ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
METROPOLITAN HEALTH NETWORKS, INC.
(Pursuant to Section 607.0602 of the
Florida Business Corporation Act)
Metropolitan Health Networks, Inc., a corporation organized and
existing under the Florida Business Corporation Act (the "Corporation") bearing
document no. P96000004953, hereby certifies that the following resolutions were
adopted by the Board of Directors of the Corporation on June 30, 1998 pursuant
to authority of the Board of Directors:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Articles of Incorporation on April 16,
1998, the Board of Directors authorized a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share, as Series B Preferred
Stock, in the aggregate amount of 2,000 shares; and
RESOLVED, that pursuant to the unanimous Written Consent of the Board
of Directors and sole Series B Preferred Stockholder, the Corporation increased
the authorized amount of Series B Preferred Stock from 2,000 shares to 7,000
shares and hereby amends Article 3 of the Articles of Amendment to replace the
description of the Series B Preferred Stock with the following which states the
designation and number of shares, and fixes the relative rights, preferences,
privileges, powers and restrictions of the Series B Preferred Stock thereof as
follows:
Series B Convertible Preferred Stock:
I. Designation and Amount
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The designation of this series, which consists of 7,000 shares of
Preferred Stock, is Series B Convertible Preferred Stock (the "Series B
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
This document prepared by:
ROXANNE K. BEILLY, ESQ., Florida Bar No. 851450
Atlas, Pearlman, Trop & Borkson, P.A.
200 E. Las Olas Blvd., Suite 1900
Ft. Lauderdale, FL 33301 Phone: (954) 763-1200
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II. Rank
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The Series B Preferred Stock shall rank (i) prior to the Corporation's
common stock, par value $.001 per share (the "Common Stock"); (ii) prior to any
class or series of capital stock of the Corporation hereafter created (unless,
with the consent of the holders of Series B Preferred Stock obtained in
accordance with Article IX hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Series B
Preferred Stock) (collectively, with the Common Stock, "Junior Securities");
(iii) pari passu with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series B Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series B Preferred Stock ("Pari Passu Securities");
and (iv) junior to any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series B Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series B Preferred Stock ("Senior Securities"), in each
case as to distribution of assets upon liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary.
III. Dividends
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Holders of the Series B Preferred Stock shall be entitled to receive,
whether or not declared by the Board of Directors out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share,
as a percentage of the Stated Value equal to 5% percent per annum, payable, in
cash or shares of Common Stock (subject to the terms and conditions hereof) at
the option of the Company quarterly in arrears, but in no event later than
conversion applicable to such share of Series B Preferred Stock. Dividends on
the Series B Preferred Stock shall be calculated on the basis of a 360-day year,
shall accrue daily commencing the date of issuance and shall be deemed to accrue
on such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. The party that holds the Series B Preferred Stock of record on an
applicable record date for any dividend payment will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such dividend payment date, without regard to any sale or disposition of such
Series B Preferred Stock subsequent to the applicable record date but prior to
the applicable dividend payment date. Except as otherwise provided herein, if at
any time the Company pays less than the total amount of dividends then accrued
on account of the Series B Preferred Stock, such payment shall be distributed
ratably among the holders of the Series B Preferred Stock based upon the number
of shares held by each holder.
In no event, so long as any Series B Preferred Stock shall remain
outstanding, shall any dividend whatsoever be declared or paid upon, nor shall
any distribution be made upon, any Junior Securities, nor shall any shares of
Junior Securities be purchased or redeemed by the Corporation nor shall any
moneys be paid to or made available for a sinking fund for the purchase or
redemption of any Junior Securities (other than a distribution of Junior
Securities), without, in each such case, the written consent of the holders of a
majority of the outstanding shares of Series B Preferred Stock, voting together
as a class.
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IV. Liquidation Preference
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A. If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto, the holders of
shares of Series B Preferred Stock, subject to Article VI, shall have received
the Liquidation Preference (as defined in Article IV.C) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series B Preferred Stock and
holders of Pari Passu Securities (including any dividends or distribution paid
on any Pari Passu Securities after the date of filing of this Articles of
Amendment) shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series B Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
Any prior dividends or distribution made after the date of filing of this
Articles of Amendment shall offset, dollar for dollar, the amount payable to the
class or series to which such distribution was made.
B. At the option of any holder of Series B Preferred Stock, the sale,
conveyance or disposition of all or substantially all of the assets of the
Corporation, the effectuation by the Corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person (as defined below)
or Persons when the Corporation is not the survivor shall either: (i) be deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
which the Corporation shall be required to distribute upon consummation of such
transaction an amount equal to 120% of the Liquidation Preference with respect
to each outstanding share of Series B Preferred Stock in accordance with and
subject to the terms of this Article IV or (ii) be treated pursuant to Article
VI.C(b) hereof. "Person" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
C. For purposes hereof, the "Liquidation Preference" with respect to a
share of the Series B Preferred Stock shall mean an amount equal to the sum of
(i) the Stated Value thereof
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plus (ii) and amount equal to five percent (5%) per annum of such Stated Value
for the period beginning on the date of issuance of the Series B Preferred Stock
(the "Issue Date") and ending on the date of final distribution to the holder
thereof (prorated for any portion of such period). The liquidation preference
with respect to any Pari Passu Securities shall be as set forth in the Articles
of Incorporation filed in respect thereof.
V. Redemption
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A. If any of the following events (each, a "Mandatory Redemption
Event") shall occur:
(i) The Corporation fails to issue shares of Common Stock to
the holders of Series B Preferred Stock upon exercise by the holders of their
conversion rights in accordance with the terms of this Articles of Amendment
(for a period of at least sixty (60) days if such failure is solely as a result
of the circumstances governed by the second paragraph of Article VI.F below and
the Corporation is using all commercially reasonable efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or to cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series B Preferred Stock as and when required by
this Articles of Amendment or the Registration Rights Agreement, dated as of
April 24, 1998, by and among the Corporation and the other signatories thereto
(the "Registration Rights Agreement"), fails to remove any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the holders of Series B
Preferred Stock upon conversion of the Series B Preferred Stock as and when
required by this Articles of Amendment, the Securities Purchase Agreement dated
as of April 24, 1998, by and between the Corporation and the other signatories
thereto (the "Purchase Agreement") or the Registration Rights Agreement, or
fails to fulfill its obligations pursuant to Sections 4(c), 4(e), 4(h), 4(i),
4(j) or 5 of the Purchase Agreement (or makes any announcement, statement or
threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any announcement,
statement or threat not to honor its obligations shall not be rescinded in
writing) for ten (10) business days;
(ii) In connection with the Securities Purchase Agreement
dated April 24, 1998, the Corporation fails to obtain effectiveness with the
Securities and Exchange Commission (the "SEC") of the Registration Statement (as
defined in the Registration Rights Agreement) prior to November 7, 1998 or such
Registration Statement lapses in effect (or sales otherwise cannot be made
thereunder, whether by reason of the Company's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise) for more than thirty (30) consecutive days or sixty (60)
days in any twelve (12) month period after such Registration Statement becomes
effective. In connection with shares of Series B Preferred Stock issued pursuant
to any other securities purchase agreement, the Corporation fails to obtain
effectiveness with the Securities and Exchange Commission (the "SEC") of the
Registration Statement (as defined in the Registration Rights Agreement) prior
to the expiration of six (6) months from the date of issuance of the Series B
Preferred Stock or such Registration Statement lapses in effect (or sales
otherwise cannot be made thereunder, whether by reason of the Company's failure
to amend or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise) for more than
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thirty (30) consecutive days or sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective;
(iii) The Corporation shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for all or substantially all of its property or business; or
such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the listing of the
Common Stock on the Nasdaq National Market, the Nasdaq SmallCap Market ("Nasdaq
SmallCap"), the New York Stock Exchange or the American Stock Exchange and such
failure shall remain uncured for at least ten (10) business days, then, upon the
occurrence and during the continuation of any Mandatory Redemption Event
specified in subparagraphs (i), (ii) or (v) at the option of the holders of at
least 50% of the then outstanding shares of Series B Preferred Stock by written
notice (the "Mandatory Redemption Notice") to the Corporation of such Mandatory
Redemption Event, or upon the occurrence of any Mandatory Redemption Event
specified in subparagraphs (iii) or (iv), the Corporation shall purchase each
holder's shares of Series B Preferred Stock for an amount per share equal to the
greater of (1) 120% multiplied by the sum of (a) the Stated Value of the shares
to be redeemed (the "Mandatory Redemption Date"), and (2) the "parity value" of
the shares to be redeemed, where parity value means the product of (a) the
number of shares of Common Stock issuable upon conversion of such shares in
accordance with Article VI below (without giving any effect to any limitations
or conversions of shares set forth in Article VI.A(b) below, and treating the
Trading Day (as defined in Article VI.B.) immediately preceding the date of
payment of the Mandatory Redemption Amount ("Mandatory Redemption Date") as the
"Conversion Date" (as defined in Article VI.B(a)) unless the Mandatory
Redemption Event arises as a result of a breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the Conversion
Date), multiplied by (b) the Closing Price (as defined in Article VI.A(b)) for
the Common Stock on such "Conversion Date" (the greater of such amounts being
referred to as the "Mandatory Redemption Amount").
In the case of a Mandatory Redemption Event, if the Corporation fails
to pay the Mandatory Redemption Amount for each share within five (5) business
days of written notice that such amount is due and payable, then (assuming there
are sufficient authorized shares) in addition to all other available remedies,
each holder of Series B Preferred Stock shall have the right at any time, so
long as the Mandatory Redemption Event continues, to require the Corporation,
upon written notice, to immediately issue (in accordance with and subject to the
terms of Article VI below), in lieu of the Mandatory Redemption Amount, with
respect to each outstanding share of Series B Preferred Stock held by such
holder, the number of shares of Common Stock of the Corporation equal to the
Mandatory Redemption Amount divided by the Conversion Price then in effect.
B. If the Series B Preferred Stock ceases to be convertible as a result
of the limitations described in the second paragraph of Article VI.A below (a
"19.99% Redemption Event"), and the Corporation has not prior to, or within
thirty (30) days of, the date that such
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19.99% Redemption Event arises, (i) obtained approval of the issuance of the
additional shares of Common Stock by the requisite vote of the holders of the
then-outstanding Common Stock (not including any shares of Common Stock held by
present or former holders of Series B Preferred Stock that were issued upon
conversion of Series B Preferred Stock) or (ii) received other permission
pursuant to Nasdaq Marketplace Rule 4460(i) allowing the Corporation to resume
issuances of shares of Common Stock upon conversion of Series B Preferred Stock,
then the Corporation shall be obligated to redeem immediately all of the then
outstanding Series B Preferred Stock, in accordance with this Article V.B. An
irrevocable Redemption Notice shall be delivered promptly to the holders of
Series B Preferred Stock at their registered address appearing on the records of
the Corporation and shall state (1) that 19.99% of the Outstanding Common Amount
(as defined in Article VI.A) has been issued upon exercise of the Series B
Preferred Stock, (2) that the Corporation is obligated to redeem all of the
outstanding Series B Preferred Stock and (3) the Mandatory Redemption Date,
which shall be a date within five (5) business days of the date of the
Redemption Notice. On the Mandatory Redemption Date, the Corporation shall make
payment of the Mandatory Redemption Amount (as defined in Article V.A. above) in
cash. If the Corporation fails to redeem in accordance with this Article V.B.,
then, in addition to all other remedies available to the holders of the Series B
Preferred Stock, upon request of a majority-in-interest of the Series B
Preferred Stock, the Corporation shall terminate the listing of its Common Stock
on Nasdaq SmallCap (and any other exchange or quotation system with a rule
substantially similar to Rule 4460(i)) and cause its Common Stock to be eligible
for trading on the over-the-counter electronic bulletin board.
C. Notwithstanding anything to the contrary contained in this Article
V, so long as no Mandatory Redemption Event shall have occurred and be
continuing, the Corporation shall have the right, on the date which is the third
(3rd) anniversary of the date on which the Registration Statement is declared
effective by the SEC, exercisable on not less than twenty (20) Trading Days
prior written notice to the holders of Series B Preferred Stock, to redeem all
of the outstanding shares of Series B Preferred Stock in accordance with this
Article V. Any notice of redemption hereunder (an "Optional Redemption") shall
be delivered to the holders of Series B Preferred Stock at their registered
addresses appearing on the books and records of the Corporation and shall state
(1) that the Corporation is exercising its right to redeem all of the
outstanding shares of Series B Preferred Stock issued on the Issue Date and (2)
the date of redemption (the "Optional Redemption Notice"). On the date fixed for
redemption (the "Optional Redemption Date"), the Corporation shall make payment
of the Optional Redemption Amount (as defined below) to or upon the order of the
holders as specified by the holders in writing to the Corporation at least one
(1) business day prior to the Optional Redemption Date. If the Corporation
exercises its right to redeem the Series B Preferred Stock, the Corporation
shall make payment to the holders of an amount in cash (the "Optional Redemption
Amount") equal to 120% of the Stated Value of the shares of Series B Preferred
Stock to be redeemed plus any unpaid dividend for each share of Series B
Preferred Stock then held. Notwithstanding notice of an Optional Redemption, the
holders shall at all times prior to the Optional Redemption Date maintain the
right to convert all or any shares of Series B Preferred Stock in accordance
with Article VI and any shares of Series B Preferred Stock so converted after
receipt of an Optional Redemption Notice and prior to the Optional Redemption
Date set forth in such notice and payment of the aggregate Optional Redemption
Amount shall be deducted from the shares of Series B Preferred Stock which are
otherwise subject to redemption pursuant to such notice.
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From time to time following the Issue Date, the holders may request
advance notice as to whether the Corporation intends to redeem the shares of
Series B Preferred Stock. Such request shall be made in writing and the
Corporation shall respond in writing as promptly as practicable but prior to
5:00 p.m. Eastern Standard Time one (1) business day after receipt of the
request. The Corporation will be bound by such response for a period of twenty
(20) Trading Days (the "Term") from the date of its response. A failure to
respond within one (1) business day shall be deemed to be an election not to
redeem the Series B Preferred Stock during the Term. The holders may not request
such notice in the event that the Corporation files a registration statement
where the use of proceeds set forth in such registration statement are
identified for purposes of redemption of the outstanding Series B Preferred
Stock.
VI. Conversion at the Option of the Holder
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A. (a) Each holder of shares of Series B Preferred Stock may, at its
option at any time and from time to time, upon surrender of the certificates
therefor, convert any or all of its shares of Series B Preferred Stock into
Common Stock as follows (an "Optional Conversion"). Each share of Series B
Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (1) the Stated
Value thereof by (2) the then effective Conversion Price (as defined below);
provided, however, that, unless the holder delivers a waiver in accordance with
the immediately following sentence, in no event (other than pursuant to the
Automatic Conversion (as defined herein)) shall a holder of shares of Series B
Preferred Stock be entitled to convert any such shares in excess of that number
of shares upon conversion of which the sum of (x) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the shares of Series B Preferred Stock) and (y) the
number of shares of Common Stock issuable upon the conversion of the shares of
Series B Preferred Stock with respect to which the determination of this proviso
is being made, would result in beneficial ownership by a holder and such
holder's affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, (i)
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (x) of such proviso and (ii) a holder may
waive the limitations set forth therein by written notice to the Corporation
upon not less than sixty-one (61) days prior written notice (with such waiver
taking effect only upon the expiration of such sixty-one (61) day notice
period).
(b) So long as the Common Stock is listed for trading on
Nasdaq SmallCap or an exchange or quotation system with a rule substantially
similar to Rule 4460(i) then, notwithstanding anything to the contrary contained
herein if, at any time, the aggregate number of shares of Common Stock then
issued upon conversion of the Series B Preferred Stock (including any shares of
capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued or
issuable upon conversion of the Series B Preferred Stock for purposes of such
rule) equals 19.99% of the "Outstanding Common Amount" (as hereinafter defined),
the Series B Preferred Stock shall, from that time forward, cease to be
convertible into Common Stock in accordance with the terms of this Article VI
and Article VII below, unless the Corporation (i) has obtained approval of the
issuance of the Common Stock upon conversion of the Series B Preferred Stock by
a majority
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of the total votes cast on such proposal, in person or by proxy, by the holders
of the then-outstanding Common Stock (not including any shares of Common Stock
held by present or former holders of Series B Preferred Stock that were issued
upon conversion of Series B Preferred Stock), or (ii) shall have otherwise
obtained permission to allow such issuances from Nasdaq SmallCap in accordance
with Nasdaq SmallCap Rule 4460(i). If the Corporation's Common Stock is not then
listed on Nasdaq SmallCap or an exchange or quotation system that has a rule
substantially similar to Rule 4460(i) limitations set forth herein shall be
inapplicable and of no force and effect. For purposes of this paragraph,
"Outstanding Common Amount" means (i) the number of shares of the Common Stock
outstanding on the date of issuance of the Series B Preferred Stock pursuant to
the Purchase Agreement plus (ii) any additional shares of Common Stock issued
thereafter in respect of such shares pursuant to a stock dividend, stock split
or similar event. The maximum number of shares of Common Stock issuable as a
result of the 19.99% limitation set forth herein is hereinafter referred to as
the "Maximum Share Amount." With respect to each holder of Series B Preferred
Stock, the Maximum Share Amount shall refer to such holder's pro rata share
thereof determined in accordance with Article X below. In the event that
Corporation obtains Stockholder Approval or the approval of Nasdaq SmallCap, by
reason of the inapplicability of the rules of Nasdaq SmallCap or otherwise and
concludes that it is able to increase the number of shares to be issued above
the Maximum Share Amount (such increased number being the "New Maximum Share
Amount"), the references to Maximum Share Amount, above, shall be deemed to be,
instead, references to the greater New Maximum Share Amount. In the event that
Stockholder Approval is not obtained, there are insufficient reserved or
authorized shares or a registration statement covering the additional shares of
Common Stock which constitute the New Maximum Share Amount is not effective
prior to the Maximum Share Amount being issued (if such registration statement
is necessary to allow for the public resale of such securities), the Maximum
Share Amount shall remain unchanged; provided, however, that the Holder may
grant an extension to obtain a sufficient reserved or authorized amount of
shares or of the effective date of such registration statement. In the event
that (a) the aggregate number of shares of Common Stock issued pursuant to the
outstanding Series B Preferred Stock represents at least twenty percent (20%) of
the Maximum Share Amount and (b) the sum of (x) the aggregate number of shares
of Common Stock issued upon conversion of Series B Preferred Stock plus (y) the
aggregate number of shares of Common Stock that remain issuable upon conversion
of Series B Preferred Stock, represents at least one hundred percent (100%) of
the Maximum Share Amount (the "Triggering Event"), the Corporation will use its
best efforts to seek and obtain Stockholder Approval (or obtain such other
relief as will allow conversions hereunder in excess of the Maximum Share
Amount) as soon as practicable following the Triggering Event and before the
Mandatory Redemption Date.
B. (a) Subject to subparagraph (b) below, the "Conversion Price" shall
be the lesser of the Market Price (as defined herein) and the Fixed Conversion
Price (as defined herein), subject to adjustments pursuant to the provisions of
Article VI.C below. "Market Price" shall mean 90% of the average of the two (2)
lowest Closing Bid Prices during the twelve (12) consecutive Trading Day period
ending one (1) Trading Day prior to the date (the "Conversion Date") the
Conversion Notice is sent by a holder to the Corporation via facsimile (the
"Pricing Period"). The "Fixed Conversion Price" shall mean $4.00. "Closing Bid
Price" means, for any security as of any date, the closing bid price on Nasdaq
SmallCap as reported by Bloomberg Financial Markets or an equivalent reliable
reporting service mutually acceptable to and hereafter designated by the holders
of a majority in interest of the shares of Series B Preferred Stock and
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the Corporation ("Bloomberg") or, if Nasdaq SmallCap is not the principal
trading market for such security, the closing bid price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security or in any of the foregoing manners, the average of the
bid prices of any market makers for such security or as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date in the manner provided above, the
Closing Bid Price shall be the fair market value as mutually determined by the
Corporation and the holders of a majority in interest of shares of Series B
Preferred Stock being converted for which the calculation of the Closing Bid
Price is required in order to determine the Conversion Price of such Series B
Preferred Stock. "Trading Day" shall mean any day on which the Common Stock is
traded for any period on Nasdaq SmallCap, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(b) Notwithstanding anything contained in subparagraph (a) of
this Paragraph B to the contrary, in the event the Corporation (i) makes a
public announcement that it intends to consolidate or merge with any other
corporation (other than a merger in which the Corporation is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Corporation or (ii) any person,
group or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the corporation's Board of
Directors by waging a proxy battle or otherwise (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price that would otherwise be in
effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in subparagraph (a) of this
Article VI.B. For purposes hereof, "Adjusted Conversion Price Termination Date"
shall mean, with respect to any proposed transaction, tender offer or removal of
the majority of the Board of Directors which a public announcement as
contemplated by this subparagraph (b) has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the termination or abandonment
of the proposed transaction or tender offer which caused this subparagraph (b)
to become operative.
C. The Conversion Price shall be subject to adjustment from time to
time as follows:
(a) Adjustment to Conversion Price Due to Stock Split, Stock
Dividend, Etc. If at any time when Series B Preferred Stock is issued and
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Trading Price (as defined below) to all holders of
Common Stock or other similar event, which event shall have taken place during
the reference period for determination of the Conversion Price for any Optional
Conversion or Automatic Conversion of the Series B Preferred Stock, then the
Conversion Price shall be
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calculated giving appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar event. In such event, the
Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any
time when Series B Preferred Stock is issued and outstanding and prior to the
conversion of all Series B Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation, then the holders of Series B Preferred Stock shall thereafter have
the right to receive upon conversion of the Series B Preferred Stock, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the holders of Series B Preferred Stock would
have been entitled to receive in such transaction had the Series B Preferred
Stock been converted in full (without regard to any limitations on conversion
contained herein) immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series B Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares of Common Stock issuable upon conversion of
the Series B Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities or assets thereafter deliverable
upon the conversion of Series B Preferred Stock. The Corporation shall not
effect any transaction described in this subsection (b) unless (a) it first
gives, to the extent practical, thirty (30) days' prior written notice (but in
any event at least fifteen (15) business days prior written notice) of such
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event or sale of assets (during which time the holders of Series B
Preferred Stock shall be entitled to convert the Series B Preferred Stock) and
(b) the resulting successor or acquiring entity (if not the Corporation) assumes
by written instrument the obligations of this subsection (b). The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c) Other Securities Offerings. If, at any time after the
Issue Date, the Corporation sells Common Stock or securities convertible into,
or exchangeable for, Common Stock, other than a sale pursuant to a bona fide
firm commitment underwritten public offering of Common Stock by the Corporation
(not including a continuous offering pursuant to Rule 415 under the Securities
Act of 1933, as amended), (collectively, the "Other Common Stock"), then, if the
effective or maximum sales price of the Common Stock with respect to such
transaction (including the effective or maximum conversion, or exchange price)
("Other Price") is less than the effective Conversion Price of the Series B
Preferred Stock at such time and such Other Common Stock is eligible for resale
prior to December 31, 1999, the Corporation shall adjust the Conversion Price
applicable to the Series B Preferred Stock not yet converted in form and
substance reasonably satisfactory to the holders of Series B Preferred Stock so
that the Conversion Price applicable to the Series B Preferred Stock shall not,
in any event, be greater, after giving effect to all other adjustments contained
herein, than the Other Price.
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(d) Adjustment Due to Distribution. Subject to Article III, if
the Corporation shall declare or make any distribution of its assets (or rights
to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a
"Distribution"), then the holders of Series B Preferred Stock shall be entitled,
upon any conversion of shares of Series B Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(e) Purchase Rights. Subject to Article III, if at any time
when any Series B Preferred Stock is issued and outstanding, the Corporation
issues any convertible securities or rights to purchase stock, warrants,
securities or other property (the "Purchase Rights") pro rata to the record
holders of any class of Common Stock, then the holders of Series B Preferred
Stock will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
complete conversion of the Series B Preferred Stock (without regard to any
limitations on conversion contained herein) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f) Adjustment for Restricted Periods. In the event that (1)
the Corporation fails to obtain effectiveness with the Securities and Exchange
Commission of the Registration Statement (as defined in the Registration Rights
Agreement) prior to one hundred twenty (127) days following the Issue Date, or
(2) such Registration Statement lapses in effect, or sales otherwise cannot be
made thereunder, whether by reason of the Corporation's failure or inability to
amend or supplement the prospectus (the "Prospectus") included therein in
accordance with the Registration Rights Agreement or otherwise, after such
Registration Statement becomes effective (including, without limitation, during
an Allowed Delay (as defined in Section 3(f) of the Registration Rights
Agreement), then the Pricing Period shall be comprised of, (i) in the case of an
event described in clause (1), the twenty (20) Trading Days preceding the 127th
day following the Issue Date plus all Trading Days through and including the
third Trading Day following the date of effectiveness of the Registration
Statement; and (ii) in the case of an event described in clause (2), the number
of Trading Days preceding the date on which the holder of the Series B Preferred
Stock is first notified that sales may not be made under the Prospectus that
would otherwise then be included in the Pricing Period in accordance with the
definition thereof set forth in Article VI.B(a), plus all Trading Days through
and including the third Trading Day following the date on which the Holder is
first notified that such sales may again be made under the Prospectus. If a
holder of Series B Preferred Stock determines that sales may not be made
pursuant to the Prospectus (whether by reason of the Corporation's failure or
inability to amend or supplement the Prospectus) it shall so notify the
Corporation in writing and, unless the Corporation provides such holder with a
written opinion of the Corporation's counsel to the contrary, such determination
shall be binding for purposes of this paragraph.
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(g) Notice of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Article
VI.C, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series B Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series B Preferred Stock.
D. For purposes of Article VI.C(a) above, "Trading Price," which shall
be measured as of the record date in respect of the rights offering means (i)
the average of the last reported sale prices for the shares of Common Stock on
Nasdaq SmallCap as reported by Bloomberg, as applicable, for the five (5)
Trading Days immediately preceding such date, or (ii) if Nasdaq SmallCap is not
the principal trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal trading market for the Common Stock
during the same period as reported by Bloomberg, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Trading Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board of Directors of the Corporation or, (b) at the option of a
majority-in-interest of the holders of the outstanding Series B Preferred Stock
by an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the Corporation.
E. In order to convert Series B Preferred Stock into full shares of
Common Stock, a holder of Series B Preferred Stock shall: (i) submit a copy of
the fully executed notice of conversion in the form attached hereto as Exhibit A
("Notice of Conversion") to the Corporation by facsimile dispatched on the
Conversion Date (or by other means resulting in notice to the Corporation on the
Conversion Date) at the office of the Corporation or its designated Transfer
Agent for the Series B Preferred Stock that the holder elects to convert the
same, which notice shall specify the number of shares of Series B Preferred
Stock to be converted, the applicable Conversion Price and a calculation of the
number of shares of Common Stock issuable upon such conversion (together with a
copy of the first page of each certificate to be converted) prior to Midnight,
New York City time (the "Conversion Notice Deadline") on the date of conversion
specified on the Notice of Conversion; and (ii) surrender the original
certificates representing the Series B Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice
of Conversion to the office of the Corporation or the Transfer Agent for the
Series B Preferred Stock as soon as practicable thereafter. The Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
Certificates are delivered to the Company or its Transfer Agent as provided
above, or the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within two (2) business days of receipt of the Notice of
Conversion. The accountant shall audit the calculations and notify the
Corporation
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and the holder of the results no later than 48 hours from the time it receives
the disputed calculations. The accountant's calculation shall be deemed
conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series B Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion. Upon the
surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (a) above)
(the "Delivery Period"), deliver (or cause its Transfer Agent to so issue and
deliver) to or upon the order of the holder (i) that number of shares of Common
Stock for the portion of the shares of Series B Preferred Stock converted as
shall be determined in accordance herewith and (ii) a certificate representing
the balance of the shares of Series B Preferred Stock not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Corporation shall pay to a holder $2,000 per day in
cash for each day beyond a two (2) day grace period following the Delivery
Period that the Corporation fails to deliver Common Stock (a "Conversion
Default") issuable upon surrender of shares of Series B Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock (the "Conversion Default Payments"). Such cash amount shall be paid
to such holder by the fifth day of the month following the month in which it has
accrued or, at the option of the holder (by written notice to the Corporation by
the first day of the month following the month in which it has accrued), shall
be convertible into Common Stock in accordance with the terms of this Article
VI.
In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Corporation's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the holder and its compliance with
the provisions contained in Article VI.A. and in this Article VI.E., the
Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of Series B
Preferred Stock would result in a fractional share of Common Stock or the right
to acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon Conversion of
the Series B Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be the date
specified in the Notice of Conversion, provided that the Notice of Conversion is
submitted by facsimile (or
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by other means resulting in notice) to the Corporation or its Transfer Agent
before Midnight, New York City time, on the Conversion Date. The person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such
securities as of the Conversion Date and all rights with respect to the shares
of Series B Preferred Stock surrendered shall forthwith terminate except the
right to receive the shares of Common Stock or other securities or property
issuable on such conversion and except that the holders preferential rights as a
holder of Series B Preferred Stock shall survive to the extent the corporation
fails to deliver such securities.
F. A number of shares of the authorized but unissued Common Stock
sufficient to provide for the conversion of the Series B Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series B Preferred Stock, 750,000
authorized and unissued shares of Common Stock have been duly reserved for
issuance upon conversion of the Series B Preferred Stock (the "Reserved
Amount"). The Reserved Amount shall be increased from time to time in accordance
with the Company's obligations pursuant to Section 4(h) of the Purchase
Agreement. In addition, if the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Series B Preferred Stock shall be
convertible at the then current Conversion Price, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series B Preferred Stock.
If at any time a holder of shares of Series B Preferred Stock submits a
Notice of Conversion, and the Corporation does not have sufficient authorized
but unissued shares of Common Stock available to effect such conversion in
accordance with the provisions of this Article VI (a "Conversion Default"), the
Corporation shall issue to the holder (or holders, if more than one holder
submits a Notice of Conversion in respect of the same Conversion Date, pro rata
based on the ratio that the number of shares of Series B Preferred Stock then
held by each such holder bears to the aggregate number of such shares held by
such holders) all of the shares of Common Stock which are available to effect
such conversion. The number of shares of Series B Preferred Stock included in
the Notice of Conversion which exceeds the amount which is then convertible into
available shares of Common Stock (the "Excess Amount") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by the holder in respect thereof. The Corporation shall
use its best efforts to effect an increase in the authorized number of shares of
Common Stock as soon as possible following a Conversion Default. In addition,
the Corporation shall pay to the holder payments ("Conversion Default Payments")
for a Conversion Default in the amount of (a) (N/365), multiplied by (b) the sum
of the Stated Value plus the Premium Amount per share of Series B Preferred
Stock through the Authorization Date (as defined below), multiplied by (c) the
Excess Amount on the day the holder submits a Notice of Conversion giving rise
to a Conversion Default (the "Conversion Default Date"), multiplied by (d) .24,
where (i) N = the
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number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Corporation authorizes a sufficient number of shares of Common
Stock to effect conversion of the full number of shares of Series B Preferred
Stock. The Corporation shall send notice to the holder of the authorization of
additional shares of Common Stock, the Authorization Date and the amount of
holder's accrued Conversion Default Payments. The accrued Conversion Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock at the Conversion Price, at the holder's option, as follows:
(a) In the event the holder elects to take such payment in
cash, cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and
(b) In the event the holder elects to take such payment in
Common Stock, the holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of Conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article VI (so long as there is then a
sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual damages
for the Corporation's failure to maintain a sufficient number of authorized
shares of Common Stock, and each holder shall have the right to pursue all
remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this Article VI, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series B Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series B Preferred Stock.
H. Upon submission of a Notice of Conversion by a holder of Series B
Preferred Stock, (i) the shares covered thereby (other than the shares, if any,
which cannot be issued because their issuance would exceed such holder's
allocated portion of the Reserved Amount) shall be deemed converted into shares
of Common Stock and (ii) the holder's rights as a holder of such converted
shares of Series B Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of this
Articles of Amendment. Notwithstanding the foregoing, if a holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of shares of Series B Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series B Preferred Stock with respect to such
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unconverted shares of Series B Preferred Stock and the Corporation shall, as
soon as practicable, return such unconverted shares of Series B Preferred Stock
to the holder or, if such shares of Series B Preferred Stock have not been
surrendered, adjust its records to reflect that such shares of Series B
Preferred Stock have not been converted. In all cases, the holder shall retain
all of its rights and remedies (including, without limitation, the right to
receive Conversion Default Payments pursuant to Article IV.E. to the extent
required thereby for such Conversion Default and any subsequent Conversion
Default).
VII. Automatic Conversion
--------------------
So long as the Registration Statement is effective and there is not
then a continuing Mandatory Redemption Event, each share of Series B Preferred
Stock issued and outstanding on April 24, 2003, subject to any adjustment
pursuant to Article V.A.(ii) (the "Automatic Conversion Date"), automatically
shall be converted into shares of Common Stock on such date at the then
effective Conversion Price in accordance with, and subject to, the provisions of
Article VI hereof (the "Automatic Conversion"). The Automatic Conversion Date
shall be delayed by one (1) Trading Day each for each Trading Day occurring
prior thereto and prior to the full conversion of the Series B Preferred Stock
that (i) sales cannot be made pursuant to the Registration Statement (whether by
reason of the Company's failure to properly supplement or amend the prospectus
included therein in accordance with the terms of the Registration Rights
Agreement or otherwise including any Allowed Delays (as defined in Section 3(f)
of the Registration Rights Agreement) or (ii) any Default Event (as defined in
Article V.A.) exists, without regard to whether any cure periods shall have run.
The Automatic Conversion Date shall be the Conversion Date for purposes of
determining the Conversion Price and the time within which certificates
representing the Common Stock must be delivered to the holder.
VIII. Voting Rights
-------------
The holders of the Series B Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Florida Corporation Law ("FCL"),
in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each holder of
Series B Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
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To the extent that under the FCL the vote of the holders of the Series
B Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series B
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series B Preferred Stock
(except as otherwise may be required under the FCL) shall constitute the
approval of such action by the class. To the extent that under the FCL holders
of the Series B Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series B Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated. Holders of the Series B Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents (and copies of proxy
materials and other information sent to shareholders) with respect to which they
would be entitled to vote, which notice would be provided pursuant to the
Corporation's bylaws and the FCL.
IX. Protective Provisions
---------------------
So long as shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the FCL) of the holders of at least a majority of the
then outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series B Preferred Stock or any Senior Securities so as to affect adversely
the Series B Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article II hereof, "Senior Securities");
(c) create any new class or series of capital stock ranking
pari passu with the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article II hereof, "Pari Passu Securities");
(d) increase the authorized number of shares of Series B
Preferred Stock; or
(e) do any act or thing not authorized or contemplated by this
Articles of Amendment which would result in taxation of the holders of shares of
the Series B Preferred Stock under Section 305 of the Internal Revenue Code of
1986, as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event holders of at least a majority of the then outstanding
shares of Series B Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series B Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series B Preferred
Stock, then the Corporation will deliver notice of such approved change to the
holders of the Series B Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of
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thirty (30) days to convert pursuant to the terms of this Articles of Amendment
as they exist prior to such alteration or change or continue to hold their
shares of Series B Preferred Stock.
X. Pro Rata Allocations
--------------------
The Maximum Share Amount and the Reserved Amount (including any
increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series B Preferred Stock based on the number of shares of Series B
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series B Preferred Stock then outstanding.
(THIS PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, this Articles of Amendment is executed on
behalf of the Corporation this 1st day of July, 1998.
METROPOLITAN HEALTH NETWORKS, INC.
By:
-------------------------
Name: Noel J. Guillama
Title: President
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