5
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AFGL INTERNATIONAL, INC.
Commission File Number: 0-23170
Payment of Filing Fee (Check the appropriate box): PAID $125
WITH PRELIMINARY PROXY STATEMENT
[ ] $125 per Exchange Act rule 0-11(c)(1)(ii), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each Party to the controversy pursuant to Exchange
Act Rule 14a-6(j)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:_________________________________
2) Aggregate number of securities to which
transaction
applies:_____________________________________________
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined) : _______
4) Proposed maximum aggregate value of
transaction:_____
Total fee paid:___________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:______________________________
2) Form, Schedule or Registration Statement No.:________
3) Filing Party:________________________________________
4) Date Filed:__________________________________________
AFGL INTERNATIONAL, INC.
850 THIRD AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10022
ANNUAL MEETING OF STOCKHOLDERS
November 6, 1996
PROXY STATEMENT AND NOTICE
SOLICITATION OF PROXIES
The enclosed proxy is being solicited by the Board of
Directors of AFGL International, Inc., 850 Third Avenue, 11th
Floor, New York, New York 10022, a Nevada corporation ("AFGL" or
the "Company"), for use at the Annual Meeting of the Stockholders
of AFGL (the "Annual Meeting") to be held at 3:00 p.m., on
November 6, 1996, at the principal office of the Company listed
above, and at any adjournment thereof. This Proxy Statement,
together with the Company's 1995 Annual Report, serves as notice
of the Annual Meeting, a description of the proposals to be
addressed at the Annual Meeting, and a source of information on
the Company and its management.
Stockholders may revoke their proxies by delivering a
written notice of revocation to the Secretary of the Company at
any time prior to the exercise thereof, by the execution of a
later-dated proxy by the same person who executed the prior proxy
with respect to the same shares or by attendance at the Annual
Meeting and voting in person by the person who executed the prior
proxy.
The solicitation will be primarily by mail but may also
include telephone, telegraph or oral communication by officers or
regular employees. Officers and employees will receive no
additional compensation in connection with the solicitation of
proxies. All costs of soliciting proxies will be borne by the
Company. The approximate mailing date of the proxy statement and
proxy to stockholders is October 4, 1996.
All proxies will be voted as specified. In the absence of
specific instructions, proxies will be voted FOR:
(1) the election of two Directors of AFGL to serve for a term of
three years and until their successors are duly elected and
qualified, the election of two Directors of AFGL to serve for a
term of two years and until their successors are duly elected and
qualified, and the election of two Directors of AFGL to serve for
a term of one year and until their successors are duly elected
and qualified;
(2) approval of the change of the state of incorporation of the
Company from Nevada to Delaware through a merger of the Company
with and into Headway Corporate Resources, Inc., a Delaware
company formed for that purpose;
(3) approval of the change of the Company's corporate name to
"Headway Corporate Resources, Inc.";
(4) ratification of the appointment of Ernst & Young LLP as
independent auditors of the Company for 1996; and
(5) approval of all other matters by the persons named in the
proxies in accordance with their judgment.
PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON THE PROXY.
STOCKHOLDERS RECEIVING MORE THAN ONE PROXY BECAUSE OF SHARES
REGISTERED IN DIFFERENT NAMES OR ADDRESSES MUST COMPLETE AND
RETURN EACH PROXY IN ORDER TO VOTE ALL SHARES TO WHICH ENTITLED.
OUTSTANDING SHARES AND VOTING RIGHTS
Record Date. Stockholders of record at the close of
business on September 26, 1996, are entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof.
Shares Outstanding. As of September 26, 1996, a total of
5,520,658 shares of the Company's Common Stock (the "Common
Stock") were outstanding and entitled to vote, a total of 2,800
shares of the Company's Series A Preferred Stock were outstanding
and entitled to vote on certain proposals, a total of 6,858
shares of the Company's Series B Preferred Stock were outstanding
and entitled to vote on certain proposals, a total of nine shares
of the Company's Series C Preferred Stock were outstanding and
entitled to vote on certain proposals, a total of 80 shares of
the Company's Series D Preferred Stock were outstanding and
entitled to vote on certain proposals, and no shares of the
Company's Series E Preferred Stock were outstanding and entitled
to vote (the Series A through Series E Preferred Stock is
collectively referred to as the "Preferred Stock").
Voting Rights and Procedures. Each outstanding share of
Common Stock is entitled to one vote on all matters submitted to
a vote of stockholders. Each Series of Preferred Stock is
entitled to vote as a separate class on the proposed change in
the state of incorporation from Nevada to Delaware. The holders
of Series A Preferred Stock are entitled to elect, as a class,
two directors of the Company. The holders of Series B Preferred
Stock are entitled to vote their shares on an as converted basis
with the Common Stock, without distinction as to class, on all
other proposals addressed at the Annual Meeting. The
stockholders of the Company have the right to dissent to the
proposed merger of the Company to effect a change in the
Company's state of incorporation to Delaware, and demand payment
of the fair value of their shares in the Company, which is
described in more detail below under Proposal No. 2,
Reincorporation in Delaware.
The Company's Bylaws and Nevada law require the presence, in
person or by proxy, of a majority of the outstanding shares of
Common Stock entitled to vote to constitute a quorum to convene
the Annual Meeting. Shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e., shares held by a broker
or nominee which are represented at the meeting, but with respect
to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of
a quorum.
Stockholder Proposals For The 1997 Annual Meeting.
Proposals from stockholders intended to be included in the
Company's proxy statement for the 1997 Annual Meeting must be
received by the Secretary of the Company on or before December 1,
1996, and may be omitted unless the submitting stockholder meets
certain requirements. It is suggested that the proposal be
submitted by certified mail, return-receipt requested.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Company's Articles of Incorporation and Bylaws authorize
a Board comprised of not less than three nor more than nine
members. Within the limits specified above, the number of
Directors is determined by a resolution of the Board or by the
stockholders at the Annual Meeting. Pursuant to a resolution
adopted by the Board of Directors the authorized number of
members of the Board of Directors has been set at six.
On September 16, 1996, the Board amended the Bylaws to
provide that the Board be divided into three classes to be
designated as Class 1, Class 2 and Class 3, each of which is to
be as nearly equal in number as possible. Under the new
provision, each Director serves for a term ending on the date of
the third Annual Meeting following the meeting at which such
Director was elected. However, if a Director is being elected to
replace a director who has resigned for any reason, the newly
elected director will be elected to serve the remainder of the
replaced director's term.
The Board of Directors adopted the amendment to the Bylaws
staggering the Board to enhance continuity of the Board of
Directors and management of the Company. Although the Company
has not had any problems with continuity in the past, management
is of the opinion continuity will become more important to the
development and stability of the Company in the future as the
Company continues to grow in size and operations.
One effect of staggering the Board is to make it more
difficult for stockholders to change a majority of Directors
sitting on the Board. Before adoption of the new bylaw,
stockholders could change a majority of the Board at one meeting
of stockholders where directors were elected. After adoption of
the new bylaw two consecutive annual meetings of stockholders at
which directors are elected are required for the stockholders to
change a majority of the Board of Directors. Consequently,
stockholders who are dissatisfied with the performance of the
Board of Directors will find it more difficult to change a
majority of the Board. Another effect of this provision is to
make it more difficult for a single person or group of persons to
attempt to gain control of the Company by electing a slate of
directors in opposition to the nominees proposed by the Board of
Directors. The Company is not presently aware of any person or
group who proposes to nominate any person for election as a
director in opposition to any nominee of the Board.
The new bylaw staggering the Board was adopted by the Board
of Directors without stockholder approval as permitted by Nevada
corporate law and the Company's Articles of Incorporation and
Bylaws, based on management's belief that enhancing the stability
and continuity of the Board of Directors is in the best interest
of the Company.
Set forth below for each nominee for election as a Director,
based on information supplied by him, are his name, age as of the
date of the Annual Meeting, any presently held positions with the
Company, his principal occupation now and for the past five
years, other Directorships in public companies and his tenure of
service with the Company as a Director. The term the "Company"
includes subsidiaries of the Company. Each nominee in Class 1
shall hold office until the annual meeting of stockholders in
1999; each nominee in Class 2 shall hold office until the annual
meeting of stockholders in 1998; and each nominee in Class 3
shall hold office until the annual meeting of stockholders in
1997.
Nominees For Election As Directors
Class 1
Gary S. Goldstein (age 41) founded The Whitney Group in July
1984 and AFGL International, Inc., in November 1991, and
currently serves as the Chairman and Chief Executive Officer of
the Company and its subsidiaries. Mr. Goldstein has extensive
experience in human resource recruitment within all areas of the
financial services industry. Prior to entering the recruitment
industry, Mr. Goldstein was on the audit and consulting staffs of
Arthur Andersen & Co., in New York. Mr. Goldstein is an active
member of the Young Presidents' Organization, Inc., and serves on
its Metro Division Board of Directors. He is also an active
member of The Brookings Council of the Brookings Institution, The
Presidents Association of the American Management Association,
and is listed in Who's Who in Finance and Industry.
Barry S. Roseman (age 42) oversees all operation of the
Company and its subsidiaries. He joined AFGL as its Senior
Executive Vice President and Chief Operating Officer in January
1992, and became President in September 1996. For nine years
prior to 1992 he was employed at FCB/Leber Katz Partners, Inc., a
division of True North Communications, Inc., in various
positions; most recently as Senior Vice President Director of
Agency Operations.
The holders of Series A Preferred Stock are entitled to elect two
Directors of the Company. The Board has nominated for election
by the Series A Stockholders the Class 1 nominees.
Class 2
Edward E. Furash (age 61) founded Furash & Company, Inc., in
1980 and currently serves as its Chairman and Chief Executive
Officer. Mr. Furash has extensive experience in strategic
planning and restructuring, organization and management design
and practices, mergers and acquisitions, holding company
expansion strategies, and turnaround of troubled institutions. A
seasoned banker, he served nearly twelve years as Senior Vice
President at the Shawmut Corporation and subsequently was a
Managing Associate and member of the Board of Directors of
Golembe Associates. Mr. Furash has earned degrees from The
Wharton School and Harvard College and later served of the
faculty of both institutions. He is listed in Who's Who in
America in 1995 and has written for a wide variety of
publications, including Bankers Magazine, Banking Week and The
American Banker.
Ehud D Laska (age 46) is the Chairman of Coleman and Company
Securities, Inc., a New York Stock Exchange member investment
bank. Mr. Laska is also a founding partner of InterBank/Birchall
Acquisition Partners, LLC. Through these firms, Mr. Laska
specializes in building up companies through same industry
consolidation and acquisitions. From August 1994 to February
1996, Mr. Laska served as a managing director at the investment
banking firm of Continuum Capital, Inc. While serving as a
Managing Director with Tallwood Associates, Inc., a boutique
investment banking firm, from May 1992 to August 1994, Mr. Laska
founded the Private Equity Finance Group, which merged with
Continuum Capital, Inc. in August 1994. Prior to May 1992, Mr.
Laska was an investment banker with Laidlaw Equities. He
currently services as a director of Intile Designs, Inc., a
publicly-held distributor of ceramic tile products.
Class 3
G. Chris Andersen (age 58) is one of the founders of
Andersen, Weinroth & Co., L.P., a merchant banking firm, which
commenced operations in January 1996. For over five years prior
to 1996, Mr. Andersen served as the Vice Chairman of PaineWebber
Incorporated, in New York City. Mr. Andersen also serves as a
director of three other public companies, Sunshine Mining and
Refining Company, TEREX Corporation, and United Waste
Incorporated.
Richard B. Salomon (age 48) has been engaged in the private
practice of law for the past five years, during which period he
has been a partner in the law firm of Christy & Viener, counsel
to the Company. Mr. Salomon's practice is primarily in the areas
of real estate and corporate law. He currently services as a
director of Tweedy Browne Fund, Inc., a mutual fund based in New
York City.
Board Meetings and Committees/ Compensation
The Board of Directors has established three committees.
The Compensation Committee has been established to consider
salary and benefit matters for the executive officers and key
personnel of the Company. The Finance Committee assists the
Board in areas of financing proposals, budgeting, and
acquisitions. The Audit Committee is responsible for financial
reporting matters, internal controls, and compliance with
financial polices of the Company, and meets with the Company's
auditors when appropriate.
The Board of Directors met three times during the past
fiscal year. The Finance Committee met three times, the
Compensation Committee met four times, and the Audit Committee
met once during the year. All the directors attended all
meetings of the Board of Directors and the committees on which
they serve. Directors who are not employees of the Company are
paid $1,000 for attendance at each Board meeting, and are
reimbursed for travel expenses incurred to attend each meeting.
No payment is made for attending committee meetings.
Vote and Recommendation
Each Director is elected by vote of a plurality of the
shares of voting stock present and entitled to vote, in person or
by proxy, at the Annual Meeting, except for the two directors
elected by the holders of Series A Preferred Stock, who are
elected by vote of a plurality of the shares of Series A
Preferred Stock present and entitled to vote, in person or by
proxy, at the Annual Meeting. Abstentions or broker non-votes as
to the election of directors will not affect the election of the
candidates receiving the plurality of votes. Unless instructed
to the contrary, the shares represented by the proxies will be
voted FOR the election of the nominees named above as directors.
Although it is anticipated that each nominee will be able to
serve as a director, should any nominee become unavailable to
serve, the proxies will be voted for such other person or persons
as may be designated by the Company's Board of Directors.
The Board Recommends a Vote "FOR" The Nominees
REINCORPORATION IN DELAWARE
(PROPOSAL NO. 2)
The Board of Directors of the Company has approved a
proposal to change the Company's state of incorporation from
Nevada to Delaware. The primary purpose of this reincorporation
is to allow the Company to benefit from Delaware's well-developed
corporate law.
The following discussion summarizes certain aspects of the
proposed reincorporation of the Company in Delaware. If approved
by the Company's stockholders, the proposed reincorporation would
be effected by merging the Company into a wholly owned subsidiary
of the Company (the "Surviving Corporation"), which will be
incorporated under the laws of Delaware for the purpose of
effecting the proposed merger (the "Merger"). The Merger would
be accomplished pursuant to the terms of an Agreement and Plan of
Merger between the Company and the Surviving Corporation in
substantially the form included herein as Appendix A (the "Merger
Agreement"). The Surviving Corporation will continue under the
name Headway Corporate Resources, Inc., subject to stockholder
approval. See "Change in Corporate Name (Proposal No. 5)" below.
At the effective time of the Merger, the Surviving
Corporation will be governed by the Delaware General Corporation
Law (the "Delaware GCL") and by the new Certificate of
Incorporation (the "Delaware Certificate") attached hereto as
Appendix B and the new Bylaws (the "Delaware Bylaws") attached
hereto as Appendix C. With certain exceptions, the Delaware GCL
is substantially similar to the Private Corporations Law of the
State of Nevada (the "Nevada Code"). For a discussion of certain
differences in stockholders' rights and the powers of management
under the Delaware GCL and the Nevada Code, see "Differences
Between the Corporation Laws of Delaware and Nevada," below.
Except for a change in corporate name to Headway Corporate
Resources, Inc., assuming stockholder approval, and a change in
the par value of the Company's authorized capital stock and
except to the extent that changes are dictated by the application
of the Delaware GCL, the Delaware Certificate and Delaware Bylaws
will be substantially similar to the Company's present Articles
of Incorporation and Bylaws (the "Nevada Articles" and the
"Nevada Bylaws," respectively). See "Differences Between the
Charter of the Company and the Surviving Corporation," below.
Upon effectiveness of the Merger, each share of Common Stock
of the Company will automatically be converted into a share of
Common Stock of the Surviving Corporation, and stockholders of
the Company will automatically become stockholders of the
Surviving Corporation. Certificates for the Common Stock of the
Company will be deemed to represent the same number of shares as
represented by the Company's current certificates prior to the
Merger. IT WILL NOT BE NECESSARY FOR STOCKHOLDERS TO EXCHANGE
THEIR COMPANY STOCK CERTIFICATES, ALTHOUGH STOCKHOLDERS MAY
EXCHANGE THEIR CERTIFICATES IF THEY WISH.
Under Nevada law, the affirmative vote of a majority of the
outstanding shares is required for approval of the proposed
Merger and reincorporation. If approved by the stockholders at
the Annual Meeting, it is anticipated that the reincorporation
would be completed as soon thereafter as practicable. The
proposed Merger and reincorporation may be abandoned or the
Merger Agreement may be amended (with certain exceptions), either
before or after stockholder approval has been obtained, if, in
the opinion of the Board of Directors, circumstances arise that
make such action advisable.
Adoption and approval of the Merger will affect certain
rights of stockholders. Accordingly, stockholders are urged to
read carefully this entire Proposal No. 4 and the annexes hereto
before voting on this Proposal No. 4.
Principal Reasons For the Reincorporation
The primary reason for the Board's recommendation of the
reincorporation is the well-developed case law interpreting the
Delaware GCL, which the Board believes will allow it to more
effectively perform its duties. Although the Nevada Code is
relatively similar to the Delaware GCL, there is a lack of
predictability under Nevada law resulting from the limited body
of case law interpreting the Nevada Code. The Delaware GCL and
the court decisions construing it, on the other hand, are widely
regarded as the most extensive and well-defined body of corporate
law in the United States. This body of case law is based in part
on Delaware's long-established policy of encouraging companies to
incorporate in that state. In furtherance of that policy,
Delaware has been a leader in adopting comprehensive, modern and
flexible corporate laws which are periodically updated and
revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or
have subsequently reincorporated in Delaware in a manner similar
to that proposed by the Company. Following from these
conditions, Delaware's courts have developed considerable
expertise in dealing with corporate issues, and a substantial
body of case law has developed construing Delaware law and
establishing public policies with respect to corporate legal
issues. Thus, for example, relative to other states Delaware
provides greater guidance to directors in the context of dealing
with major transactions, including potential changes in corporate
control, along with more general corporate matters. The Board
therefore believes that the overall effect of the reincorporation
will be to enhance the Board's ability to consider all
appropriate courses of action with respect to significant
transactions, including takeover attempts, for the benefit of all
stockholders. Moreover, the Board believes that enhanced
certainty with respect to the duties of directors is a
significant benefit to the Company and its stockholders and could
be an important factor in attracting and retaining quality
persons to serve on the Board of Directors.
Certain Consequences of the Merger
In connection with the Merger, the Company's corporate name
will be changed from AFGL International, Inc. to Headway
Corporate Resources, Inc., subject to stockholder approval. The
Merger will not result in any other change in the name, business,
management, assets, liabilities or net worth of the Company. The
Company will continue to maintain its executive offices in New
York City. The capitalization, consolidated financial condition
and results of operations of the Surviving Corporation
immediately after consummation of the Merger will be the same as
those of the Company immediately prior to the consummation of the
Merger.
Consummation of the Merger is subject to stockholder
approval. Upon satisfaction of that condition, the Merger will
be consummated as follows:
Effective Date. The Merger will take effect at the later of
the date on which a Certificate of Ownership and Merger is filed
with the Secretary of State of Delaware and Articles of Merger
with the Secretary of State of Nevada (the "Effective Date"),
which filing is anticipated to be made as soon as practicable
after the adoption and approval of the Merger Agreement by the
stockholders of the Company. On the Effective Date of the
Merger, the separate corporate existence of the Company will
cease, and stockholders of the Company will become stockholders
of the Surviving Corporation.
Management After the Merger. Upon effectiveness of the
Merger, the Board of Directors of the Surviving Corporation will
consist of those persons elected to the Board of Directors of the
Company at the Annual Meeting. Such persons and their respective
terms of office are set forth above under the caption "Election
of Directors," above. The directors will continue to hold office
as directors of the Surviving Corporation for the same term for
which they would otherwise serve as directors of the Company.
The individuals serving as executive officers of the Company
immediately prior to the Merger will serve as executive officers
of the Surviving Corporation upon the effectiveness of the
Merger.
Capitalization of the Surviving Corporation; Stock
Certificates. The authorized number of shares of common stock of
the Surviving Corporation will be 20,000,000, $0.0001 par value
(the "Surviving Corporation Common Stock"), a decrease in par
value from the current $0.01 par value of the Company's
20,000,000 authorized shares of Common Stock ("Company Common
Stock"). The Surviving Corporation will also have 5,000,000
shares, $0.0001 par value, of authorized but unissued Preferred
Stock, a decrease in par value from the current $0.001 par value
of the Company's 5,000,000 authorized shares of preferred stock.
See, "Differences Between the Charter of the Company and the
Surviving Corporation," below.
In the Merger, Company Common Stock will be converted, share
for share, without any action on the part of the holder thereof,
into the Surviving Corporation Common Stock. The Surviving
Corporation Common Stock will not have preemptive rights and will
not be subject to assessment. The Surviving Corporation will
file a Designation for Series A through E Preferred Stock
("Designation") attached hereto as Appendix D. In the Merger,
all outstanding Company Preferred Stock, Series A through Series
E, will be converted, share for share, without any action on the
part of the holder into the corresponding Series of Surviving
Corporation Preferred Stock. All shares of the Surviving
Corporation Common Stock and Preferred Stock to be issued in the
Merger will be fully paid and nonassessable. As holders of stock
in a Delaware corporation, the Surviving Corporation stockholders
will have the rights provided by the Delaware GCL, the Delaware
Certificate, the Delaware Bylaws, and the Designation. See
"Differences Between the Corporation Laws of Nevada and
Delaware," below.
Each outstanding certificate representing shares of Company
Common Stock and Preferred Stock will continue to represent the
same number of shares of the Surviving Corporation Common Stock
until submitted for transfer to the Surviving Corporation. IT
WILL NOT BE NECESSARY FOR STOCKHOLDERS OF THE COMPANY TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF THE
SURVIVING CORPORATION.
The Company currently has effective a registration statement
under the Securities Act of 1933, as amended, pertaining to
resale of shares of Company Common Stock issuable upon conversion
of the Company's Series D Preferred Stock and Series E Preferred
Stock. The Company intends to file amendments to such
registration statement to continue the registration of shares of
the Surviving Corporation Common Stock issuable on conversion of
its corresponding Series D and Series E Preferred Stock.
Progressive Transfer Company, the transfer agent and
registrar for the Company, will act as transfer agent and
registrar for the Surviving Corporation.
Company Warrants. The Company has outstanding warrants to
purchase shares of Company Common Stock. Such warrants will not
be changed in any material respect by the Merger. Each warrant
to purchase shares of Company Common Stock outstanding
immediately prior to the Merger will be converted into a warrant
to purchase the same number of shares of the Surviving
Corporation Common Stock upon the same terms and conditions as in
effect immediately prior to the Effective Date.
The Company currently has effective a registration statement
under the Securities Act of 1933, as amended, pertaining to
resale of shares of Company Common Stock issuable upon the
exercise of certain outstanding warrants. The Company intends to
file amendments to such registration statement to continue the
registration of shares of the Surviving Corporation Common Stock
issuable on exercise of such warrants.
Company Equity Incentive Plans. The Company's equity
incentive plan will not be changed in any material respect by the
Merger. Each option to purchase shares of Company Common Stock
outstanding immediately prior to the Merger pursuant to the
Company's 1993 Incentive Stock Plan and/or any successor plans,
will be converted into an option to purchase the same number of
shares of the Surviving Corporation Common Stock upon the same
terms and conditions as in effect immediately prior to the
Effective Date.
Indebtedness of the Company. All indebtedness of the
Company outstanding on the Effective Date will be assumed by the
Surviving Corporation in connection with the Merger. To the
Company's knowledge, no indebtedness of the Company will be
accelerated as a result of the proposed transaction.
Trading of the Surviving Corporation Common Stock. It is
anticipated that the Surviving Corporation Common Stock will be
quoted on the NASDAQ SmallCap Market without interruption, and
that such market will consider the delivery of existing stock
certificates of the Company as constituting "good delivery" of
shares of the Surviving Corporation in transactions subsequent to
the Merger.
Amendment, Deferral or Termination of the Agreement of
Merger. The Merger Agreement provides that the Boards of
Directors of the Company may amend the Merger Agreement prior to
or after approval of the Merger by the stockholders of the
Company but not later than the Effective Date; provided that no
such amendment may be made that is not approved by such
stockholders if it would affect the principal terms of the Merger
Agreement.
The Merger Agreement also provides that the Board of
Directors of the Company may terminate and abandon the Merger or
defer its consummation for a reasonable periods, notwithstanding
stockholder approval, if in the opinion of the Board of
Directors, such action would be in the best interests of the
Company.
Federal Income Tax Consequences. It is anticipated that the
Merger will be treated as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended. Accordingly, no gain
or loss will be recognized by holders of Company Common Stock and
Preferred Stock or by the Company or the Surviving Corporation as
a result of the consummation of the Merger. Each former holder
of Company Common Stock and Preferred Stock will have the same
tax basis in the Surviving Corporation Common Stock and Preferred
Stock received pursuant to the Merger as it has in Company Common
Stock held by it at the time of the consummation of the Merger.
Each stockholder's holding period with respect to the Surviving
Corporation Common Stock and Preferred Stock will include the
period during which it held the corresponding Company Common
Stock and Preferred Stock, provided the latter is held as a
capital asset at the time of consummation of the Merger. The
foregoing is only a summary of the federal income tax
consequences and is not tax advice. No ruling from the Internal
Revenue Service and no opinion of counsel with respect to the tax
consequences of the Merger have been or will be sought by the
Company.
Differences Between the Charter of the Company and the Surviving
Corporation
Except to the extent that changes are dictated by the
application of the Delaware GCL along with limited additional
changes discussed below, the provisions of the Delaware
Certificate and the Delaware Bylaws will be substantially similar
to the provisions of the Nevada Articles and the Nevada Bylaws.
The par value of the authorized shares of the Surviving
Corporation Common Stock and Preferred Stock will be $0.0001 per
share, a decrease from the present par value, which will
substantially decrease initial Delaware franchise taxes.
Differences Between the Corporation Laws of Delaware and Nevada
In many instances, the Nevada Code is substantially similar
to the Delaware GCL. Although it is impractical to note all of
the remaining differences between the corporation statutes of
Delaware and Nevada, the most significant differences, in the
judgment of the management of the Company, are summarized below.
The summary is not intended to be complete and reference should
be made to the Delaware GCL and the Nevada Code.
Removal of Directors. Under the Delaware GCL, any one or
all of the directors of a corporation with a classified board of
directors may be removed, with cause, by the holders of a
majority of shares then entitled to vote in an election of
directors.
Under the Nevada Code, any one or all of the directors of a
corporation with a classified board may be removed by the holders
of not less than two-thirds of the voting power of a
corporation's stock. The Company has, and the Surviving
Corporation will also have, a classified board of directors.
Indemnification of Officers and Directors and Advancement of
Expenses. Delaware and Nevada have nearly identical provisions
regarding indemnification by a corporation of its officers,
directors, employees and agents, except Nevada provides broader
indemnification in connection with stockholder derivative
lawsuits.
Delaware and Nevada law differ in their provisions for
advancement of expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding. The
Delaware GCL provides that expenses incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of the action,
suit or proceeding upon receipt of an undertaking by or an behalf
of the director or officer to repay the amount if it is
ultimately determined that he is not entitled to be indemnified
by the corporation. Thus, a corporation has the discretion to
decide whether or not to advance expenses.
Under the Nevada Code, the articles of incorporation, bylaws
or an agreement made by the corporation may provide that the
corporation MUST pay advancements of expenses in advance of the
final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined that he is not
entitled to be indemnified by the corporations. Thus, a
corporation may have no discretion to decide whether or not to
advance expenses.
Limitation on Personal Liability of Directors. Delaware
corporations are permitted to adopt charter provisions limiting,
or even eliminating, the liability of a director to a company and
its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such liability does not arise
from certain proscribed conduct, including breach of the duty of
loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or liability
to the corporation based on unlawful dividends or distributions
or improper personal benefit.
While the Nevada Code has a similar provision permitting the
adoption of provisions in the articles of incorporation limiting
personal liability, the Nevada provision differs in two respects.
First, the Nevada provision applies to both directors and
officers. Second, while the Delaware provision excepts from
limitation on liability a breach of the duty of loyalty, the
Nevada counterpart does not contain this exception. Thus, the
Nevada provision permits a corporation to limit the liability of
officers, as well as directors, and permits limitation of
liability arising from a breach of the duty of loyalty.
The Delaware Certificate, like the Nevada Articles, contains
a provision limiting the personal liability of directors.
However, unlike the Delaware Certificate, the Nevada Articles
also limit the liability of officers. Under the laws of either
state, the charter provision will not have any effect on the
availability of equitable remedies such as an injunction or
rescission based upon a breach of the duty of care, or on
liabilities which arise under certain federal statutes such as
the securities laws.
Dividends. Under the Delaware GCL, unless otherwise
provided in the certificate of incorporation, a corporation may
declare and pay dividends, out of surplus, or if no surplus
exists, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year (provided
that the amount of capital of the corporation following the
declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the
distribution of assets). In addition, the Delaware GCL provides
that a corporation may redeem or repurchase its shares only out
of surplus.
The Nevada Code provides that no distribution (including
dividends on, or redemption or repurchases of, shares of capital
stock) may be made if after giving effect to such distribution,
the corporation would not be able to pay its debts as they become
due in the usual course of business, or the corporation's total
assets would be less than the sum of its total liabilities plus
the amount that would be needed at the time of a liquidation to
satisfy the preferential rights of preferred stockholders.
The provisions of the Delaware GCL are more restrictive than
the provisions of the Nevada Code and could conceivably affect
future dividends or other distributions. Neither the Company nor
the Surviving Corporation currently intends to pay dividends or
make distributions on its Common Stock.
Restrictions on Business Combinations/ Corporation Control.
Both the Delaware GCL and the Nevada Code contain provisions
restricting the ability of a corporation to engage in business
combinations with an interested stockholder. Under the Delaware
GCL, except under certain circumstances, a corporation is not
permitted to engage in a business combination with any interested
stockholder for a three-year period following the date such
stockholder became an interested stockholder. The Delaware GCL
defines as interested stockholder generally as a person who owns
15% or more of the outstanding shares of such corporation's
voting stock.
The Nevada Code generally disallows the exercise of voting
rights with respect to "control shares" of an "issuing
corporation" held by an acquiring person," unless such voting
rights are conferred by a majority vote of the disinterested
stockholders. "Control shares" are the voting shares of an
issuing corporation acquired in connection with the acquisition
of a "controlling interest." "Controlling interest" is defined
in terms of threshold levels of voting share ownership, which
thresholds, whenever each may be crossed, trigger applications of
the voting bar with respect to the shares newly acquired.
As permitted by the Nevada Code, the Company opted not to be
subject to the business combination and control share voting
restrictions contained in the Nevada Code. The Surviving
Corporation will be subject to the business combination
restrictions contained in the Delaware GCL, which will have a
chilling effect on hostile takeovers of the Surviving
Corporation. Neither the Company nor the Surviving Corporation
is aware of any person interested in making a takeover bid.
Rights of Dissenting Stockholders
Stockholders who oppose the proposed Merger will have the
right to receive payment for the value of their shares as set
forth in Sections 92A.300 through 92A.500 of the Nevada Code,
which are attached under Appendix E to this Proxy Statement.
Under the Nevada Code, such dissenters' rights will be available
only to stockholders of the Company who refrain from voting in
favor of the Merger and notify the Company in writing prior to
the vote on the Merger of their intention to demand payment for
their shares if the Merger is effectuated (a negative vote will
not itself constitute such notice). Stockholders who hold their
shares beneficially, and not of record, may assert their
dissenter's rights only by submitting with their written notice
of dissent the written consent of the stockholders of record for
their shares, and must exercise their dissenter's rights for all
the shares of which they are beneficial owners.
If the proposed Merger is approved by the required vote at
the Annual Meeting, the Company is required to mail a notice to
all stockholders who gave due notice of their intention to demand
payment and who refrained from voting in favor of the proposed
action. The notice shall state where and when a demand for
payment shall be sent and certificates shall be deposited in
order to obtain payment, include a form for demanding payment
which includes a request for certification of the date on which
the stockholder or the person on whose behalf the stockholder
dissents acquired beneficial ownership of the shares, and be
accompanied by a copy of Sections 92A.300 through 92A.500 of the
Nevada Code. The date set for receipt of the demand for payment
from the dissenting stockholders shall be not less than 30 nor
more than 60 days from the mailing of the notice. Stockholders
who fail to demand payment or fail to deposit certificates, as
required by the notice mailed to the dissenting stockholders,
shall have no right to received payment for their shares.
Within 30 days following the date on which demand for
payment is received from dissenting stockholders who have
deposited their certificates with the Company, all in accordance
with the notice of the Company, the Company shall remit to the
dissenting stockholders the amount which the Company estimates to
be the fair value of the shares, with interest. The remittance
shall be accompanied by: (1) the Company's closing balance sheet
and statements of income and stockholders' equity for a fiscal
year ending not more than 16 months before the date of
remittance, together with the latest available interim financial
statements; (2) a statement of the Company's estimate of the fair
value of the shares; (3) an explanation of how the interest was
calculated; (4) a statement of the dissenters' right to demand
payment; and (5) a copy of Sections 92A-300 through 92A-500 of
the Nevada Code. The Company may elect, however, to withhold
remittance from any dissenter with respect to shares of which the
dissenter or the person on whose behalf the dissenter acts was
not the beneficial owner on the date of the first announcement to
the news media or to stockholders of the terms of the proposed
Merger.
If the dissenting stockholders believe that the amount
remitted is less than the fair value of their shares, they may,
within 30 days after the date of mailing of the Company's
remittance, mail to the Company their own estimate of the value
of the deficiency. If a dissenting stockholder fails to do so,
he shall be entitled to no more than the amount remitted. If a
demand for payment remains unsettled for 60 days after such
demand is made by a dissenting stockholder, the Company shall
file in an appropriate court a petition requesting that the fair
value of the shares and interest thereon be determined by the
court. All dissenters are entitled to judgment for the amount by
which the fair value of their shares is found to exceed the
amount previously remitted, with interest. If the Company fails
to file a petition, each dissenter who has made a demand and who
has not already settled his claim against the Company shall be
paid by the Company the amount demanded by him with interest and
may sue thereafter in an appropriate court.
The Plan of Merger provides that the Board of Directors may,
in its discretion, terminate the Merger nothwithstanding
stockholder approval. This provision enables the Board to
evaluate the potential burden to the Company arising from the
exercise of dissenter's rights, and abandon the Merger if the
burden to the Company is too great in the opinion of the Board.
Vote and Recommendation
The affirmative vote of a majority of the Company's issued
and outstanding Common Stock and each series of Preferred Stock
is required for approval of the reincorporation. A vote for the
reincorporation will constitute specific approval of the Merger
Agreement and all other transactions and proceedings related to
the reincorporation. Abstentions as to this Proposal 2 will be
treated as votes against Proposal 2. Broker non-votes, however,
will be treated as unvoted for purposes of determining approval
of Proposal 2 and will not be counted as votes for or against
Proposal 2. Properly executed, unrevoked Proxies will be voted
FOR Proposal 2 unless a vote against Proposal 2 or abstention is
specifically indicated in the Proxy.
The Board of Directors Recommends a Vote "For" the
Reincorporation.
CHANGE IN CORPORATE NAME
(PROPOSAL NO. 3)
Given that the Company is no longer engaged in the
advertising and public relations business it conducted under the
name "AFGL", the Board of Directors has determined that it is the
best interests of the Company to change its corporate name. The
Board of Directors has approved a change in the Company's
corporate name to Headway Corporate Resources, Inc.. Subject to
stockholder approval, Headway Corporate Resources, Inc. will be
the name of the Surviving Corporation if the reincorporation is
approved by the Company's stockholders; if the reincorporation is
not approved, the name change will be effected by an amendment to
the Company's Articles of Incorporation.
Vote and Recommendation
Approval of the change in corporate name will require the
affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock. Abstentions as to this
Proposal 3 will be treated as votes against Proposal 3. Broker
non-votes, however, will be treated as unvoted for purposes of
determining approval of Proposal 3 and will not be counted as
votes for or against Proposal 3. Properly executed, unrevoked
Proxies will be voted FOR Proposal 3 unless a vote against
Proposal 3 or abstention is specifically indicated in the Proxy.
The Board of Directors Recommends a Vote "For" the Corporate Name
Change.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
(PROPOSAL NO. 4)
The accounting firm of Ernst & Young LLP ("Ernst & Young")
has been approved by the Board, upon recommendation by the Audit
Committee, to serve as independent auditors of the Company for
1996, subject to approval by the stockholders by an affirmative
vote of a majority of the outstanding shares of the Company's
Common Stock represented at the Annual Meeting. The Company has
been advised that neither Ernst & Young nor any of its members or
associates has any relationship with the Company or any of its
affiliates, except in the firm's proposed capacity as the
Company's independent auditors. The independent auditors of the
Company for 1995 and 1994 were Moore Stephens, P.C. (formerly
Mortenson & Associates, P.C.).
The reason for the change in independent auditors to Ernst &
Young is the determination by the Audit Committee, which was
accepted by the Board, that Ernst & Young has greater resources
available for serving the present and future needs of the
Company.
During the fiscal years ended December 31, 1995 and 1994,
the financial statements of the Company did not contain any
adverse opinion or disclaimer of opinion from the Company's
former independent auditors, and were not modified as to
uncertainty, audit scope, or accounting principles. During this
period, there were no disagreements with the former independent
auditors on any matter of accounting principles, financial
statement disclosure, or auditing scope or procedure which, if
not resolved to the former independent auditor's satisfaction,
would have caused it to make reference to the subject matter of
the disagreement in connection with its audit report.
Representatives of Ernst & Young will be present at the
Annual Meeting of Stockholders, will be afforded an opportunity
to make a statement if they desire, and will be available to
respond to appropriate questions from stockholders. The Company
does not expect representatives of Moore Stephens, P.C. to be
present at the Annual Meeting to make a statement or respond to
questions.
The affirmative vote of a majority of the shares of Common
Stock represented at the Annual Meeting in person or by proxy is
required to approve the selection of Ernst & Young to serve as
independent auditors of the Company for 1996.
The Board of Directors Recommends a Vote "For" the Ratification
of the Appointment of Ernst & Young LLP.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 26, 1996, the
number and percentage of the outstanding shares of Common Stock
which, according to the information supplied to the Company, were
beneficially owned by (i) each person who is currently a director
of the Company, (ii) each Named Executive Officer (as defined
below), (iii) all current directors and executive officers of the
Company as a group and (iv) each person who, to the knowledge of
the Company, is the beneficial owner of more than 5% of the
outstanding Common Stock. Except as otherwise indicated, the
persons named in the table have sole voting and dispositive power
with respect to all shares beneficially owned, subject to
community property laws where applicable.
Amount and Nature of
Beneficial Ownership
Principal Stockholders Common Option Preferr Percent
Shares s/Warr ed of Class
ants Stock (2)
(1)
Gary S. Goldstein (3) 1,863,9 53,333 29,378 34.7
850 Third Avenue 77
New York, NY 10022
Alicia C. Lazaro (3) 314,197 13,333 31,628 6.5
850 Third Avenue
New York, NY 10022
A. Zyskind (4) 492,185 8.2
12 Brand Street
Jerusalem, Israel
The Tail Wind Fund Ltd. 240,00 325,978 9.3
(4)(5) 0
18-20 North Quay, Douglas
Isle of Man 1M95 1NR
Internationale Nederlanden 575,000 9.4
(U.S.) Capital
Corporation (6)
135 East 57th Street
New York, NY 10022
Officers, Directors
and Nominees
Barry S. Roseman (3) 83,360 96,667 78,881 4.5
850 Third Avenue
New York, NY 10022
Edward E. Furash (7) 574,312 9.4
2001 L Street, N.W.
Washington, DC 20036
Ehud D. Laska (3) 64,856 5,251 1.3
630 Fifth Avenue
New York, NY 10111
G. Chris Andersen (3) 13,126 0.2
1330 Avenue of the
Americas
New York, NY 10019
Richard B. Salomon (3) 13,126 0.2
620 Fifth Avenue
New York, NY 10020
Philicia G. Levinson 6,666 26,252 0.6
850 Third Avenue
New York, NY 10022
All Executive officers and 1,947,3 221,52 740,326 34.5
Directors as a Group 37 2
(1) These figures represent options and warrants that are vested
or will vest within 60 days from the date as of which information
is presented in the table.
(2) These figures represent the percentage of ownership of the
named individuals assuming each of them alone has exercised his
or her options, warrants, or conversion rights, and percentage
ownership of all officers and directors of a group assuming all
such purchase or conversion rights held by such individuals are
exercised.
(3) These persons are holders of Series A Convertible Preferred
Stock of the Company, a portion of which is convertible to Common
Stock of the Company.
(4) These persons hold shares of the Company's Series D
Convertible Preferred Stock (the "Series D Stock"). The face
value for each share of Series D Stock is $50,000 and is
convertible to Common Stock of the Company at the lesser of
$5.210625 or 80% of the market price of to the Company's common
stock on the date of conversion. Dividends are payable on the
Series D Stock at the rate of 8% per annum. The Company may, at
its election, issue Common Stock in payment of the dividend. On
conversion, the holders of Series D Stock are entitled to receive
a warrant to purchase one share of Common Stock for every four
shares of Common Stock issued on conversion. The amounts
reflected in the foregoing table for the holders of Series D
Stock assume that all Preferred Stock is converted into Common
Stock on September 30, 1996, at an estimated conversion price of
$3.00 per share.
(5) The Tail Wind Fund Ltd., holds warrants to purchase 240,000
shares of the Company's Common Stock. In addition, The Tail Wind
Fund Ltd. holds 10 shares of the Company's Series C Convertible
Preferred Stock ("Series C Stock") which has conversion terms
similar to those of the Series D Stock described in footnote (4),
above, except that there is no right to acquire any warrants to
purchase Common Stock of the Company. Assuming a conversion
price of $3.00 per share and the Series C Stock is converted into
Common Stock on September 30, 1996, the Tail Wind Fund Ltd. would
receive 69,238 shares of Common Stock.
(6) Internationale Nederlanden (U.S.) Capital Corporation
("INCC"), holds a warrant (the "Series E Warrant") to purchase
575,000 shares of Series E Convertible Preferred Stock ("Series E
Stock") of the Company at an exercise price of $0.02 per share.
The Series E Stock is convertible at the election of the holder
into Common Stock of the Company at the rate of one share for one
share, subject to adjustment based on anti-dilution provisions.
Assuming exercise in full of the Series E Warrant and the
conversion of all of the Series E Stock into Common Stock, INCC
would receive 575,000 shares of Common Stock.
(7) Mr. Furash is the holder of Series B Convertible Preferred
Stock of the Company which is convertible to 574,312 shares of
Common Stock.
EXECUTIVE OFFICERS
Information regarding Gary S. Goldstein (Chairman and Chief
Executive Officer), Barry S. Roseman (President, Treasurer, and
Chief Operating Officer, and Edward E. Furash (Vice Chairman of
the Company and Chief Executive Officer of Furash) is presented
under the caption "Election Of Directors", above.
Philicia G. Levinson (age 32) was appointed Secretary of the
Company in September 1996. She has served as Director of
Corporate Development and has managed the Company's acquisition
activities since April 1995. She was hired by the Company in
December 1992 to provide marketing consulting services to
investment banking clients. Prior to her employment by the
Company, she was employed by Bloomingdale's of New York City
where her responsibilities included product management and
development.
All executive officers are elected by the Board and hold
office until the next Annual Meeting of stockholders and until
their successors are elected and qualify.
EXECUTIVE COMPENSATION
Annual Compensation
The following table sets forth certain information regarding
the annual and long-term compensation for services in all
capacities to the Company for the prior fiscal years ended
December 31, 1995, 1994 and 1993 of those persons who were either
(i) the chief executive officer of the Company during the last
completed fiscal year or (ii) one of the other four most highly
compensated executive officers of the Company as of the end of
the last completed fiscal year whose annual salary and bonuses
exceeded $100,000 (collectively, the "Named Executive Officers").
Long Term All Other
Name and Year Annual Compensation Compensation
Principal Compens (1)
Position ation
Other Options/
Yea Salary( Bonus($ Annual SARs (#)
r $) ) Compensati
on
Gary S. 199 470,000 90,000 28,483 50,000 2,310
Goldstein 5 470,000 397,700 24,653 55,000 2,310
Chairman, 199 470,000 -- 15,000 -- 2,249
Chief 4
Executive 199
Officer 3
Barry S. Roseman 199 250,000 50,000 24,379 60,000 2,310
Chief 5 250,000 100,000 29,812 40,000 2,310
Operating 199 250,000 50,000 8,800 -- 2,249
Officer 4
199
3
Edward E. Furash 199 250,000 -- 50,000 -- 5,115
Vice Chairman/ 5 -- -- -- -- --
CEO of Furash 199 -- -- -- -- --
4
199
3
Philicia 199 94,375 35,000 -- 10,000 1,180
Levinson 5 80,000 -- -- 5,000 1,250
Secretary 199 57,979 20,000 -- -- 725
4
199
3
(1) Represents contributions by the Company to the defined
contribution [401(k)] plan.
Employment and Other Arrangements
The Company adopted in 1993 a form employment agreement for
its executive officers and key employees for the purpose of
memorializing annual base compensation. The employment agreement
also provides that the employee is entitled to participate in
group insurance and benefit plans. Furthermore, the Company may,
at its election, obtain key-man life insurance on the employee.
Gary S. Goldstein and Barry S. Roseman each entered into
employment agreements on September 15, 1993, providing for annual
compensation of $470,000 and $250,000, respectively.
The Company maintains key-man life insurance on Gary S.
Goldstein in the amount of $2,000,000 and on the lives of four
other employees in the aggregate amount of $3,400,000. All
policies are owned by the Company, and the Company is the named
beneficiary.
The Company has entered into a four year employment
agreement with Edward E. Furash, which was effective on January
1, 1995. Under the agreement, Mr. Furash will receive an annual
salary of $250,000, and is entitled to participate in a bonus
plan established for employees of Furash. The bonus plan
provides that, if the net income before taxes of Furash during
each fiscal year commencing January 1, 1995, based on at least
$4,000,000 of total revenue, is greater than 8%, a portion of the
excess about 8% will be set aside in a bonus pool and distributed
to the employees of Furash as determined by a committee
consisting of two executive officers of Furash and one executive
officer of the Company. Mr. Furash is currently one of the
officers of Furash serving on the committee.
Defined Contribution Plan
Whitney and Furash have adopted a qualified 401 (k)
contribution plan for their employees. Under the plan, employees
may elect to defer a portion of their salary up to 15% of total
compensation, and the employer is required to make matching
contributions up to 25% of the amount deferred not to exceed 10%
of total compensation. Employees are fully vested on their
contributions when made, and are fully vested on employer
contributions after five years of service. Contributions to the
plan for the fiscal years ended December 31, 1995 and 1994, were
$65,160 and $66,826, respectively.
Stock Options
The following table sets forth certain information with
respect to grants of stock options during fiscal year 1995 to the
Named Executive Officers pursuant to the Company's 1993 Incentive
Stock Plan ("Plan").
% of Total
Number of Options/SA
Securities Rs Exercise
Name and Underlying Granted to or Expirati
Principal Options Employees Base Price on Date
Position Granted in ($/Sh)
Fiscal
Year
Gary S. 50,000 23.8 $2.75 10/10/05
Goldstein
Chairman,
Chief
Executive
Officer
Barry S. Roseman 60,000 28.6 $2.75 10/10/05
Chief
Operating
Officer
Edward E. Furash -0- -0- -- --
Vice Chairman/
CEO of Furash
Philicia 10,000 4.8 $2.75 10/10/05
Levinson
Secretary
Following the end of the fiscal year 1995 in January 1996,
the Company granted a stock option to Barry S. Roseman expiring
January 22, 2006, to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $2.50 per share.
The following table sets forth certain information with
respect to unexercised options held by the Named Executive
Officers as of December 31, 1995. No outstanding options held by
the Named Executive Officers were exercised in fiscal year 1995.
Number of Securities Value of Unexercised
Name and Underlying Unexercised In-the-Money Options
Principal Options at FY End ($) (1)
Position at FY End (#)
Exercisable/Unexercise Exerciseable/Unexercise
able able
Gary S. 30,000/ 75,000 -0-/ -0-
Goldstein
Chairman,
Chief
Executive
Officer
Barry S. Roseman 21,666/ 78,334 -0-/ -0-
Chief
Operating
Officer
Edward E. Furash -0-/ -0- -0-/ -0-
Vice Chairman/
CEO of Furash
Philicia 1,667/ 13,333 -0-/ -0-
Levinson
Secretary
(1) This value is determined on the basis of the difference
between the fair market value of the securities underlying the
options and the exercise price at fiscal year end.
The Plan was adopted by the Company's board of directors in
August 1993, and approved by the Company's stockholders in
October 1993. The Plan provides for the grant of awards in the
form of options to purchase shares of Common Stock, stock
appreciation rights, shares of Common Stock subject to vesting
and/or forfeiture restrictions, or any combination thereof.
Awards under the Plan are granted by a committee (the
"Committee") consisting of at least two disinterested directors
of Company appointed by the company's board of directors. The
maximum number of shares of Common Stock issuable pursuant to
awards granted under the Plan is 3,771,567 shares. Directors
(other than directors serving on the Committee), officers, and
key employees of the Company who are expected to make significant
contributions to the Company are eligible to receive Plan awards
upon such terms, and subject to such conditions as the Committee,
in its sole discretion, shall determine, including, without
limitation, the number of shares issuable pursuant to the award,
type of award, restrictions upon the exercise of awards, vesting
conditions, and the manner of payment to be accepted for awards.
The Committee is authorized, within the provisions of the Plan,
to amend certain of the terms of outstanding awards, and to
modify or extend outstanding options with a higher exercise price
than new options.
During 1995, the Company granted options to purchase 210,000
shares of common stock to a number of employees. All options
were granted at the bid price for the Company's common stock in
the over-the-counter market on the date of grant, which ranged
from $2.75 to $3.75 per share. A total of 224,250 options were
canceled during the year, leaving 593,500 outstanding at December
31, 1995. All options vest over a term of three years subject to
continued employment by the Company or one of its subsidiaries.
Furthermore, all options are exercisable for a period of ten
years from the date of grant; provided, that all options expire
one month following the date on which employment is terminated
for any reason.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion includes certain relationships and
related transactions which occurred during the Company's fiscal
year ended December 31, 1995, as well as the interim period ended
June 30, 1996.
In 1995, Ehud D. Laska provided finance and advisory
services to the Company through the investment banking firm with
which he was associated and through a consulting firm in which
Mr. Laska is a principal owner. The Company paid $45,000 for
such services in 1995. For consulting services rendered in
connection with the Company's debt and equity financings in 1996,
the Company paid to a corporation owned by Mr. Laska and his
associate, in equal shares, a total of $582,500 in cash. In
addition, the Company granted to Mr. Laska and his associate
warrants to purchase 240,000 shares of Common Stock exercisable
over a period of four years commencing May 31, 1997, at an
exercise price of $4.25 per share.
In May 1996, the Company loaned a total of $507,366 to 10
employees and certain directors of the Company at 8% interest per
annum payable quarterly over a term of five years. The funds
were used by the employees and directors to purchase a total of
2,170 shares of the Company's Series A Convertible Preferred
Stock ("Series A Stock") from True North Communications, Inc.
("True North"). These purchases were part of a total sale of
2,800 shares of Series A Stock by True North to 15 purchasers.
The 2,800 shares of Series A Stock is convertible to a total of
1,332,412 shares of Common Stock. Loans made to persons who, at
the time of the transaction, were officers and directors of the
Company (Gary S. Goldstein received a loan of $59,059 to purchase
235 shares of Series A Stock and Barry S. Roseman received a loan
of $157,608 to purchase 631 shares of Series A Stock) are
collateralized by the Series A Stock purchased and additional
assets with a value in excess of the principal amount of each
loan. Prior to the sale of Series A Stock, True North had a
voice in all acquisition and financing activities of the Company
under the original agreement pursuant to which True North
acquired the Series A Stock. Sale of the Series A Stock
terminated True North's participation in the affairs of the
Company. Sale of the Series A Stock also provided an opportunity
to give management and other employees a greater equity interest
in the Company as an incentive for future performance.
Accordingly, the disinterested directors of the Company approved
the loans to facilitate the sale of Series A Stock.
Richard B. Salomon, a director of the Company, is also a
partner in the law firm of Christy & Viener, which represents the
Company on various legal matters from time to time. During the
first part of 1996, Christy & Viener received payments of
$100,273 from the Company for legal services.
On May 31, 1996, the Company entered into a Credit Agreement
with Internationale Nederlanden (U.S.) Capital Corporation
("INCC"). Under the Credit Agreement, INCC made a term loan of
$9,000,000 to the Company, and established a $6,000,000 revolving
credit facility for the Company. In connection with this
financing arrangement, the Company granted to INCC the Series E
Warrant to purchase 575,000 shares of Series E Stock of the
Company at an exercise price of $0.02 per share. The Series E
Stock is convertible at the election of the holder to Common
Stock of the Company at the rate of one share for one share,
subject to adjustment based on anti-dilution provisions. The
Company also entered into a Registration Rights Agreement with
INCC pertaining to the Common Stock of the Company issuable on
conversion of the Series E Convertible Preferred Stock. Under
the terms of the Registration Rights Agreement, the Company is
required to file and keep effective a shelf registration covering
the Common Stock issuable to INCC. In the Registration Rights
Agreement, INCC agrees not to make any private or public sale of
the Common Stock prior to May 31, 1997.
During the first part of 1996, The Tail Wind Fund Ltd.
("TWF"), provided consulting and advisory services in connection
with structuring the Company's private offerings of securities
totaling $7,000,000, and assisted the Company is locating
potential investors. In consideration for these services, TWF
received from the Company fees consisting of $350,000 in cash and
warrants to purchase 240,000 shares of the Company's Common Stock
exercisable over a period of five years at a price of $4.25 per
share.
OTHER INFORMATION
Section 16(a) of the Securities Exchange Act of 1934
requires officers and Directors of the Company and persons who
own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in
their ownership with the Securities and Exchange Commission, and
forward copies of such filings to the Company. Based on the
copies of filings received by the Company, during the most recent
fiscal year, the directors, officers, and beneficial owners of
more than ten percent of the equity securities of the Company
registered pursuant to Section 12 of the Exchange Act, have
filled on a timely basis, all required Forms 3, 4, and 5 and any
amendments thereto, except for Edward E. Furash, G. Chris
Andersen, and Richard B. Salomon, each of whom failed to file on
time their respective Forms 3 following their election to the
board of directors in June 1995.
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE
COMPANY'S MOST RECENT REPORT ON FORM 10-K, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN REQUEST TO THE
COMPANY'S SECRETARY AT AFGL INTERNATIONAL, INC., 850 THIRD
AVENUE, 11TH FLOOR, NEW YORK, NEW YORK 10022.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of
Directors of the Company knows of no other matters which may come
before the Annual Meeting. However, if any matters other than
those referred to herein should be presented properly for
consideration and action at the Annual Meeting, or any
adjournment or postponement thereof, the proxies will be voted
with respect thereto in accordance with the best judgment and in
the discretion of the proxy holders.
Please sign the enclosed proxy and return it in the enclosed
return envelope.
Dated: October 4, 1996
APPENDIX A
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"),
is made as of ______________________, 1996, by and between AFGL
International, Inc.., a Nevada corporation (the "Company"), and
Headway Corporate Resources, Inc., a Delaware corporation
("Headway"). Headway is hereinafter sometimes referred to as the
"Surviving Corporation," and together with the Company are
referred to as the "Constituent Corporations".
The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, par value $0.01 ("Company
Common Stock"), and 5,000,000 shares of Preferred Stock, $0.001
per value ("Company Preferred Stock"), and the authorized capital
stock of Headway consists of 20,000,000 shares of Common Stock,
$0.0001 par value (the "Headway Common Stock"), and 5,000,000
shares of Preferred Stock, $0.0001 par value (the "Headway
Preferred Stock"). The directors of the Constituent Corporations
deem it advisable and to the advantage of said corporations that
the Company merge into Headway upon the terms and conditions
provided herein.
NOW, THEREFORE, the parties hereby adopt the plan of
reorganization encompassed by this Merger Agreement and hereby
agree that the Company shall merge into Headway on the following
terms, conditions and other provisions:
1. Terms and Conditions.
1.1 Merger. The Company shall be merged with and into
Headway, which shall be the surviving corporation effective at
the earlier of the date when this Merger Agreement is filed as
part of the required Articles of Merger with the Secretary of
State of the State of Nevada or the date when a Certificate of
Ownership and Merger is filed with the Secretary of State of the
State of Delaware (the "Effective Date").
1.2 Succession. On the Effective Date, Headway shall
succeed to all of the rights, privileges, powers, immunities and
franchises and all the property, real, personal and mixed of the
Company, without the necessity for any separate transfer.
Headway shall thereafter be responsible and liable for all
liabilities and obligations of the Company, and neither the
rights of creditors nor any liens on the property of the Company
shall be impaired by the merger.
1.3 Common Stock and Preferred Stock of the Company and
Headway. Upon the Effective Date, by virtue of the merger and
without any further action on the part of the Constituent
Corporations or their stockholders, (i) each share of Company
Common Stock issued and outstanding immediately prior to the
Effective Date shall be changed and converted into and become one
fully paid and nonassessable share of Headway Common Stock; (ii)
each share of the Company's Series A Convertible Preferred Stock
issued and outstanding immediately prior to the Effective Date
shall be changed and converted into and become one fully paid and
nonassessable share of Headway Series A Convertible Preferred
Stock; (iii) each share of the Company's Series B Convertible
Preferred Stock issued and outstanding immediately prior to the
Effective Date shall be changed and converted into and become one
fully paid and nonassessable share of Headway Series B
Convertible Preferred Stock; (iv) each share of the Company's
Series C Convertible Preferred Stock issued and outstanding
immediately prior to the Effective Date shall be changed and
converted into and become one fully paid and nonassessable share
of Headway Series C Convertible Preferred Stock; and (v) each
share of the Company's Series D Convertible Preferred Stock
issued and outstanding immediately prior to the Effective Date
shall be changed and converted into and become one fully paid and
nonassessable share of Headway Series D Convertible Preferred
Stock.
1.4 Stock Certificates. On and after the Effective Date,
all of the outstanding certificates that prior to that time
represented shares of Company Common Stock and Company Preferred
Stock shall be deemed for all purposes to evidence ownership of
and to represent the shares of Headway Common Stock and Headway
preferred Stock into which the shares of the Company represented
by such certificates have been converted as provided herein and
shall be so registered on the books and records of Headway or its
transfer agent. The registered owner of any such outstanding
stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for
to Headway or its transfer agents, have and be entitled to
exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the shares of
Headway evidenced by such outstanding certificate as provided
above.
1.5 Options and Warrants. On the Effective Date, Headway
will assume and continue the stock option plan of the Company and
any successor plan or plans, the outstanding and unexercised
portions of all options to buy Company Common Stock shall become
options for the same number of shares of Headway Common Stock
with no other changes in the terms and conditions of such
options, including exercise prices, the outstanding and
unexercised portions of all warrants to buy Company Common Stock
and Company Preferred Stock shall become warrants for the same
number and type of shares of Headway Common Stock and Headway
Preferred Stock with no other changes in the terms and conditions
of such warrants, including exercise prices, and effective upon
the Effective Date, Headway hereby assumes the outstanding and
unexercised portions of such options and warrants and the
obligations of the Company with respect thereto.
1.6 Acts, Plans, Policies, Agreements, Etc. All corporate
acts, plans, policies, agreements, arrangements, approvals and
authorizations of the Company, its stockholders, Board of
Directors and committees thereof, officers and agents which were
valid and effective immediately prior to the Effective Date,
shall be taken for all purposes as the acts, plans, policies,
agreements, arrangements, approvals and authorizations of Headway
and shall be as effective and binding thereon as the same were
with respect to the Company.
2. Charter Documents, Directors and Officers
2.1 Certificate of Incorporation and By-Laws. The
Certificate of Incorporation and Bylaws of Headway as in effect
immediately prior to the Effective Date shall remain the
Certificate of Incorporation and Bylaws of Headway after the
Effective Date.
2.2 Directors and Officers. On the Effective Date, the
Board of Directors of Headway will consist of the members of the
Board of Directors of the Company immediately prior to the
Merger. The directors will continue to hold office as directors
of Headway for the same term for which they would otherwise serve
as directors of the Company. The individuals serving as
executive officers of the Company immediately prior to the Merger
will serve as executive officers of Headway upon the
effectiveness of the Merger.
3. Miscellaneous
3.1 Further Assurances. From time to time, and when
required by Headway or by its successors and assigns, there shall
be executed and delivered on behalf of the Company such deeds and
other instruments, and there shall be taken or caused to be taken
by it such further and other action, as shall be appropriate and
necessary in order to vest or perfect, or to conform of record or
otherwise, in Headway the title to and possession of all the
property, intents, assets, rights, privileges, immunities,
powers, franchises and authority of the Company and otherwise to
carry out the purposes of this Merger Agreement, and the
directors and officers of the Company are fully authorized in the
name and on behalf of the Company or otherwise to take any and
all such action and to execute and deliver any and all such deeds
and other instruments.
3.2 Amendment. At any time before or after approval by the
stockholders of the Company, this Merger Agreement may be amended
in any manner (except that any of the principal terms may not be
amended without the approval of the stockholders of the Company)
as may be determined in the judgment of the respective Boards of
Directors of the Company and Headway to be necessary, desirable
or expedient in order to clarify the intention of the parties
hereto or to effect or facilitate the purpose and intent of this
Merger Agreement.
3.3 Abandonment. At any time before the Effective Date,
this Merger Agreement may be terminated and the merger may be
abandoned by the Board of Directors of the Company,
notwithstanding the approval of this Merger Agreement by the
stockholders of the Company, or the consummation of the merger
may be deferred for a reasonable period if, in the opinion of the
Board of Directors of the Company, such action would be in the
best interests of the Constituent Corporations.
3.4 Governing Law. This Merger Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, this agreement has been signed as of the
date first-above written for and on behalf of the corporate
parties hereto by the undersigned thereunto duly authorized.
AFGL INTERNATIONAL, INC. HEADWAY CORPORATE RESOURCES, INC.
By_________________________ By________________________________
Barry S. Roseman, President Barry S. Roseman, President
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
HEADWAY CORPORATE RESOURCES, INC.
ARTICLE I
NAME
The name of the Corporation is Headway Corporate Resources,
Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT FOR SERVICE
The address of the Corporation's registered office in the
State of Delaware is in the county of New Castle, at 1013 Centre
Road, Wilmington, Delaware 10805. The name of its registered
agent at such address is Corporation Service Company.
ARTICLE III
CORPORATE PURPOSES
The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
1. Shares, Classes and Series Authorized.
The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 25,000,000
shares. Stockholders shall not have any preemptive rights, nor
shall stockholders have the right to cumulative voting in the
election of directors or for any other purpose. The classes and
the aggregate number of shares of stock of each class which the
Corporation shall have authority to issue are as follows:
(a) 20,000,000 shares of Common Stock, $0.0001 par value
("Common Stock").
(b) 5,000,000 shares of Preferred Stock, $0.0001 par value
("Preferred Stock").
2. Powers and Rights of the Preferred Stock.
The Preferred Stock may be issued from time to time in one
or more series, with such distinctive serial designations as may
be stated or expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by the
Board of Directors; and in such resolution or resolutions
providing for the issuance of shares of each particular series,
the Board of Directors is also expressly authorized to fix: the
right to vote, if any; the consideration for which the shares of
such series are to be issued; the number of shares constituting
such series, which number may be increased (except as otherwise
fixed by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time by
action of the Board of Directors; the rate of dividends upon
which and the times at which dividends on shares of such series
shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or
classes or any other series of stock of the Corporation; whether
such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which dividends on shares of
such series shall be cumulative; the rights, if any, which the
holders of shares of such series shall have in the event of any
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
affairs of the Corporation; the rights, if any, which the holders
of shares of such series shall have to convert such shares into
or exchange such shares for shares of any other class or classes
or any other series of stock of the Corporation or for any debt
securities of the Corporation and the terms and conditions,
including price and rate of exchange, of such conversion or
exchange; whether shares of such series shall be subject to
redemption, and the redemption price or prices and other terms of
redemption, if any, for shares of such series including, without
limitation, a redemption price or prices payable in shares of
Common Stock; the terms and amounts of any sinking fund for the
purchase or redemption of shares of such series; and any and all
other designations, preferences, and relative, participating,
optional or other special rights, qualifications, limitations or
restrictions thereof pertaining to shares of such series'
permitted by law.
3. Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to
time authorize by resolution the issuance of any or all shares of
the Common Stock and the Preferred Stock herein authorized in
accordance with the terms and conditions set forth in this
Certificate of Incorporation for such purposes, in such amounts,
to such persons, corporations or entities, for such
consideration, and in the case of the Preferred Stock, in one or
more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the
stockholders, except as otherwise required by law. The capital
stock, after the amount of the subscription price, or par value,
has been paid in shall not be subject to assessment to pay the
debts of the Corporation.
ARTICLE V
BOARD OF DIRECTORS
The governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the
Bylaws of the Corporation, provided that the number of directors
may not be less than one nor more than fifteen. Effective upon
filing of this Certificate, the members of the board of directors
shall be divided into three classes, designated as Class 1, Class
2, and Class 3 as follows:
Class 1
Gary S. Goldstein 850 Third Avenue, 11th Floor
New York, NY 10022
Barry S. Roseman 850 Third Avenue, 11th Floor
New York, NY 10022
Class 2
Ehud D. Laska 630 Third Avenue
New York, NY 10111
Edward E. Furash 2001 L Street, N. W.
Washington, DC 20036
Class 3
G. Chris Andersen 1330 Avenue of the Americas
New York, NY 10019
Richard B. Salomon 620 Fifth Avenue
New York, NY 10020
Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the
entire board of directors. The Class 1 directors shall be deemed
elected for a three-year term, Class 2 Directors for a two-year
term, and Class 3 directors for a one-year term. At each
succeeding annual meeting of shareholders commencing in 1997,
successors to the Class of directors whose term expires at that
annual meeting of shareholders shall be elected for a three-year
term. If the number of directors has changed, any increase or
decrease shall be appointed among the Classes so as to maintain
the number of directors in each Class as nearly equal as
possible, and any additional director of any Class elected to
fill a vacancy resulting from an increase in such a Class shall
hold office for a term that shall coincide with the remaining
term of that Class, unless otherwise required by law, but in no
case shall a decrease in the number of directors in a Class
shorten the term of an incumbent director. A director shall hold
office until the date of the annual meeting of shareholders upon
which his term expires and until his successor shall be elected
and qualified, subject, however, to his prior death, resignation,
retirement, disqualification, or removal from office. A director
may be removed from office only for cause and at a meeting of
shareholders called expressly for that purpose, by a vote of the
holders of a majority of the shares entitled to vote at an
election of directors.
ARTICLE VI
POWERS OF BOARD OF DIRECTORS
The property and business of the Corporation shall be
controlled and managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized:
(a) To make, alter, amend or repeal the Bylaws of the
Corporation; provided, that no adoption, amendment, or repeal of
the Bylaws shall invalidate any act of the board of directors
that would have been valid prior to such adoption, amendment, or
repeal.;
(b) To determine the rights, powers, duties, rules and
procedures that affect the power of the board of directors to
manage and direct the property, business, and affairs of the
Corporation, including the power to designate and empower
committees of the board of directors, to elect, appoint and
empower the officers and other agents of the Corporation, and to
determine the time and place of, and the notice requirements for
board meetings, as well as the manner of taking board action; and
(c) To exercise all such powers and do all such acts as may
be exercised by the Corporation, subject to the provisions of the
laws of the State of Delaware, this Certificate of Incorporation,
and the Bylaws of the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify and may advance expenses to
its officers and directors to the fullest extent permitted by law
in existence either now or hereafter.
ARTICLE VIII
LIMITATION ON PERSONAL LIABILITY FOR DIRECTORS
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of a fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which
the director derived any improper personal benefit. If the
Delaware General Corporation Law is amended hereafter to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
ARTICLE IX
CERTIFICATE SUBJECT TO AMENDMENT
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute or by the Certificate of Incorporation, and except as
otherwise provided by this Certificate of Incorporation, all
rights conferred upon stockholders herein are granted subject to
this reservation.
ARTICLE X
INCORPORATOR
The sole incorporator of the Corporation is:
IN WITNESS WHEREOF, the undersigned, acting as the sole
incorporator of the Corporation, signs this Certificate of
Incorporation as his act and deed this ______ day of
_____________________, 1996.
APPENDIX C
BYLAWS OF
HEADWAY CORPORATE RESOURCES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of
the Corporation shall be in the county of New Castle, at 1013
Centre Road, Wilmington, Delaware 10805. The name of its
resident agent at such address is Corporation Service Company.
Section 2. Other Offices. Other offices may be
established by the Board of Directors at any place or places,
within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders
shall be held either at the principal executive office or any
other place within or without the State of Delaware which may be
designated either by the Board of Directors pursuant to authority
hereinafter granted to said Board, or by the written consent of
all stockholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the
Corporation; provided, however, that if no place is designated or
so fixed, stockholder meetings shall be held at the principal
executive office of the Corporation.
Section 2. Annual Meetings. The annual meetings of the
stockholders shall be held each year on a date and a time
designated by the Board of Directors. At the annual meeting of
stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought
before an annual meeting, business must be specified in the
Notice of Meeting given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors or otherwise properly
brought before the meeting by a stockholder. For business to be
properly brought before the annual meeting by a stockholder,
including the nomination of a director, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the Corporation not more than five business days after
the giving of notice of the date and place of the meeting to the
stockholders. A stockholder's notice to the Secretary shall
inform as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business,
(iii) the class and numbers of shares of the Corporation which
are beneficially owned by the stockholder and (iv) any material
interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the
procedures set forth in this Section. The chairman of the annual
meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any
such business not properly before the meeting shall not be
transacted.
Section 3. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes whatsoever, may be
called at any time by the Chairman of the Board, the President or
by a majority of the Board of Directors, or by such other person
as the Board of Directors may designate.
For business to be properly brought before a special meeting
by a stockholder, including the nomination of a director, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the
principal executive offices of the Corporation not more than five
business days after the giving of notice of the date and place of
the meeting to the stockholders. A stockholder's notice to the
Secretary shall inform as to each matter the stockholder proposes
to bring before a special meeting (i) a brief description of the
business desired to be brought before the special meeting and the
reasons for conducting such business at the special meeting, (ii)
the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Section 4. Notice of Stockholders' Meetings. Written
notice of each annual or special meeting signed by the President
or a Vice President, or the Secretary, or an Assistant Secretary,
or by such other person or persons as the Directors shall
designate, shall be delivered personally to, or shall be mailed
postage prepaid, to each stockholder of record entitled to vote
at such meeting. If mailed, the notice shall be directed to the
stockholder at his address as it appears upon the records of the
Corporation, and service of such notice by mail shall be complete
upon such mailing, and the time of the notice shall begin to run
from the date it is deposited in the mail for transmission to
such stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a
partnership, shall constitute delivery of such notice to such
corporation, association or partnership. All such notices shall
be delivered or sent to each stockholder entitled thereto not
less than ten nor more than sixty days before each annual or
special meeting, and shall specify the purpose or purposes for
which the meeting is called, the place, the day and the hour of
such meeting.
Any stockholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or
after the meeting.
Section 5. Voting. At all meetings of stockholders,
every stockholder entitled to vote shall have the right to vote
in person or by written proxy the number of shares standing in
his own name on the stock records of the Corporation. There
shall be no cumulative voting. Such vote may be viva voce or
ballot; provided, however, that all elections for Directors must
be by ballot upon demand made by a stockholder at any election
and before the voting begins.
Section 6. Quorum. The presence in person or by proxy
of the holders of a majority of the shares entitled to vote at
any meeting shall constitute a quorum for the transaction of
business. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 7. Ratification and Approval of Actions at
Meetings. Whenever the stockholders entitled to vote at any
meeting consent, either by: (a) A writing on the records of the
meeting or filed with the Secretary; (b) Presence at such meeting
and oral consent entered on the minutes; or (c) Taking part in
the deliberations at such meeting without objection; the doings
of such meeting shall be as valid as if had at a meeting
regularly called and noticed. At such meeting, any business may
be transacted which is not excepted from the written consent or
to the consideration of which no objection for want of notice is
made at the time. If any meeting be irregular for want of notice
or of such consent, provided a quorum was present at such
meeting, the proceedings of the meeting may be ratified and
approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having
the right to vote at such meeting. Such consent or approval of
stockholders may be by proxy or attorney, but all such proxies
and powers of attorney must be in writing.
Section 8. Proxies. At any meeting of the stockholders,
any stockholder may be represented and vote by a proxy or proxies
appointed by an instrument in writing, which instrument shall be
filed with the Secretary of the Corporation. In the event that
any such instrument in writing shall designate two or more
persons to act as proxies, a majority of such persons present at
the meetings, or, if only one shall be present, then that one
shall have and may exercise all of the powers conferred by such
written instrument upon all of the persons so designated unless
the instrument shall otherwise provide. No such proxy shall be
valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is
to continue in force, which in no case shall exceed seven years
from the date of its execution. Subject to the above, any proxy
duly executed is not revoked and continues in full force and
effect until an instrument revoking it or a duly executed proxy
bearing a later date is filed with the Secretary of the
Corporation.
Section 9. Action Without a Meeting. Any action which
may be taken by the vote of stockholders at a meeting, may be
taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power;
provided that if any greater proportion of voting power is
required for such action at a meeting, then such greater
proportion of written consents shall be required. This general
provision for action by written consent shall not supersede any
specific provision for action by written consent contained in the
Delaware General Corporation Law. In no instance where action is
authorized by written consent need a meeting of stockholders be
called or noticed.
ARTICLE III
DIRECTORS
Section 1. Powers. Incorporation, these Bylaws, and the
provisions of the Delaware General Corporation Law as to action
to be authorized or approved by the stockholders, and subject to
the duties of Directors as prescribed by these Bylaws, all
corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation must be managed
and controlled by, the Board of Directors. Without prejudice to
such general powers, but subject to the same limitations, it is
hereby expressly declared that the Directors shall have the
following powers:
First. To select and remove all officers, agents and
employees of the Corporation, prescribe such powers and duties
for them as may not be inconsistent with law, the Certificate of
Incorporation or the Bylaws, fix their compensation and require
from them security for faithful service.
Second. To conduct, manage and control the affairs and
business of the Corporation, and to make such rules and
regulations therefor not inconsistent with law, the Certificate
of Incorporation or the Bylaws, as they may deem best.
Third. To change the registered office of the Corporation
in the State of Delaware from one location to another, and the
registered agent in charge thereof, as provided in Article I,
Section 1, hereof; to fix and locate from time to time one or
more subsidiary offices of the Corporation within or without the
State of Delaware, as provided in Article I, Section 2, hereof,
to designate any place within or without the State of Delaware,
for the holding of any stockholders' meeting or meetings; and to
adopt, make and use a corporate seal, and to prescribe the forms
of certificates of stock, and to alter the form of such seal and
of such certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at
all times comply with the provisions of law.
Fourth. To authorize the issuance of shares of stock of the
Corporation from time to time, upon such terms as may be lawful,
in consideration of cash, services rendered, personal property,
real property or leases thereof, or in the case of shares issued
as a dividend, against amounts transferred from surplus to
capital.
Fifth. To borrow money and incur indebtedness for the
purpose of the Corporation, and to cause to be executed and
delivered therefor, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidence of debt and securities therefor.
Sixth. To make the Bylaws of the Corporation, subject to
the Bylaws, if any, adopted by the stockholders.
Seventh. To, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the
Corporation, which, to the extent provided in the resolution or
resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers on which the Corporation
desires to place a seal. Such committee or committees shall have
such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Number and Qualification of Directors. The
number of Directors constituting the whole Board shall be not
less than one nor more than fifteen. The first Board shall
consist of six directors. Thereafter, within the limits above
specified, the number of Directors shall be determined by
resolution of the Board of Directors or by the stockholders at
the annual meeting. All directors must be at least 18 years of
age. Unless otherwise provided in the Certificate of
Incorporation, directors need not be stockholders.
Section 3. Election, Classification and Term of Office.
Each Director shall be elected at each annual meeting of
stockholders by a plurality of votes cast at the election, but if
for any reason the Directors are not elected at the annual
meeting of stockholders, each Director may be elected at any
special meeting of stockholders by a plurality of votes cast at
the election.
The Board of Directors shall be divided into three classes
to be designated as follows: Class 1, Class 2 and Class 3, each
of which shall be as nearly equal in number as possible. Each
Director shall serve for a term ending on the date of the third
annual meeting of stockholders following the meeting at which
such Director was elected; provided, however, that each initial
Director in Class 1 shall hold office until the annual meeting of
stockholders in 1999; each initial Director in Class 2 shall hold
office until the annual meeting of stockholders in 1998; and each
initial Director in Class 3 shall hold office until the annual
meeting of stockholders in 1997.
In the event of any increase or decrease in the authorized
number of Directors: (a) each Director then serving as such shall
nevertheless continue as a Director of the class of which he is a
member until the expiration of his current term, or his earlier
resignation, removal from office or death, and (b) the newly
created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors (which
is in existence immediately prior to such an increase or
decrease) among the three classes of Directors so as to maintain
such classes as nearly equal as possible. Notwithstanding the
foregoing, each Director shall hold office until his successor is
elected and qualified.
Section 4. Vacancies. Vacancies in the Board of
Directors may be filled by a majority of the remaining Directors,
though less than a quorum, or by a sole remaining Director, and
each Director so elected shall hold office until his successor is
elected at an annual or a special meeting of the stockholders.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of
any Director, or if the authorized number of Directors be
increased.
If the Board of Directors accepts the resignation of a
Director tendered to take effect at a future time, the Board or
the stockholder shall have power to elect a successor to take
office when the resignation is to become effective, and such
successor shall hold office during the remainder of the resigning
Director's term of office.
Section 5. Place of Meeting. Regular meetings of the
Board of Directors shall be held at any place within or without
the State of Delaware as designated from time to time by
resolution of the Board or by written consent of all members of
the Board. In the absence of such designation regular meetings
shall be held at the principal executive office of the
Corporation. Special meetings of the Board may be held either at
a place so designated or at the principal executive office.
Members of the Board, or any committee designated by the
Board, may participate in a meeting of such Board or committee by
means of a conference telephone network or a similar
communications method by which all persons participating in the
meeting can hear each other. Such participation shall constitute
presence in person at such meeting. Each person participating in
such meeting shall sign the minutes thereof, which minutes may be
signed in counterparts.
Section 6. Organization Meeting. Immediately following
each annual meeting of stockholders, the Board of Directors shall
hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business. Notice of
such meetings is hereby dispensed with.
Section 7. Special Meetings. Special meetings of the
Board of Directors for any purpose or purposes may be called at
any time by the Chairman of the Board, President or by any two or
more Directors.
Written notice of the time and place of special meetings
shall be delivered personally to the Directors or sent to each
Director by mail or other form of written communication (such as
by telegraph, Federal Express package, or other similar forms of
written communication), charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation, or if
it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the
Directors are regularly held. In case such notice is mailed or
otherwise communicated in writing, it shall be deposited in the
United States mail or delivered to the appropriate delivering
agent at least seventy-two hours prior to the time of the holding
of the meeting. In case such notice is Personally delivered, it
shall be so delivered at least twenty-four hours prior to the
time of the holding of the meeting. Such mailing, personal
delivery or other written communication as above provided shall
be due, legal and personal notice to such Director.
Section 8. Notice of Adjournment. Notice of the time
and place of holding an adjourned meeting need not be given to
absent Directors if the time and place be fixed at the meeting
adjourned.
Section 9. Ratification and Approval. Whenever all
Directors entitled to vote at any meeting consent, either by: (a)
A writing on the records of the meeting or filed with the
Secretary; (b) Presence at such meeting and oral consent entered
on the minutes; or (c) Taking part in the deliberations at such
meeting without objection; the doings of such meeting shall be as
valid as if had at a meeting regularly called and noticed. At
such meeting any business may be transacted which is not excepted
from the written consent or to the consideration of which no
objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the
proceedings of the meeting may be ratified and approved and
rendered likewise valid and the irregularity or defect therein
waived by a writing signed by all Directors having the right to
vote at such meeting.
Section 10. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all the members
of the Board or of such committee. Such written consent shall be
filed with the minutes of proceedings of the Board or committee.
Section 11. Quorum. A majority of the authorized number
of Directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter
provided. Every act or decision done or made by a majority of
the Directors present at a meeting duly assembled at which a
quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the
Certificate of Incorporation.
Section 12. Adjournment. A quorum of the Directors may
adjourn any Directors' meeting to meet again at a stated day and
hour provided, however, that in the absence of a quorum, a
majority of the Directors present at any Directors' meeting,
either regular or special, may adjourn from time to time until a
quorum shall be present.
Section 13. Fees and Compensation. The Board shall have
the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at
each meeting of the Board and may be paid a fixed sum for
attendance at each meeting of the Board or a stated salary as
Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity as an officer,
agent, employee or otherwise, and receiving the compensation
therefor. Members of committees may be compensated for attending
committee meetings.
Section 14. Removal. Any Director may be removed from
office with or without cause by the vote of stockholders
representing not less than two-thirds of the issued and
outstanding capital stock entitled to voting power.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation
shall be a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of
Directors, one or more additional Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, a
Chairman of the Board, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this
Article. Officers other than the Chairman of the Board need not
be Directors. One person may hold two or more offices.
Section 2. Election. The officers of this Corporation,
except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be
chosen annually the Board of Directors and each shall hold his
office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and
qualified.
Section 3. Subordinate Officers, Etc. The Board of
Directors may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are
provided in these Bylaws or as the Board of Directors may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be
removed, either with or without cause, by a majority of the
Directors at the time in office. Any officer may resign at any
time by giving written notice to the Board of Directors, the
President or the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such
notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in the Bylaws for
regular appointments to such office.
Section 6. Chairman of the Board. The Chairman of the
Board, if there be such a position, shall preside at all meetings
of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed by these Bylaws.
Section 7. President. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, the President shall, subject to the
control of the Board of Directors, have general supervision,
direction and control of the business and officers of the
Corporation. In the absence of the Chairman of the Board, or if
there be none, he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. He
shall be ex officio a member of all committees, including the
executive committee, if any, and shall have the general powers
and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or by these
Bylaws.
Section 8. Vice-President. In the absence or disability
of the President, the Vice Presidents, in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, shall perform all
the duties of the President, and when so acting shall have all
the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors or these Bylaws.
Section 9. Secretary. The Secretary shall keep, or
cause to be kept, a book of minutes at the principal executive
office or such other place as the Board of Directors may order,
of all meetings of Directors, committees and stockholders, with
the time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of
those present at Directors' and committee meetings, the number of
shares present or represented at stockholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal executive office (1) a share register, or a duplicate
share register, revised annually, showing the names of the
stockholders, alphabetically arranged, and their places of
residence, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation; (2) a copy of the Certificate of Incorporation
and all amendments thereto certified by the Secretary of State;
and (3) a copy of the Bylaws and all amendments thereto certified
by the Secretary.
The Secretary shall give, or cause to be given, notice of
all the meetings of the stockholders, committees and Board of
Directors required by the Bylaws or by law to be given, and he
shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
Section 10. Treasurer. The Treasurer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus
and surplus arising from a reduction of stated capital, shall be
classified according to source and shown in a separate account.
The books of account shall at all times be open to inspection by
any Director.
The Treasurer shall deposit all monies and other valuables
in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, shall render to the President and
Directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or
the Bylaws.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The
Board of Directors may fix a day, not more than sixty (60) days
prior to the holding of any meeting of stockholders, and not
exceeding thirty (30) days preceding the date fixed for the
payment of any dividend or distribution or for the allotment of
rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of
the stockholders entitled to notice of and to vote at any such
meeting, or entitled to receive any such dividend or
distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of
shares, and in such case only stockholders of record on the date
so fixed shall be entitled to notice of and to vote at such
meetings, or to receive such dividend, distribution or allotment
of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
Corporation after any record date is fixed as aforesaid. The
Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of any such
period.
Section 2. Inspection of Corporate Records.
Stockholders shall have the right to inspect such corporate
records at such times and based upon such limitations of such
rights as may be set forth in the Delaware General Corporation
Law from time to time.
Section 3. Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 4. Contract, Etc., How Executed. The Board of
Directors, except as otherwise provided in these Bylaws may
authorize any officer or officers, agent or agents to enter into
any contract, deed or lease or execute any instrument in the name
of and on behalf of the Corporation, and such authority may be
general or confined to specific instances; and unless so
authorized by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
to render it liable for any purpose or to any amount.
Section 5. Certificates of Stock. A certificate or
certificates for certificated shares of the capital stock of the
Corporation shall be issued to each stockholder when any such
shares are fully paid up. All such certificates shall be signed
by the Chairman of the Board, President or a Vice President, and
by the Treasurer, Secretary or an Assistant Secretary, or be
authenticated by facsimiles of their respective signatures;
provided, however, that every certificate authenticated by a
facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and by a registrar, which registrar
cannot be the Corporation itself.
Certificates for certificated shares may be issued prior to
full payment under such restrictions and for such purposes as the
Board of Directors or the Bylaws may provide; provided, however,
that any such certificate so issued prior to full payment shall
state the amount remaining unpaid and the terms of payment
thereof.
The Board of Directors is hereby authorized, pursuant to the
provisions of Delaware General Corporation Law Section 158, to
issue uncertificated shares of some or all of the shares of any
or all of its classes or series.
Section 6. Representation of the Shares of Other
Corporation. The President or any Vice President, and the
Secretary or Assistant Secretary, of this Corporation are
authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to
vote or represent on behalf of this Corporation any and all
shares held by this Corporation in any other corporation or
corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of
attorney duly executed by said officers.
ARTICLE VI
AMENDMENTS
Section 1. Power of Stockholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote of
stockholders entitled to exercise a majority of the voting power
of the Corporation or by the written assent of such stockholders.
Section 2. Power of Directors. Subject to the right of
stockholders as provided in Section 1 of this Article VI to
adopt, amend or repeal Bylaws, Bylaws may be adopted, amended or
repealed by the Board of Directors.
ARTICLE VII
TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
Section 1. Validity of Contracts and Transactions. No
contract or transaction between the Corporation and one or more
of its Directors or officers, or between the Corporation and any
other corporation, firm, association, or other organization in
which one or more of its Directors or officers are Directors or
officers or are financially interested, shall be void or voidable
solely for this reason, or solely because the Director or officer
is present at or participates in the meeting of the Board of
Directors or committee that authorizes or approves the contract
or transaction, or because their votes are counted for such
purpose, provided that:
(a) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the
committee and noted in the minutes, and the Board of Directors or
committee, in good faith, authorizes the contract or transaction
in good faith by the affirmative vote of a majority of
disinterested directors, even though the disinterested directors
are less than a quorum;
(b) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved
or ratified in good faith by the majority of shares entitled to
vote, counting the votes of the common or interested directors or
officers; or
(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized or approved.
Section 2. Determining Quorum. Common or interested
directors may be counted in determining the presence of a quorum
at a meeting of the board of directors or of a committee which
authorizes, approves or ratifies the contract or transaction.
ARTICLE VIII
INSURANCE AND OTHER FINANCIAL ARRANGEMENTS
The Corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses
incurred by him in his capacity as a Director, officer, employee
or agent, or arising out of his status as such, whether or not
the Corporation has the authority to indemnify him against such
liability and expenses. The insurance or other financial
arrangements may be provided by the Corporation or by any other
person or entity approved by the Board of Directors including a
subsidiary of the corporation.
Such other financial arrangements made by the Corporation
may include the following:
(a) The creation of a trust fund;
(b) The establishment of a program of self-insurance;
(c) The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the
Corporation; or
(d) The establishment of a letter of credit, guaranty or
surety. No financial arrangement may provide protection for a
person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with
respect to the advancement of expenses or indemnification ordered
by a court as provided in Article IX hereof.
ARTICLE IX
INDEMNIFICATION
Section 1. Action Not By Or On Behalf Of Corporation.
The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or
was a Director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by
him in connection with the action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent
does not, of itself, create an presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 2. Action By Or On Behalf Of Corporation. The
Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise against
expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that
indemnification may not be made for any claim, issue or matter as
to which such a person shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the Corporation or for amounts paid in
settlement to the Corporation, unless and only to the extent that
the court in which the action or suit was brought or other court
of competent jurisdiction determines upon application that, in
view of all of the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
Section 3. Successful Defense. To the extent that a
Director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 1 or 2 of this Article
IX, or in defense of any claim, issue or matter therein, he must
be indemnified by the Corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense.
Section 4. Determination Of Right To Indemnification In
Certain Circumstances. Any indemnification under Section I or 2
of this Article IX, unless ordered by a court or advanced
pursuant to this Article IX, must be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is
proper in the circumstances. The determination must be made by
the Stockholders, the Board of Directors by a majority vote of a
quorum consisting of Directors who were not parties to the act,
suit or proceeding, or if a majority vote of a quorum of
Directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion, or if
a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. Advance Payment of Expenses. Expenses of
officers and Directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the Corporation as
they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the Corporation as
authorized in this Article. The provisions of this subsection
(5) of this Article IX shall not affect any rights to advancement
of expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
Section 6. Not Exclusive.
(a) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to any other section
of this Article IX or any provision of law:
(i) does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any statute,
bylaw, agreement, vote of stockholders or disinterested Directors
or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
2 of this Article IX or for the advancement of expenses made
pursuant to this Article IX may not be made to or on behalf of
any Director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of
action; and
(ii) continues for a person who has ceased to be a Director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
(b) Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any Director, officer,
employee or agent of the Corporation providing indemnification
for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from
any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, that
arises by reason of the fact that such person is or was a
Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, to the full extent
allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute intentional
misconduct, fraud, or a knowing violation of law and was material
to the cause of action.
Section 7. Certain Definitions. For the purposes of
this Article IX, (a) any Director, officer, employee or agent of
the Corporation who shall serve as a director, officer, employee
or agent of any other corporation, joint venture, trust or other
enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is
or was in any way interested, or (b) any Director, officer,
employee or agent of any subsidiary corporation, joint venture,
trust or other enterprise wholly owned by the Corporation, shall
be deemed to be serving as such Director, officer, employee or
agent at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all
other instances where any person shall serve as director,
officer, employee or agent of another corporation, joint venture,
trust or other enterprise of which the Corporation is or was a
stockholder or creditor, or in which it is or was otherwise
interested, if it is not otherwise established that such person
is or was serving as such director, officer, employee or agent at
the request of the Corporation, the Board of Directors of the
Corporation may determine whether such service is or was at the
request of the Corporation, and it shall not be necessary to show
any actual or prior request for such service. For purposes of
this Article IX references to a corporation include all
constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person
who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, joint venture, trust or other
enterprise shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving
corporation as he would if he had served the resulting or
surviving corporation in the same capacity. For purposes of this
Article IX, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a Director, officer,
employee or agent of the Corporation which imposes duties on, or
involves services by, such Director, officer, employee, or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article IX.
APPENDIX D
HEADWAY CORPORATE RESOURCES, INC.
CERTIFICATE OF DESIGNATION OF
RIGHTS, PRIVILEGES, AND RIGHTS
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK
SERIES C CONVERTIBLE PREFERRED STOCK
SERIES D CONVERTIBLE PREFERRED STOCK
SERIES E CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
HEADWAY CORPORATE RESOURCES, INC., a corporation organized
and existing under the laws of the state of Delaware (the
"Corporation"), in accordance with Section 151(g) of the General
Corporation Law of Delaware, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation
(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 $.0001 per share
(herein referred to as "Preferred Stock"), and Twenty Million
(20,000,000) shares shall be shares of Common Stock, par value
$.0001 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, if any, 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
revolutions 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 ______________, 1996, by unanimous written consent,
duly authorized and adopted the following resolutions providing
for issue of the following series of its Preferred Stock
a series to be designated "Series A Convertible Preferred
Stock";
a series to be designated "Series B Convertible Preferred
Stock";
a series to be designated "Series C Convertible Preferred
Stock";
a series to be designated "Series D Convertible Preferred
Stock"; and
a series to be designated "Series E Convertible Preferred
Stock".
"RESOLVED, that issue of five series of Preferred Stock,
$.0001 par value per share, of the Corporation consisting of
Twenty-Eight Hundred (2,800) shares designated as "Series A
Preferred Stock", Sixty-Eight Hundred Fifty-Eight (6,858) shares
designated as "Series B Preferred Stock", Twenty-Three and 4/10s
(23.4) shares designated as "Series C Preferred Stock", Eighty
(80) shares designated as "Series D Preferred Stock", and Five
Hundred Seventy-Five Thousand (575,000) shares designated as
"Series E Preferred Stock", 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:
SECTION I. SERIES A PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series A Convertible
Preferred Stock" (hereinafter referred to as the "Series A
Stock") and the number of authorized shares constituting the
Convertible Preferred Stock is Two Thousand Eight Hundred(2,800).
The Series A Stock shall be deemed a separate class of Preferred
Stock apart from any other series of Preferred Stock.
Part 1. Dividends.
1A. Entitlement. The holders of Series A Stock shall be
entitled to receive cumulative cash dividends when and as
declared by the Corporation's Board of Directors out of funds
available therefor under applicable law. Such dividends shall be
paid to the holders of record at the close of business on the
date specified by the Board of Directors at the time such
dividend is declared; provided, however, that such date shall not
be more than sixty (60) days nor less than ten (10) days prior to
each respective Dividend Payment Date (as defined below under
this Section I).
1B. Accrual Rate. Dividends on each share of Series A
Stock shall accrue cumulatively on a daily basis at the rate of
8.00% per annum of the Liquidation Value (as defined below under
this Section I) thereof, but not including such portion of the
Liquidation Value, if any, which constitutes accrued and unpaid
dividends, from and including the date of issuance of such share
to and including the date on which the Redemption Price (as
defined below under this Section I) of such share is paid or the
date on which such share in converted into Common Stock. Such
dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. The
date on which the Corporation initially issues any share of the
Series A Stock will be deemed to be its "date of issuance"
regardless of the number of times transfer of any such share is
made on the stock records maintained by or for the Corporation
and regardless of the number of certificates which may be issued
to evidence any such share.
1C. Dividend Payment Dates. Dividends on the Series A
Stock shall be payable semi-annually on June 30 and December 31
of each year (the "Dividend Payment Dates"). All dividends which
have accrued on each share of Series A Stock outstanding during
the six-month period ending upon each such Dividend Payment Date
will be added to the Liquidation Value of such share and will
remain a part thereof until such dividends are paid.
1D. Certain Restrictions. The Corporation shall not,
without the prior written consent of the holders of a majority of
Series A Stock, (i) declare, order or pay any dividend (other
than dividends payable solely in shares of stock) on any Junior
Securities (as defined below under this Section I) or (ii) redeem
any shares of Junior Securities, unless and until the Corporation
shall have redeemed all of the outstanding Series A Stock in
accordance with Part 3 of Section I, below.
1E. Distribution of Partial Dividend Payments; Fractional
Shares. If at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Series A
Stock, such payment will be distributed ratably among the holders
of such Series A Stock based upon the aggregate accrued but
unpaid dividends on such Series A Stock held by each holder.
Each fractional share of Series A Stock outstanding, if any,
shall be entitled to a ratably proportionate amount of all
dividends to which each outstanding full share of such Series A
Stock is entitled hereunder.
Part 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation, the holders of Series A Stock will be entitled to be
paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation
Value of all shares of Series A Stock outstanding, and the
holders of Series A 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 A 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 A Stock held by each
such holder. The Corporation will mail written notice of such
liquidation, dissolution or winding up not less than 30 days
prior to the payment date stated therein, to each record holder
of Series A 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 a liquidation, dissolution or
winding up of the Corporation within the meaning of Part 2 of
this Section I.
Part 3. Redemptions.
3A. For each share of Series A Stock which is to be
redeemed, the Corporation will be obligated on the Redemption
Date (as defined below) to pay to the holder thereof (upon
surrender by such holder at the Corporation's principal office or
to the corporation's transfer agent of the certificate(s)
representing such shares of Series A Stock) an amount in
immediately available funds equal to the Liquidation Value
thereof. If the funds of the Corporation legally available for
redemption of Series A Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series A
Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of
shares of Series A Stock ratably among the holders of the Series
A Stock to be redeemed based upon the Liquidation Value of such
Series A Stock held by each such holder. At any time thereafter
when additional funds of the Corporation are legally available
for the redemption of Series A Stock, such funds will immediately
be used to redeem the balance of the Series A Stock which the
Corporation has become obligated to redeem on any Redemption Date
but which it has not redeemed.
3B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series A Stock to each
record holder of Series A Stock not more than sixty (60) nor less
then twenty (20) days prior to the date on which such redemption
in to be made. In case fewer than the total number of shares of
Series A Stock represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of
Series A Stock will be issued to the holder thereof without cost
to such holder within ten business days after surrender of the
certificate representing the redeemed Series A Stock.
3C. Redemption Date. On the date on which the Liquidation
value of any Series A Stock is paid all rights, including, but
not limited to any right of conversion, of the holder of such
Series A Stock will cease, and such Series A Stock will not be
deemed to be outstanding.
3D. Redeemed or Otherwise Acquired Shares. Any shares of
Series A Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series A
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
3E. Optional Redemption. The Corporation may at any time
redeem all or any portion of the Series A Stock at a price per
share equal to the Liquidation Value thereof, including any
accrued and unpaid dividends.
3F. Redemptions upon Certain Voluntary Corporate Actions.
Upon the occurrence of a Fundamental Change, the Corporation
shall redeem all of the outstanding Series A Stock at a price per
share equal to the Liquidation Value thereof including any
accrued and unpaid dividends to the Redemption Date. The term
"Fundamental Change" means (a) a sale or transfer of all or
substantially all of the assets of the Corporation on a
consolidated basis in any transaction or series of related
transactions (other than sales in the ordinary course of
business) and (b) any merger or consolidation to which the
Corporation is a party, except for a merger in which the
Corporation is the surviving corporation and, after giving effect
to such merger, the holders of the Corporation's outstanding
capital stock (on a fully-diluted basis) immediately prior to
such merger will own the Corporation's outstanding capital stock
(on a fully-diluted basis) having a majority of the ordinary
voting power to elect the Corporation's board of directors.
Part 4. Events of Noncompliance
4A. Definition. An Event of Noncompliance will be deemed
to have occurred if:
(i) the Corporation fails to make any redemption payment
with respect to the Series A Stock which it is obligated to make
hereunder, whether or not such payment in legally permissible;
(ii) the Corporation fails to pay dividends to the holders
of Series A Stock for two (2) consecutive Dividend Payment Dates;
(iii) the Corporation makes an assignment for the benefit
of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is
entered adjudicating the Corporation bankrupt or insolvent; or
any order for relief with respect to the Corporation is entered
under the Federal Bankruptcy Code; or the Corporation petitions
or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or of any
substantial part of the assets of the Corporation, or commences
any proceeding relating to the, Corporation under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction or any such
petition or application is filed, or any such proceeding is
commenced, against the Corporation and either (a) the Corporation
by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or
proceeding is not dismissed within sixty (60) days.
4B. Consequences of Certain Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and continued
for a period of 30 days, the holder or holders of a majority of
the Series A Stock then outstanding may demand (by written notice
delivered to the Corporation) (a) immediate acceleration of the
right to convert the Series A Stock into shares of Common Stock
under Part 6B of this Section I, below, such that 100% of the
Series A Stock shall be vested in such holder or holders and
eligible for conversion into Common Stock on the date of such
written notice, which notice may include a written notice of
conversion of all or a portion of such shares pursuant to Part 6A
of this Section I, below.
(ii) If an Event of Noncompliance has occurred and
continued for a period of 30 days, the holder or holders of a
majority of the Series A Stock then outstanding (the "Holder")
may also demand that the Board of Directors be deemed dissolved
and all positions vacated. In this connection, the Holder may
schedule a meeting of all stockholders of the Corporation upon at
least twenty-four (24) hours advance notice either in writing,
telegram or by a telephonic communication to all stockholders at
which meeting a new Board of Directors shall be elected.
Notwithstanding anything to the contrary in the herein or in the
Corporation's By-laws, it is expressly agreed that the Holder
acting in person or by proxy may elect a majority of the members
of the Board of Directors. The remaining members of the Board of
Directors may be elected or designated by holders of a majority
of the Common Stock. Upon such election, the Board of Directors,
by majority vote, may conduct the business and affairs of the
Corporation and may also terminate the employment of any employee
of the Corporation or his or her official position with the
Corporation, or both, subject to any existing employment
agreements. The Holders' directors shall serve as directors
until such time as the Event of Noncompliance has been remedied
or the Series A Stock converted entirely to Common Stock or
redeemed in full, at which time such directors shall resign.
(iii) If any Event of Noncompliance exists, each Holder
will also have any other rights which such holder may have been
afforded under any contract or agreement at any time and any
other rights which such Holder may have pursuant to applicable
law.
Part 5. Voting Rights. The voting powers of the holders of
Series A Stock include:
(i) the right, as a class, to elect two (2) directors to
the Corporation's Board of Directors; and
(ii) the exclusive right, as a class, to approve any
enlargement of the Corporation's Board of Directors in excess of
nine (9) directors.
Except an otherwise provided herein and as otherwise
provided by law, the Series A Stock will have no other voting
rights.
Part 6. Conversion Rights.
6A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series A 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 A 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 a 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 A 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
than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issue of shares of
Common Stock in such name or names. After receipt of such notice
of conversion, the Corporation shall either:
(i) within sixty (60) 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; or
(ii) within sixty (60) days after receipt of such notice,
redeem all or any portion of the Series A Stock specified in the
aforementioned notice at an amount in immediately available funds
equal to the Liquidation Value thereof, including any accrued and
unpaid dividends.
In case less than all of the shares of Series A 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 A Stock not so converted.
6B. Basic Conversion Rights. The right to convert the
Series A Stock into shares of Common Stock shall vest immediately
on issuance with respect to 26.27% of the shares of Series A
Stock issued to each holder, and shall vest with respect to the
remaining shares of Series A Stock of all holders outstanding on
August 31, 1997. If shares of Cumulative Preferred Stock are
held by more than one holder, each such holder shall be entitled
to convert only the applicable percentage of such shares held by
such holder. Each share of Series A Stock is convertible into
476 newly issued shares of Common Stock of the Corporation.
6C. Fundamental Changes. In case the Corporation shall
effect any capital reorganization of the Common Stock or shall
consolidate, merge or engage in a statutory share exchange with
or into any other corporation (other than a consolidation, merger
or share exchange in which the Corporation is the surviving
corporation and each share of Common Stock outstanding
immediately prior to such consolidation or merger is to remain
outstanding immediately after such consolidation or merger) or
shall sell or transfer all or substantially all its assets to any
other corporation, lawful provision shall be made as a part of
the terms of such transaction whereby the holders of shares of
the Series A Stock shall receive upon conversion thereof, in lieu
of each share of Common Stock which would have been issuable upon
conversion of such stock if converted immediately prior to the
consummation of such transaction, the same kind and amount of
stock (or other securities, cash or property, if any) as may be
issuable or distributable in connection with such transaction
with respect to each share of Common Stock outstanding at the
effective time of such transaction.
6D. Conversion Date. Conversion shall be deemed to have
been made as of the date of surrender of certificates for the
shares of Series A Stock to be converted, and the giving of
written notice, as prescribed in Part 6A of this Section I, or as
otherwise prescribed by Part 4B(i) of Section I, above, 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 A
Stock are duly closed for any purpose, but certificates for
shares of Common Stock shall be issued and delivered as soon an
practicable after the opening of such books.
6E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series A Stock which at any time have been
converted shall be canceled, may not be reissued as Series A
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. 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 A Stock, the full number of shares of Common Stock then
issuable or which may become issuable upon the conversion of all
shares of Series A 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.
6F. 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 A 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 A 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 7. Definitions Applicable to Section I.
"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 or required by law to close.
"Common Stock" means the Common Stock, $0.0001 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 of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock.
"Liquidation Value" of any Series A Stock as of any
particular date will be equal to $250 per share plus all unpaid
cumulative dividends on the Series A Stock.
"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.
"Redemption Date" as to any Series A Stock means the date
specified in the notice of any redemption at the Corporation's
option or the applicable date specified herein in the case of any
other redemption; provided that no such date will be a Redemption
Date unless the applicable Liquidation Value is actually paid in
full on such date, and, if not so paid in full, the Redemption
Date will be the date on which Such Liquidation Value is fully
paid.
Part 8. Amendment and Waiver. No amendment, modification or
waiver will be binding or effective with respect to any provision
of this Section I without the prior written consent of the
holders of a majority of the Series A Stock outstanding at the
time such action is taken; provided that no such action will
change the amount payable on redemption of the Series A Stock or
the times at which redemption of the Series A Stock is to occur,
or the percentage required to approve such change, without the
prior written consent of the holders of at least two-thirds of
the Series A Stock then outstanding; and, provided further, that
no change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation unless
the Corporation has obtained the prior written consent of the
holders of the applicable percentage of the Series A Stock then
outstanding.
Part 9. Ranking. For purposes hereof, all Junior Securities
shall be deemed to rank junior to the Series A Stock as to
dividends or distribution of assets upon liquidation, dissolution
or winding up.
II. SERIES B PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock (which includes all sub-series) shall
be "Series B Convertible Preferred Stock" (hereinafter referred
to as the "Series B Stock") and the number of authorized shares
constituting the Series B Stock is Six Thousand Eight Hundred
Fifty-Eight (6,858). Of the Series B Stock, Six Thousand Two
Hundred Eighty-Six (6,286) shares are designated as "Series B-1
Convertible Preferred Stock" (hereinafter referred to as the
"Series B-1 Stock"), Three Hundred Forty-Three (343) shares are
designated as "Series B-2 Convertible Preferred Stock"
(hereinafter referred to as the "Series B-2 Stock"), and Two
Hundred Twenty-Nine (229) shares are designated as "Series B-3
Convertible Preferred Stock" (hereinafter referred to as the
"Series B-3 Stock"). The Series B Stock shall be deemed a
separate class of Preferred Stock, and each sub-series of the
Series B Stock 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 B Stock will be entitled to be
paid, after any distribution or payment is made upon any Series A
Stock and before any distribution or payment is made upon Junior
Securities (as defined below under this Section II), an amount in
cash equal to the aggregate Liquidation Value (as defined below
under this Section II) of all shares of Series B Stock
outstanding, and the holders of Series B 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 B 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 B 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 B 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 Part 1 of this Section II.
Part 2. Conversion Rights.
2A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series B 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 B 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 B 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 B
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 B stock not so converted.
2B. Conversion of Series B-1 Stock. The right to convert
the Series B-1 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-1 Stock.
Each share of Series B-1 Stock is convertible into One Hundred
(100) newly issued shares of Common Stock of the Corporation (the
"B-1 Conversion Rate").
2C. Conversion of Series B-2. The right to convert the
Series B-2 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-2. Each
share of Series B-2 Stock is convertible into Twenty-Six (26)
newly issued share of Common Stock of the Corporation (the "B-2
Conversion Rate"), which is subject to adjustment as provided in
Part 2C of this Section II.
(i) In the event the gross revenue of Furash & Company,
Inc. ("FCI"), the wholly-owned subsidiary of the Corporation
acquired under that certain Agreement and Plan of Exchange dated
December 23, 1994, to which the Corporation and FCI are parties
("Exchange Agreement"), for the calendar year ending December 31,
1996, equals or exceeds $4,000,000, as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1997, by an amount equal to 8,572 divided
by the number of shares of Series B-2 Stock outstanding on April
30, 1997. In the event the gross revenue of FCI for the calendar
year ending December 31, 1996, exceeds $2,500,000 (but is less
than $4,000,000), as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-2 Conversion Rate for each share of Series B-2
Stock shall automatically be increased on April 30, 1997, by an
amount determined by dividing 8,572 by the number of shares of
Series B-2 Stock outstanding on April 30, 1997, and multiplying
the result by a fraction, the numerator of which is the amount by
which gross revenues exceed $2,500,000 for the calendar year
ending December 31, 1996, and the denominator of which is
$1,500,000. In the event the gross revenue of FCI for the
calendar year ending December 31, 1996, does not exceed
$2,500,000, there will be no adjustment in the B-2 Conversion
Rate.
(ii) In the event the gross revenue of FCI for the calendar
year ending December 31, 1997, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-2
Conversion Rate for each share of Series B-2 Stock shall
automatically be increased on April 30, 1998, by an amount equal
to 8,572 divided by the number of shares of Series B-2 Stock
outstanding on April 30, 1998. In the event the gross revenue of
FCI for the calendar year ending December 31, 1997, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1998, by an amount determined by dividing
8,572 by the number of shares of Series B-2 Stock outstanding on
April 30, 1998, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1997, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1997,
does not exceed $2,500,000, there will be no adjustment in the B-
2 Conversion Rate.
(iii) In the event the gross revenue of FCI for the
calendar year ending December 31, 1998, equals or exceeds
$4,000,000, as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-2 Conversion Rate for each share of Series B-2
Stock shall automatically be increased on April 30, 1999, by an
amount equal to 8,572 divided by the number of shares of Series B-
2 Stock outstanding on April 30, 1999. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
exceeds $2,500,000 (but is less than $4,000,000), as determined
by the Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1999, by an amount determined by dividing
8,572 by the number of shares of Series B-2 Stock outstanding on
April 30, 1999, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1998, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
does not exceed $2,500,000, there will be no adjustment in the B-
2 Conversion Rate.
(iv) In the event the employment of Edward E. Furash
("Furash") under that certain employment agreement between FCI
and Furash included as an exhibit to the Exchange Agreement (the
"Employment Agreement"), is terminated by FCI during the initial
four year term thereof ("Initial Term") for reasons other than
cause as defined in paragraph 14 of the Employment Agreement, or
is terminated during the Initial Term by either FCI or Furash
pursuant to paragraph 15 of the Employment Agreement, the B-2
Conversion Rate for each share of Series B-2 Stock shall
automatically be increased on the date of such termination by an
amount determined by multiplying 8,572 by the number of calendar
years remaining in the unexpired Initial Term of the Employment
Agreement after the date of termination (with each partial
calendar year in the unexpired Initial Term counted as one full
year), and dividing the product by the number of shares of Series
B-2 Stock outstanding on the date of termination.
2D. Conversion of Series B-3. The right to convert the
Series B-3 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-3. Each
share of Series B-3 Stock is convertible into Twenty-Six (26)
newly issued share of Common Stock of the Corporation (the "B-3
Conversion Rate"), which is subject to adjustment as provided in
Part 2D of this Section II.
(i) In the event the gross revenue of FCI for the calendar
year ending December 31, 1996, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-3
Conversion Rate for each share of Series B-3 Stock shall
automatically be increased on April 30, 1997, by an amount equal
to 5,714 divided by the number of shares of Series B-3 Stock
outstanding on April 30, 1997. In the event the gross revenue of
FCI for the calendar year ending December 31, 1996, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1997, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1997, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1996, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1996,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(ii) In the event the gross revenue of FCI for the calendar
year ending December 31, 1997, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-3
Conversion Rate for each share of Series B-3 Stock shall
automatically be increased on April 30, 1998, by an amount equal
to 5,714 divided by the number of shares of Series B-3 Stock
outstanding on April 30, 1998. In the event the gross revenue of
FCI for the calendar year ending December 31, 1997, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1998, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1998, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1997, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1997,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(iii) In the event the gross revenue of FCI for the
calendar year ending December 31, 1998, equals or exceeds
$4,000,000, as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-3 Conversion Rate for each share of Series B-3
Stock shall automatically be increased on April 30, 1999, by an
amount equal to 5,714 divided by the number of shares of Series B-
3 Stock outstanding on April 30, 1999. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
exceeds $2,500,000 (but is less than $4,000,000), as determined
by the Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1999, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1999, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1998, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(iv) In the event the employment of Furash under the
Employment Agreement, is terminated by FCI during the initial
four year term thereof ("Initial Term") for reasons other than
cause as defined in paragraph 14 of the Employment Agreement, or
is terminated during the Initial Term by FCI pursuant to
paragraph 15 of the Employment Agreement, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on the date of such termination by an amount determined
by multiplying 5,714 by the number of calendar years remaining in
the unexpired Initial Term of the Employment Agreement after the
date of termination (with each partial calendar year in the
unexpired Initial Term counted as one full year), and dividing
the product by the number of shares of Series B-3 Stock
outstanding on the date of termination.
2E. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series B Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
2F. Conversion Date. Conversion shall be deemed to have
been made as of the date of surrender of certificates for the
shares of Series B Stock to be converted, and the giving of
written notice as prescribed in Part 2A of this Section II, 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 B 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.
2G. Converted Shares and Common Stock Held for Conversion.
Any shares of Series B Stock which at any time have been
converted shall be canceled, may not be reissued as Series B
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. 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 B 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.
2H. 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 B 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 Convertible
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.
The holders of Series B Stock shall be entitled to
participate fully with the Common Stock in all dividends, whether
payable in cash, Common Stock, or other property of the
Corporation, when and as declared by the Corporation's Board of
Directors. The dividend payable on each share of Series B-1, B-
2, and B-3 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 B-1, B-2, and B-3 Conversion Rates, as the case
may be, 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 of this Section II, 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 B Stock unless
all dividends on the Corporation's Series A Convertible Preferred
Stock ("Series A Stock"), have been paid or reserved in
accordance with the terms of the Series A Stock.
Part 4. Voting Rights.
Each share of Series B Stock shall have that number of votes
equal to the number of shares of Common Stock issuable on
conversion of the Series B Stock as of the record date or any
such other date with respect to which a determination is made of
the Persons and number of shares entitled to be voted at any
meeting of the stockholders of the Corporation or sign a written
consent to action without a meeting, after giving taking into
account all adjustments to such Conversion Rates required to be
made under Part 2 of this Section II, above. The holders thereof
shall have the right to vote (but not as a separate class, except
to the extent required by law) on all matters subject to vote at
any meeting of the stockholders of the Corporation or submitted
for stockholder approval by written consent.
Part 5. Definitions Applicable to Section II.
"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, $0.0001 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 the Series A Stock and Series B Stock.
"Liquidation Value" of any Series B Stock as of any
particular date will be equal to $350 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.
III. SERIES C PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock (which includes all sub-series) shall
be "Series C Convertible Preferred Stock" (hereinafter referred
to as the "Series C Stock") and the number of authorized shares
constituting the Series C Stock is ______________ (____). The
Series C 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 C Stock will be entitled to be
paid, after any distribution or payment is made upon any Series A
Stock and Series B Stock and before any distribution or payment
is made upon Junior Securities (as defined below under this
Section III), an amount in cash equal to the aggregate
Liquidation Value (as defined below under this Section III) of
all shares of Series C Stock outstanding, and the holders of
Series C 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 C 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 C 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 C
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 Part 1 of this Section III.
Part 2. Dividends.
2A. Entitlement. The holders of Series C Stock, shall be
entitled to receive cumulative dividends. Such dividends shall
be paid to the holders in cash or in-kind through the issuance of
Common Stock, as determined at the election of the Corporation,
on conversion of the Series C Stock in accordance with Part 3 of
Section III, below, except as provided in Part 5 of Section III,
below.
2B. Accrual Rate. Dividends on each share of Series C
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below under this Section
III), from and including the Date of Issuance of such share to
and including the date on which the Redemption Price (as defined
below) of such share is paid or the date on which such share is
converted into Common Stock. Such dividends shall accrue whether
or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the
Corporation initially issues any share of the Series C Stock will
be deemed to be its "Date of Issuance" as that term is uses
herein, regardless of the number of times transfer of any such
share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series C 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
C 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 C Stock to
be converted (provided that the number of shares tendered for
conversion at any one time shall not be less than $100,000 in
Face Value) and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be
issued. The date of execution of the notice of conversion and
delivery thereof to the Corporation by facsimile transmission at
(212) 508-3540 shall be the "Conversion Date"; provided, that if
the certificate representing the shares of Series C Stock to be
converted as stated in the notice of conversion is not received
by the Corporation or its designated agent within three business
days of receiving said facsimile transmission, the Conversion
Date shall be the date on which the Series C Stock certificates
are actually received by the Corporation or agent. After the
receipt of such notice of conversion and the certificates for the
Series C Stock converted, the Corporation shall promptly 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 C 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 C Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series C Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series C Stock shall be determined by dividing
the Face Value of the Series C Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) $4.558125, or (ii) 80%
of the market price on the Conversion Date. For purposes of Part
3B of this Section III, "market price" on a given date shall be
the average closing bid prices of the Common Stock for the five
NASDAQ trading days immediately preceding the applicable date as
reported by the National Association of Securities Dealers
Automated Quotation System or such other inter-dealer quotation
system as may report quotations on the Common Stock. In the
event any fractional share of Common Stock would become issuable
under the calculation contained in Part 3B of this Section III,
the number of shares issuable shall be rounded up to the nearest
whole number.
3C. Conversion Dates The right to convert the Series C
Stock into shares of Common Stock shall vest over a 95-day
period following the Date of Issuance as set forth below:
(i) With respect to 33% of the shares of Series C Stock
held, 42 days following the Date of Issuance;
(ii) With respect to 33% of the shares of Series C Stock
held, 65 days following the Date of Issuance; and
(iii) With respect to 34% of the shares of Series C
Stock held, 95 days following the Date of Issuance.
3D. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series C Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series C Stock which at any time have been
converted shall be canceled, may not be reissued as Series C
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. 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 C 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.
Part 4. Voting Rights.
The Series C Stock shall have no voting rights, except as
required in the specific instance by the Delaware Revise Statutes
and except the right to approve by majority vote of the holders
of the Series C Stock: the authorization and issuance of any
class or series of Preferred Stock senior to the Series C Stock
which is not authorized and issued as of March 1, 1996; any
amendment, modification, or repeal of the articles of
incorporation of the Corporation if the powers, preferences, or
special rights of the Series C Stock would be adversely affected;
and, the imposition of any restriction on the Series C Stock,
other than restrictions arising under the Delaware Revised
Statutes or existing under the articles of incorporation as in
effect at March 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series C Stock
which is to be redeemed, the Corporation will be obligated on the
Redemption Date (as defined below) to pay to the holder thereof
(upon surrender by such holder at the Corporation's principal
office or to the Corporation's transfer agent of the certificates
representing such shares of Series C Stock) an amount in
immediately available funds equal to the Face Value thereof plus
all accrued dividends as of the Redemption Date; provided, that
if redemption is effected pursuant to Part 5F of this Section
III, the amount payable on the Redemption Date shall be 120% of
the Face Value plus all accrued dividends as of that date.
5B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series C Stock to each
record holder of Series C Stock not more than sixty (60) nor less
than ten (10) days prior to the date on which such redemption is
to be made. The date specified in such notice for redemption is
herein referred to as the "Redemption Date."
5C. Termination of Rights. On the Redemption Date all
rights pertaining to the Series C Stock, including, but not
limited to, any right of conversion, will cease, and such Series
C Stock will not be deemed to be outstanding.
5D. Redeemed or Otherwise Acquire Shares. Any shares of
Series C Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series C
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
5E. Optional Redemption. Except as provided in Part 5F of
this Section III, the Corporation may, at any time after April 1,
1997, redeem all or any portion of the Series C Stock.
5F. Redemption upon Specific Event. In the event any
shares of the Series C Stock are submitted for conversion under
Part 3 of this Section III and the market price for the Common
Stock on the Conversion Date as determined under Part 3B of this
Section III is less than $2.00 per share, the Corporation may, at
its option, elect to redeem the Series C Stock tendered for
conversion rather than convert the shares.
Part 6. Definitions Applicable to Section III.
"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, $0.0001 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.
"Face Value" of any Series C Stock as of any particular date
will be equal to $20,000 per share.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock and Series B Stock.
"Liquidation Value" of any Series C Stock as of any
particular date will be equal to $20,000 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.
IV. SERIES D PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series D Convertible
Preferred Stock" (hereinafter referred to as the "Series D
Stock") and the number of authorized shares constituting the
Series D Stock is Eighty (80). The Series D 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 D 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 (as defined below under this Section IV), an
amount in cash equal to the aggregate Liquidation Value (as
defined below under this Section IV) of all shares of Series D
Stock outstanding, and the holders of Series D 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 D 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 D 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 D 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 Part 1 of this Section IV.
Part 2. Dividends.
2A. Entitlement. The holders of Series D Stock, shall be
entitled to receive cumulative dividends. Such dividends shall
be paid to the holders in cash or in-kind through the issuance of
Common Stock, as determined at the election of the Corporation,
on conversion of the Series D Stock in accordance with Part 3 of
Section IV, below, except as provided in Part 5 of Section IV,
below.
2B. Accrual Rate. Dividends on each share of Series D
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below under this Section IV),
from and including the Date of Issuance of such share to and
including the date on which the Redemption Price (as defined
below) of such share is paid or the date on which such share is
converted into Common Stock. Such dividends shall accrue whether
or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the
Corporation initially issues any share of the Series D Stock will
be deemed to be its "Date of Issuance" as that term is used
herein, regardless of the number of times transfer of any such
share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series D 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
D 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 D Stock to
be converted (provided that the number of shares tendered for
conversion at any one time shall not be less than $100,000 in
Face Value) and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be
issued. The date of execution of the notice of conversion and
delivery thereof to the Corporation by facsimile transmission at
(212) 508-3540 shall be the "Conversion Date"; provided, that if
the certificate representing the shares of Series D Stock to be
converted as stated in the notice of conversion is not received
by the Corporation or its designated agent within three business
days of receiving said facsimile transmission, the Conversion
Date shall be the date on which the Series D Stock certificates
are actually received by the Corporation or agent. After the
receipt of such notice of conversion and the certificates for the
Series D Stock converted, the Corporation shall promptly 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 D 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 D Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series D Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series D Stock shall be determined by dividing
the Face Value of the Series D Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) $5.210625, or (ii) 80%
of the market price on the Conversion Date. For purposes of Part
3B of this Section IV, "market price" on a given date shall be
the average closing bid prices of the Common Stock for the five
NASDAQ trading days immediately preceding the applicable date as
reported by the National Association of Securities Dealers
Automated Quotation System or such other inter-dealer quotation
system as may report quotations on the Common Stock. In the
event any fractional share of Common Stock would become issuable
under the calculation contained in this Part 3B of this Section
IV, the number of shares issuable shall be rounded up to the
nearest whole number.
3C. Conversion Dates The right to convert the Series D
Stock into shares of Common Stock shall vest over a 100-day
period following the Date of Issuance as set forth below:
(i) With respect to 50% of the shares of Series D Stock
held, shall commence 70 days following the Date of Issuance; and
(ii) With respect to any remaining shares of Series D Stock
held, shall commence 100 days following the Date of Issuance.
Any shares of Series D Stock that remain outstanding at 12:01
a.m., New York City time on June 1, 1998, shall there upon be
automatically converted to Common Stock without any action on the
part of the holder thereof, and all certificates that theretofore
represented shares of Series D Stock shall represent only the
right to receive shares of Common Stock on surrender of the
certificates to the Corporation as provided in Part 3 of this
Section IV
3D. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series D Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series D Stock which at any time have been
converted shall be canceled, may not be reissued as Series D
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.. 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 D 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.
Part 4. Voting Rights.
The Series D Stock shall have no voting rights, except as
required in the specific instance by the Delaware Revise Statutes
and except the right to approve by majority vote of the holders
of the Series D Stock: the authorization and issuance of any
class or series of Preferred Stock senior to the Series D Stock
which is not authorized as of June 1, 1996; any amendment,
modification, or repeal of the articles of incorporation of the
Corporation if the powers, preferences, or special rights of the
Series D Stock would be adversely affected; and, the imposition
of any restriction on the Series D Stock, other than restrictions
arising under the Delaware Revised Statutes or existing under the
articles of incorporation as in effect at June 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series D Stock
which is to be redeemed, the Corporation will be obligated on the
Redemption Date (as defined below) to pay to the holder thereof
(upon surrender by such holder at the Corporation's principal
office or to the Corporation's transfer agent of the certificates
representing such shares of Series D Stock) an amount in
immediately available funds equal to 120% of the Liquidation
Value thereof plus all accrued dividends as of the Redemption
Date.
5B. Redemption upon Specific Event. In the event any
shares of the Series D Stock are submitted for conversion under
Part 3 of this Section IV and the market price for the Common
Stock on the Conversion Date as determined under Part 3B of this
Section IV is less than $2.00 per share, the Corporation may, at
its option, elect to redeem the Series D Stock tendered for
conversion rather than convert the shares.
5C. Notice of Redemption. The Corporation will mail
written notice of redemption of Series D Stock to the record
holder submitting the Series D Stock to the Corporation for
conversion not later than the close of the next Business Day
following the date on which the shares of Series D Stock are
tendered to the Corporation for conversion. The date specified
in such notice for redemption is herein referred to as the
"Redemption Date."
5D. Termination of Rights. On the Redemption Date all
rights pertaining to the Series D Stock, including, but not
limited to, any right of conversion, will cease, and such Series
D Stock will not be deemed to be outstanding.
5E. Redeemed or Otherwise Acquire Shares. Any shares of
Series D Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series D
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
Part 6. Definitions Applicable to Section IV.
"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, $0.0001 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 the Senior Securities.
"Liquidation Value" of any Series D Stock as of any
particular date will be equal to $50,000 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 Stock,
Series B Stock, and Series C Stock.
V. SERIES E PREFERRED STOCK
Designation; Number of Shares. 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 (as defined below under this Section V), an
amount in cash equal to the aggregate Liquidation Value (as
defined below under this Section V) 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
than 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 Part 1 of this Section V.
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
than 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 of this
Section V, 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 Part 2C of this Section V. 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 Part 2C of this
Section V.
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 Part 2C of this Section V) 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 any of the transactions described in subsection (a)
of Part 2C of this Section V or (ii) any transaction for which an
adjustment has been made pursuant to the provisions of paragraphs
(c) or (d) of Part 2C of this Section V or (iii) the issuance of
any Excluded Shares (as defined in paragraph (l) of Part 2C of
this Section V).
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 specified 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 Part 2C of this Section V, 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 Part 2C of this Section V, 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 Part 2C of this Section V) 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 Part 2C of this Section V, 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 Part 2C of this Section V) 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 Part 2C of this Section V 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 Part 2C of this
Section V, 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 of this Section V 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 Part 2C of this Section
V, 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 of this Section V, 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, may not be reissued as Series E
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. 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 of this Section V) 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 of this Section V, 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 Delaware
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 Applicable to Section V.
"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, $0.0001 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 Barry S. Roseman, its President,
and attested to by Philicia Levinson, its Secretary, this ______
day of ________________, 1996.
HEADWAY CORPORATE SERVICES, INC.
By________________________________
Barry S. Roseman, President
ATTEST
By_____________________________
Philicia Levinson, Secretary
APPENDIX E
NEVADA REVISED STATUTES (NRS)
RIGHTS OF DISSENTING OWNERS
92A.300. Definitions. As used in NRS 92A.300 to 92A.500,
inclusive, unless the context otherwise requires, the words and
terms defined in NRS 92A.305 to 92A.335, inclusive, have the
meanings ascribed to them in those sections.
92A.305. "Beneficial stockholder" defined. "Beneficial
stockholder" means a person who is a beneficial owner of shares
held in a voting trust or by a nominee as the stockholder of
record.
92A.310. "Corporate action" defined. "Corporate action" means
the action of a domestic corporation.
92A.315. "Dissenter" defined. "Dissenter" means a stockholder
who is entitled to dissent from a domestic corporation's action
under NRS 92A.380 and who exercises that right when and in the
manner required by NRS 92A.410 to 92A.480, inclusive.
92A.320. "Fair value" defined. "Fair value," with respect to a
dissenter's shares, means the value of the shares immediately
before the effectuation of the corporate action to which he
objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable.
92A.325. "Stockholder" defined. "Stockholder" means a
stockholder of record or a beneficial stockholder of a domestic
corporation.
92A.330. "Stockholder of record" defined. "Stockholder of
record" means the person in whose name shares are registered in
the records of a domestic corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee's
certificate on file with the domestic corporation.
92A.335. "Subject corporation" defined. "Subject corporation"
means the domestic corporation which is the issuer of the shares
held by a dissenter before the corporate action creating the
dissenter's rights becomes effective or the surviving or
acquiring entity of that issuer after the corporate action
becomes effective.
92A.340. Computation of interest. Interest payable pursuant to
NRS 92A.300 to 92A.500, inclusive, must be computed from the
effective date of the action until the date of payment, at the
average rate currently paid by the entity on its principal bank
loans or, if it has no bank loans, at a rate that is fair and
equitable under all of the circumstances.
92A.350. Rights of dissenting partner of domestic limited
partnership. A partnership agreement of a domestic limited
partnership or, unless otherwise provided in the partnership
agreement, an agreement of merger or exchange, may provide that
contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited
partnership are available for any class or group of partnership
interests in connection with any merger or exchange in which the
domestic limited partnership is a constituent entity.
92A.360. Rights of dissenting member of domestic
limited-liability company. The articles of organization or
operating agreement of a domestic limited-liability company or,
unless otherwise provided in the articles of organization or
operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a
dissenting member are available in connection with any merger or
exchange in which the domestic limited-liability company is a
constituent entity.
92A.370. Rights of dissenting member of domestic nonprofit
corporation.
1. Except as otherwise provided in subsection 2, and unless
otherwise provided in the articles or bylaws, any member of any
constituent domestic nonprofit corporation who voted against the
merger may, without prior notice, but within 30 days after the
effective date of the merger, resign from membership and is
thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before
his resignation and is thereby entitled to those rights, if any,
which would have existed if there had been no merger and the
membership had been terminated or the member had been expelled.
2. Unless otherwise provided in its articles of
incorporation or bylaws, no member of a domestic nonprofit
corporation, including, but not limited to, a cooperative
corporation, which supplies services described in chapter 704 of
NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of
the ownership of an interest in real property, may resign and
dissent pursuant to subsection 1.
92A.380. Right of stockholder to dissent from certain corporate
actions and to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390,
a stockholder is entitled to dissent from, and obtain payment of
the fair value of his shares in the event of any of the following
corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for
the merger by NRS 92A.120 to 92A.160, inclusive, or the articles
of incorporation and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is
merged with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the
domestic corporation is a party as the corporation whose subject
owner's interests will be acquired, if he is entitled to vote on
the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of incorporation,
bylaws or a resolution of the board of directors provides that
voting or nonvoting stockholders are entitled to dissent and
obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain
payment under NRS 92A.300 to 92A.500, inclusive, may not
challenge the corporate action creating his entitlement unless
the action is unlawful or fraudulent with respect to him or the
domestic corporation.
92A.390. Limitations on right of dissent: Stockholders of
certain classes or series; action of stockholders not required
for plan of merger.
1. There is no right of dissent with respect to a plan of
merger or exchange in favor of stockholders of any class or
series which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or exchange is to be acted
on, were either listed on a national securities exchange,
included in the national market system by the National
Association of Securities Dealers, Inc., or held by at least
2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation
issuing the shares provide otherwise; or
(b) The holders of the class or series are required under
the plan of merger or exchange to accept for the shares anything
except:
(1) Cash, owner's interests or owner's interests and
cash in lieu of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective
date of the plan of merger or exchange, were either listed on a
national securities exchange, included in the national market
system by the National Association of Securities Dealers, Inc.,
or held of record by a least 2,000 holders of owner's interests
of record; or
(2) A combination of cash and owner's interests of the
kind described in sub-subparagraphs (I) and (II) of subparagraph
(1) of paragraph (b).
2. There is no right of dissent for any holders of stock of
the surviving domestic corporation if the plan of merger does not
require action of the stockholders of the surviving domestic
corporation under NRS 92A.130.
92A.400. Limitations on right of dissent: Assertion as to
portions only to shares registered to stockholder; assertion by
beneficial stockholder.
1. A stockholder of record may assert dissenter's rights as
to fewer than all of the shares registered in his name only if he
dissents with respect to all shares beneficially owned by any one
person and notifies the subject corporation in writing of the
name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he
dissents and his other shares were registered in the names of
different stockholders.
2. A beneficial stockholder may assert dissenter's rights
as to shares held on his behalf only if:
(a) He submits to the subject corporation the written
consent of the stockholder of record to the dissent not later
than the time the beneficial stockholder asserts dissenter's
rights; and
(b) He does so with respect to all shares of which he
is the beneficial stockholder or over which he has power to
direct the vote.
92A.410. Notification of stockholders regarding right of
dissent.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, the
notice of the meeting must state that stockholders are or may be
entitled to assert dissenters' rights under NRS 92A.300 to
92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is
taken without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to
assert dissenters' rights that the action was taken and send them
the dissenter's notice described in NRS 92A.430.
92A.420. Prerequisite to demand for payment for shares.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, a
stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the
vote is taken, written notice of his intent to demand payment for
his shares if the proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed
action.
2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this
chapter.
92A.430. Dissenter's notice: Delivery to stockholders entitled
to assert rights; contents.
1. If a proposed corporate action creating dissenters'
rights is authorized at a stockholders' meeting, the subject
corporation shall deliver a written dissenter's notice to all
stockholders who satisfied the requirements to assert those
rights.
2. The dissenter's notice must be sent no later than 10
days after the effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and
where and when certificates, if any, for shares must be
deposited;
(b) Inform the holders of shares not represented by
certificates to what extent the transfer of the shares will be
restricted after the demand for payment is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to the news media or to the
stockholders of the terms of the proposed action and requires
that the person asserting dissenter's rights certify whether or
not he acquired beneficial ownership of the shares before that
date;
(d) Set a date by which the subject corporation must
receive the demand for payment, which may not be less than 30 nor
more than 60 days after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500,
inclusive.
92A.440. Demand for payment and deposit of certificates;
retention of rights of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the
dissenter's notice for this certification; and
(c) Deposit his certificates, if any, in accordance with
the terms of the notice.
2. The stockholder who demands payment and deposits his
certificates, if any, retains all other rights of a stockholder
until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit
his certificates where required, each by the date set forth in
the dissenter's notice, is not entitled to payment for his shares
under this chapter.
92A.450. Uncertificated shares: Authority to restrict transfer
after demand for payment; retention of rights of stockholder.
1. The subject corporation may restrict the transfer of
shares not represented by a certificate from the date the demand
for their payment is received.
2. The person for whom dissenter's rights are asserted as
to shares not represented by a certificate retains all other
rights of a stockholder until those rights are canceled or
modified by the taking of the proposed corporate action.
92A.460. Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30
days after receipt of a demand for payment, the subject
corporation shall pay each dissenter who complied with NRS
92A.440 the amount the subject corporation estimates to be the
fair value of his shares, plus accrued interest. The obligation
of the subject corporation under this subsection may be enforced
by the district court:
(a) Of the county where the corporation's registered office
is located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the
dissenter resides or has its registered office. The court shall
dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end
of a fiscal year ending not more than 16 months before the date
of payment, a statement of income for that year, a statement of
changes in the stockholders' equity for that year and the latest
available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of
the fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment
under NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470. Payment for shares: Shares acquired on or after date of
dissenter's notice.
1. A subject corporation may elect to withhold payment from
a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenter's notice as the date
of the first announcement to the news media or to the
stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold
payment, after taking the proposed action, it shall estimate the
fair value of the shares, plus accrued interest, and shall offer
to pay this amount to each dissenter who agrees to accept it in
full satisfaction of his demand. The subject corporation shall
send with its offer a statement of its estimate of the fair value
of the shares, an explanation of how the interest was calculated,
and a statement of the dissenters' right to demand payment
pursuant to NRS 92A.480.
92A.480. Dissenter's estimate of fair value: Notification of
subject corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in
writing of his own estimate of the fair value of his shares and
the amount of interest due, and demand payment of his estimate,
less any payment pursuant to NRS 92A.460, or reject the offer
pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid
pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is
less than the fair value of his shares or that the interest due
is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant
to this section unless he notifies the subject corporation of his
demand in writing within 30 days after the subject corporation
made or offered payment for his shares.
92A.490. Legal proceeding to determine fair value: Duties of
subject corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject
corporation shall commence a proceeding within 60 days after
receiving the demand and petition the court to determine the fair
value of the shares and accrued interest. If the subject
corporation does not commence the proceeding within the 60-day
period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in
the district court of the county where its registered office is
located. If the subject corporation is a foreign entity without
a resident agent in the state, it shall commence the proceeding
in the county where the registered office of the domestic
corporation merged with or whose shares were acquired by the
foreign
entity was located.
3. The subject corporation shall make all dissenters,
whether or not residents of Nevada, whose demands remain
unsettled, parties to the proceeding as in an action against
their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified
mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is
commenced under subsection 2 is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The
appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is
entitled to a judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the amount paid
by the subject corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject corporation elected
to withhold payment pursuant to NRS 92A.470.
92A.500. Legal proceeding to determine fair value: Assessment of
costs and fees.
1. The court in a proceeding to determine fair value shall
determine all of the costs of the proceeding, including the
reasonable compensation and expenses of any appraisers appointed
by the court. The court shall assess the costs against the
subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding
payment.
2. The court may also assess the fees and expenses of the
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) Against the subject corporation and in favor of all
dissenters if the court finds the subject corporation did not
substantially comply with the requirements of NRS 92A.300 to
92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter
in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to the
rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the subject corporation, the court may
award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the
court may assess the costs against the subject corporation,
except that the court may assess costs against all or some of the
dissenters who are parties to the proceeding, in amounts the
court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding
commenced pursuant to NRS 92A.460 or 92A.490 from applying the
provisions of N.R.C.P. 68 or NRS 17.115.
APPENDIX/PROXY FORM
AFGL INTERNATIONAL, INC.
850 THIRD AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary S. Goldstein and Barry S.
Roseman as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and
to vote, as designated below, all the shares of Common Stock of
AFGL International, Inc. (the "Company") held of record by the
undersigned on September 26, 1996, at the Annual Meeting of
Stockholders to be held on November 6, 1996, and at any
adjournment or postponement thereof.
(1) Election of Directors
[ ] FOR all four of the nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all four nominees listed
below
[ ] FOR all four nominees listed below, except WITHHOLDING
AUTHORITY to vote for the nominee(s) whose name(s) is (are) lined
through
Class 2 Edward E. Furash and Ehud D. Laska
Class 3 G. Chris Andersen and Richard B. Salomon
(2) Approval of the change of the state of incorporation of the
Company from Nevada to Delaware through a merger of the Company
with and into Headway Corporate Resources, Inc., a Delaware
company formed for that purpose.
For [ ] Against [ ] Abstain [ ]
(3) Approval of the change of the Company's corporate name to
"Headway Corporate Resources, Inc.";
For [ ] Against [ ] Abstain [ ]
(4) Ratification of the appointment of Ernst & Young LLP as
independent auditors of the Company for 1996; and
For [ ] Against [ ] Abstain [ ]
(5) The proxies are authorized to vote in accordance with their
judgment on any matters other than those referred to herein that
are properly presented for consideration and action at the Annual
Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
All other proxies heretofore given by the undersigned to vote
shares of stock of the Company, which the undersigned would be
entitled to vote if personally present at the Annual Meeting or
any adjournment or postponement thereof, are hereby expressly
revoked.
Dated:_________________________, 1996
____________________________________
____________________________________
Please date this Proxy and sign it exactly as your name or names
appear below. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If shares
are held by a corporation, please sign in full corporate name by
the President or other authorized officer. If shares are held by
a partnership, please sign in partnership name by an authorized
person.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING
THE ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN,
PLEASE PRINT CHANGES.