per Share may represent the
fight to acquire a minority interest in the Corporation
or may not be freely transferable under federal or
state securities laws, or for any other reason. The
Fair Market Value per Share shall be determined as
provided in clause (X) or (Y) below, as applicable.
(X) In any circumstances in which the
Fair Market Value per Share is required to be
determined, not later than ten (10) days following
the date as of which such determination is
required to be made, the Board of Directors of the
Corporation shall determine in good faith the Fair
Market Value per Share, and the Corporation shall
give to the Holders (or, if such determination
affects less than all of the Holders, to the
Holders so affected) prompt written notice of such
determination. If within thirty (30) days after
the date such notice is given, the Corporation and
the Required Holders agree upon the Fair Value per
Share, then the Fair Market Value per Share shall
be as so agreed. If within such 30-day period,
the Corporation and the Required Holders do not
agree upon such Fair Market Value per Share, then
the Fair Market Value per Share shall be
determined as provided in clause (Y) of this
definition.
(Y) If the Required Holders and the
Corporation do not agree upon such Fair Market
Value per Share within the 30-day period specified
in clause (X) of this definition, then the
Required Holders and the Corporation shall appoint
a recognized investment banking firm of national
reputation, reasonably acceptable to the Required
Holders and the Corporation. If the Corporation
and the Required Holders cannot agree on the
appointment of a mutually acceptable investment
banking firm, or if the firm so appointed declines
or fails to serve, then the Required Holders and
the Corporation shall each choose one such
investment banking firm and the respective firms
so chosen shall appoint another recognized
investment banking firm of national reputation.
The investment banking firm so selected shall
appraise the value of the Corporation (which shall
be in the form of a written report signed by such
investment banking firm), and such appraised value
of the Corporation determined as herein provided
shall be final and conclusive and binding on the
Corporation and the Holders. If the appraised
value of the Corporation as determined by such
investment banking firm is equal to or less than
that determined by the Board of Directors of the
Corporation in accordance with clause (X) of this
definition, then all fees and expenses of such
investment banking firm shall be paid by the
Required Holders requesting such appraisal. If
the appraised value of the Corporation as
determined by such investment banking firm is
greater than that determined by the Board of
Directors in accordance with clause (X) of this
definition, then all fees and expenses of such
investment banking firm shall be paid by the
Corporation.
(3) "Fully Diluted Shares" means, as of any
date of determination, the number of shares of Common
Stock of the Corporation equal to the sum of (i) the
number of shares of Common Stock outstanding on such
date of determination, plus (ii) the number of shares
issuable upon conversion of the Series E Stock as of
such date of determination, plus (iii) the number of
shares of Common Stock that would be issued in respect
of all Option Securities of the Corporation outstanding
and immediately exercisable as of such date of
determination if such Option Securities were to be
converted into shares of Common Stock in accordance
with the following formula:
X = Y(A-B)
A
where: X = the number of shares to be issued to the
holders of such Option Securities;
Y = the number of shares for which such Option
Securities are exercisable;
A = the Fair Market Value per Share determined on
the basis of the then outstanding Common
Stock and assuming that all Option Securities
outstanding are converted to Common Stock as
of the date of determination: and
B = the exercise price for such Option
Securities.
(4) "Required Holders" means the Holders
holding at least 66-2/3% of the Series E Stock
outstanding.
(5) "Stock" means any capital stock of the
Corporation.
2D. Conversion Date. Conversion shall be deemed to
have been made as of the date of surrender of certificates for
the shares of Series E Stock to be converted, and the giving of
written notice as prescribed in Part 2A, and 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. The Corporation shall not be required to
deliver certificates for shares of its Common Stock while the
stock transfer books for such stock or for the Series E Stock are
duly closed for any purpose, but certificates for shares of
Common Stock shall be issued and delivered as soon as practicable
after the opening of such books.
2E. Converted Shares and Common Stock Held for
Conversion. Any shares of Series E Stock which at any time have
been converted shall be canceled and may not be reissued. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, for the
purpose of issuance upon conversion of shares of Series E Stock
then outstanding and shall take all action necessary so that
shares of Common Stock so issued will be validly issued, fully
paid and nonassessable.
2F. Taxes. The Corporation will pay any and all
stamp or similar taxes that may be payable in respect of the
issuance or delivery of shares of Common Stock on conversion of
shares of Series E Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of
Series E Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person requesting
such issuance has paid to the Corporation the amount of any such
tax or has established to the satisfaction of the Corporation
that such tax has been paid.
Part 3. Dividends.
If the Corporation pays a dividend or makes a distribution
to the holders of its Common Stock of any securities (other than
capital stock for which an adjustment in the Conversion Rate is
made pursuant to part 2C) or property (including cash or
securities of other companies) of the Corporation, or any rights,
options or warrants to subscribe for or purchase securities or
property (including securities of other companies) of the
Corporation, then, simultaneously with the payment of such
dividend or the making of such distribution the Corporation will
pay or distribute to the holders of record of the Series E Stock
an amount of property (including, without limitation, cash)
and/or securities (including, without limitation, securities of
other companies) of the Corporation as would have been received
by such holders had they exercised their conversion rights and
converted such shares of Series E Stock into Common Stock
immediately prior to the record date used for determining
stockholders of the Corporation entitled to receive such dividend
or distribution. The dividend payable on each share of Series E
Stock outstanding on the record date for determining those
persons entitled to receive a dividend on Common Stock (or on the
date the dividend is paid if no record date is set), shall be
equal to the product of the dividend per share of Common Stock
multiplied by the Conversion Rate in effect on such record date
(or on the date the dividend is paid if no record date is set)
after giving taking into account all adjustments to such
Conversion Rates required to be made under Part 2, above, as of
such record date (or on the date the dividend is paid if no
record date is set). No dividends shall be paid on the Series E
Stock unless all dividends on the Senior Securities have been
paid or reserved in accordance with the terms thereof.
Part 4. Voting Rights.
Each share of Series E Stock shall have no voting rights
with respect to any matter submitted to the stockholders of the
Corporation, except to the extent required by the Nevada Revised
Statutes and except the right to approve by majority vote of the
holders of the Series E Stock, (i) any amendment, modification or
repeal of the articles of incorporation of the Corporation if the
powers, preferences or special rights of the Series E Stock would
be adversely affected, and (ii) the imposition of any restriction
on the Series E Stock, other than restrictions arising under the
articles of incorporation as in effect at June 1, 1996; provided,
that no voting right attributable to the Series E Stock shall
impose, or be construed to impose, any limitation on the power of
the Corporation to create, authorize or issue, without the vote
or approval of the Series E Stock, shares of any class or series
of Preferred Stock with rights, powers, privileges and
preferences superior or equal to the Series E Stock.
Part 5. Definitions.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York, are authorized by law to close.
"Common Stock" means the Common Stock, $0.01 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than Senior Securities and the Series E Stock.
"Liquidation Value" of any Series E Stock as of any
particular date will be equal to $0.02 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Securities" means the Corporation's Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C 8% Convertible Preferred Stock, Series D 8%
Convertible Preferred Stock, and any other class or series of
Preferred Stock hereafter created, authorized, and issued with
rights, powers, privileges and preferences superior or equal to
the Series E Stock.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Gary S. Goldstein, its President,
and attested to by Barry S. Roseman, its Secretary, this ______
day of May, 1996.
AFGL INTERNATIONAL, INC.
By: /s/
Gary S. Goldstein, President
ATTEST
By: /s/
Barry S. Roseman, Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
I, Gary S. Goldstein, hereby certify that I am the duly
elected and qualified President of AFGL INTERNATIONAL, INC., that
the foregoing instrument if the act and deed of the Corporation
and the fact stated therein are true.
/S/
Gary S. Goldstein, President
Subscribed and sworn to before me the undersigned, a Notary
Public in and for said county and state, this 29th, day of May,
1996.
/s/
Notary Public