EXHIBIT 4.4
CERTIFICATE OF DETERMINATION OF RIGHTS,
PREFERENCES AND PRIVILEGES OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GENUS, INC.
The undersigned, Mary F. Bobel and Mario M. Rosati, do hereby certify that:
H. They are the duly elected and acting Executive Vice President and
Chief Financial Officer, and Secretary, respectively, of Genus, Inc., a
California corporation (the "Corporation").
I. Pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Corporation, the said Board of
Directors on January 26, 1998, adopted the following resolution creating a
series of 100,000 shares of Preferred Stock designated as Series A
Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Restated Articles of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation to be designated "Series A Convertible Preferred
Stock" initially consisting of 100,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions of the Series A Convertible
Preferred Stock are not stated and expressed in the Restated Articles of
Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, as follows (all
terms used herein which are defined in the Restated Articles of Incorporation
shall be deemed to have the meanings provided therein):
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of
preferred stock shall be designated as 6% Series A Convertible Preferred
Stock (the "PREFERRED STOCK"), and the number of shares so designated shall
be 100,000. Each share of Preferred Stock shall have no par value and a
stated value of $50.00 per share (the "STATED VALUE").
Section 2. DIVIDENDS.
(a) Each Holder of Preferred Stock ("HOLDER") shall be entitled to
receive, when and as 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 per share) equal to 6%
per annum, payable, in cash or shares of Common Stock (as defined in Section
8) at (subject to the terms and conditions set fort herein) the option of the
Company. Dividends on the Preferred Stock shall be due and payable on each
yearly anniversary of the Original Issue Date (each a "DIVIDEND PAYMENT
DATE"), and any dividends not paid on any Dividend Payment Date shall accrue
and shall be due and payable upon conversion of the Preferred Stock. No
dividends shall be due and payable for any partial year period for which the
Dividend Payment Date has not yet occurred. A party that holds shares of
Preferred Stock on a Dividend Payment Date 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
Preferred Stock subsequent to the applicable record date. All overdue accrued
and unpaid dividends and other amounts due herewith shall entail a late fee
at the rate of 15% per annum (to accrue daily, from the date such dividend is
due hereunder through and including the date of payment). 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 Preferred Stock or
on account of the Company's 6% Series B Convertible Preferred Stock (which
would be the next series of preferred stock authorized by the Board of
Directors pursuant to the proper filing of a Certificate of Determination
setting forth the rights, preferences and privileges of such series) (the
"SERIES B PREFERRED STOCK"), if issued, which may be purchased pursuant to
the Purchase Agreement, such payment shall be distributed ratably among the
Holders and the holders of the Series B Preferred Stock (the "PREFERRED
HOLDERS") based upon the number of shares held by each Preferred Holder. The
Company shall provide the Holders notice of its intention to pay dividends in
cash or shares of Common Stock not less than 10 Trading Days prior to the
Dividend Payment Date for so long as shares of Preferred Stock are
outstanding. If dividends are paid in shares of Common Stock, the number of
shares of Common Stock payable as such dividend to each Holder shall be equal
to the cash amount of such dividend payable to such Holder on such Dividend
Payment Date divided by the closing bid price of the Common Stock on the
Trading Day prior to such Dividend Payment Date ("DIVIDEND CONVERSION
PRICE"), further provided that the Dividend Conversion Price shall not be
less than $3.47.
(b) Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends (and
must deliver cash in respect thereof) on the Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay
such dividends in shares of Common Stock;
(ii) the shares of Common Stock to be issued in respect of
such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a selling
stockholder thereunder (unless such registration statement is not declared
effective solely as a result of the actions of the recipient of such dividend
or if such recipient has failed to provide the Company with the necessary
selling shareholder information to be included in such registration
statement) and may not be sold without volume restrictions pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), as determined by counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent in the form and substance
acceptable to the Holder;
(iii) the shares of Common Stock to be issued in respect of
such dividends are not listed on the Nasdaq Stock Market or any other
exchange or quotation system on which the Common Stock is then listed for
trading;
(iv) the Company has failed to timely satisfy its obligations
pursuant to any Conversion Notice (as defined in Section 5(a)(ii)).
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5) upon, nor shall any distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or applied
to the purchase or redemption (through a sinking fund or otherwise) of any
Junior Securities or shares pari passu with the Preferred Stock, except for
repurchases effected by the Company on the open market, pursuant to a direct
stock purchase plan.
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Section 3. VOTING RIGHTS.
(a) Except as otherwise provided herein and as otherwise required
by law, the Preferred Stock shall have no voting rights. However, so long as
any shares of Preferred Stock are outstanding, the Company shall not and
shall cause its subsidiaries not to, without the affirmative vote of the
Holders of all of the shares of the Preferred Stock then outstanding,(a)
alter or change adversely the powers, preferences or rights given to the
Preferred Stock, (b) alter or amend this Certificate of Determination, (c)
authorize or create any class of stock ranking as to dividends or
distribution of assets upon a Liquidation (as defined in Section 4) or
otherwise senior to or pari passu with the Preferred Stock, except for any
series of Preferred Stock issued and sold in accordance with the Purchase
Agreement, (d) amend its Articles of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (e) increase
the authorized number of shares of Preferred Stock and (f) enter into any
agreement with respect to the foregoing.
(b)(i) If the Company shall have defaulted on any of its
conversion obligations, registration obligations or payment obligations
hereunder, and such default has continued for 180 days, then on the 181st day
of the continuance of such default, without the requirement of any additional
action by the Company's Board of Directors or stockholders, the fixed number
of directors constituting the Company's Board of Directors shall be
automatically increased, pursuant to the authority of the Board of Directors
to adjust the fixed number of directors within the authorized minimum and
maximum numbers as stated in the Company's Bylaws, by one directorship and
the Preferred Holders, voting together as a single class, shall be entitled
to elect the director to fill the resulting vacancy on the Company's Board of
Directors. At elections for such director, each Preferred Holder shall be
entitled to one vote for each share of Preferred Stock or Series B Preferred
Stock held. Such right to vote as a single class to elect directors shall,
when vested, continue until all defaults which triggered such right have been
completely cured, and when so cured such right to elect such director
separately as a separate class shall cease.
(ii) Whenever such voting right shall have vested, such right
may be exercised initially either, at a special meeting of the Preferred
Holders called as hereinafter provided or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at
such meetings or by the written consent of such holders pursuant to the
California Corporations Code.
(iii) At any time when the voting right granted by this
Section 3(b) shall have vested in the Preferred Holders entitled to vote
thereon, and if such right shall not already have been initially exercised,
an officer of the Corporation shall, upon written request of Preferred
Holders of record of 10% in the aggregate, of shares of Preferred Stock and
Series B Preferred Stock then outstanding, addressed to the Chief Financial
Officer of the Corporation, call a special meeting of Preferred Holders.
Such meeting shall be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation or, if none, at a place
designated by the Chief Financial Officer of the Corporation. If notice of
such meeting is not mailed within 30 days after such written request is
mailed to the Chief Financial Officer of the Corporation, by registered mail,
addressed to the Chief Financial Officer of the Corporation at its principal
office (such mailing to be evidenced by the registry receipt issued by the
postal authorities), then the Preferred Holders of record of 10% of the
shares of the Preferred Stock and the Series B Preferred Stock then
outstanding may designate in writing any person to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held at the same place as is elsewhere provided in this paragraph
3(b)(iii). Any Preferred Holder that would be entitled to vote at such
meeting shall have access to the stock record books of the Corporation for
the purpose of causing a meeting of stockholders to be called pursuant to the
provisions of this paragraph 3(b)(iii). Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called or held
during a period within 30 days immediately preceding the date fixed for the
Corporation's next annual meeting of stockholders.
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(iv) The directors elected pursuant to this paragraph 3(b)
shall serve until the next annual meeting or until their respective
successors shall be elected and shall qualify, unless earlier terminated as
set forth below. Any director elected by the Preferred Holders may be
removed by, and shall not be removed otherwise than by, the vote of the
Preferred Holders of a majority of the outstanding shares of the Preferred
Stock and the Series B Preferred Stock who were entitled to participate in
such election of directors, voting as a special class, at a meeting called
for such purpose or by written consent as permitted by law and the Articles
of Incorporation and By-laws of the Corporation. If the office of the
director elected by the Preferred Holders, voting as a class, becomes vacant
by reason of death, resignation, retirement, disqualification or removal from
office or otherwise, the Preferred Holders in accordance with the above
procedures, voting as a class, shall elect a successor director who shall
hold office for the unexpired term in respect of which such vacancy occurred.
Upon any termination of the right of the Preferred Holders to vote for
directors as herein provided, the term of office of all directors then in
office elected by the Preferred Holders, voting as a class, shall terminate
immediately. Whenever the terms of office of the directors elected by the
Preferred Holders shall have expired, the number of directors shall be such
number as may be provided for pursuant to the By-laws of the Corporation
irrespective of any increase made pursuant to the provisions of this Section
3(b).
(v) So long as any shares of Preferred Stock or Series B
Preferred Stock are outstanding, the By-laws shall contain no provisions that
would restrict the exercise, by the Preferred Holders of the right to elect
directors under the circumstances provided in Section 3(b)(i) above.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"LIQUIDATION"), the Holders shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all due but unpaid
dividends per share, whether declared or not, before any distribution or
payment shall be made to the holders of any Junior Securities, and if the
assets of the Company shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders of Preferred Stock shall
be distributed among the Preferred Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not
be treated as a Liquidation, but instead shall be subject to the provisions
of Section 5. The Company shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each
record Holder of Preferred Stock.
Section 5. CONVERSION.
(a)(i) Each share of Preferred Stock shall be convertible into
shares of Common Stock (subject to reduction pursuant to Section 5(a)(iii)
and Section 3.16 of the Purchase Agreement) at the Conversion Ratio (as
defined in Section 8) at the option of the Holder in whole or in part at any
time after the Original Issue Date. The Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, or its agent, together with
the form of conversion notice attached hereto as EXHIBIT A (the "HOLDER
CONVERSION NOTICE"). Each Holder Conversion Notice shall specify the number
of shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the
Holder delivers such Holder Conversion Notice by facsimile (the "HOLDER
CONVERSION DATE"). If no Holder Conversion Date is specified in a Holder
Conversion Notice, the Holder Conversion Date shall be the date that the
Holder Conversion Notice is deemed delivered pursuant to Section 5(h).
Subject to Sections 5(b) and 5(a)(iii) hereof, each Holder Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Holder
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Conversion Notice, or if a conversion hereunder cannot be effected in full
for any reason, the Company shall promptly deliver to such Holder (in the
manner and within the time set forth in Section 5(b)) a certificate for such
number of shares as have not been converted.
(ii) On the second anniversary of the Original Issue Date or
thereafter, the Company may require the conversion of all, but not less than
all, of the then outstanding and unconverted shares of Preferred Stock with
such conversion being effectuated at the Conversion Price then in effect
(subject to reduction pursuant to Section 5(a)(iii)) by delivering to the
Holder of such shares to be converted a notice in the form attached hereto as
EXHIBIT B (the "COMPANY CONVERSION NOTICE"), PROVIDED, that, no such
conversion is permitted unless at the time of the delivery of the Company
Conversion Notice and on the Company Conversion Date (as defined below), (a)
the Company shall have complied in all material respects with its obligations
under the Registration Rights Agreement, (b) the Company was at the time of
the issuance of the Preferred Stock and the Company is at the time of the
conversion of the Preferred Stock a "listed corporation" as defined in
subdivision (d) of Section 301.5 of the California Corporations Code, (c) the
shares of Common Stock issuable upon such conversion are listed for trading
on the Nasdaq Stock Market or any other exchange or quotation system on which
the Common Stock is then listed for trading as such is defined by subdivision
(d) of Section 301.5 of the California Corporations Code, (d) the Company is
in compliance with all of its obligations under this Certificate of
Determination, the Purchase Agreement and the Registration Rights Agreement,
and (e) the closing bid price of the Common Stock for at least 20 of the 30
Trading Days immediately preceding the date of the Company Conversion Notice
shall have been at least 150% of the Conversion Price on the Original Issue
Date. Each Company Conversion Notice shall specify the date on which such
conversion is to be effected, which date may not be prior to the day after
the Company delivers such Company Conversion Notice by facsimile or later
than 10 Trading Days subsequent to such delivery (the "COMPANY CONVERSION
DATE"). If no Company Conversion Date is specified in a Company Conversion
Notice, the Company Conversion Date shall be the date that the Company
Conversion Notice is deemed delivered pursuant to Section 5(h). A Holder
Conversion Date and a Company Conversion Date are sometimes referred to
herein as the "CONVERSION DATE" and a Holder Conversion Notice and a Company
Conversion Notice are sometimes referred to as a "CONVERSION NOTICE." Any
conversion pursuant to this Section 5(a)(ii) shall be subject to Section 5(b)
with respect to consequences of the Company's failure to deliver shares of
Common Stock in respect of a conversion under this Section. If a conversion
hereunder cannot be effected in full for any reason, the Company shall
promptly deliver to such tendering Holder (in the manner and within the time
set forth in Section 5(b)) a certificate for such number of shares of
Preferred Stock as have not been converted.
(iii) If on the Conversion Date applicable to any conversion,
(A) the Common Stock is then listed for trading on the Nasdaq Stock Market,
the American Stock Exchange or the Nasdaq SmallCap Market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Common
Stock that would then be issuable upon conversion of all outstanding shares
of Preferred Stock and Series B Preferred Stock, if issued, together with any
shares of Common Stock previously issued upon conversion of Preferred Stock
or Series B Preferred Stock, if issued, and in respect of payment of
dividends hereunder or thereunder and shares of Common Stock issuable upon
the exercise of Warrants, would equal or exceed 19.999% of the number of
shares of Common Stock outstanding on the Original Issue Date (the "ISSUABLE
MAXIMUM"), and (C) the Company has not previously obtained Shareholder
Approval (as defined below), then the Company shall deliver to the Holder
seeking conversion a notice within two Trading Days of receiving such
conversion request of the Company's intention to either (1) issue to any
Holder so requesting conversion of Preferred Stock its pro rata portion of
the Issuable Maximum in the same ratio that the number of shares of Preferred
Stock held by any such Holder bears to all shares of Preferred Stock then
outstanding and, with respect to any shares of Common Stock that otherwise
would have been issuable to such Holder in respect of the Conversion Notice
at issue or in respect of payment of dividends hereunder in excess of the
Issuable Maximum, the Holder may require the Company to, as promptly as
possible, but in no event later than 60 days after notice from such Holder
convene a meeting of the holders of the Common Stock and use its best efforts
to obtain the Shareholder Approval; provided that in no event shall such
meeting be required to occur prior to May 31, 1998, or (2) redeem as
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soon as reasonably possible, but in any event within seven days of such
notice, from funds legally available therefor at the time of such redemption,
the balance of the Preferred Stock subject to such Conversion Notice at a
price per share equal to the product of (i) the average Per Share Market
Value for the five (5) Trading Days immediately preceding (x) the Conversion
Date or (y) the date of payment in full by the Company of such redemption
price, whichever is greater, and (ii) the Conversion Ratio calculated on the
Conversion Date; PROVIDED, HOWEVER, that if the Holder has requested that the
Company obtain Shareholder Approval under clause (1) above and the Company
fails for any reason to obtain such Shareholder Approval within the time
period set forth in clause (1) above, the Company shall be obligated to
redeem as promptly as reasonably possible but in any event within seven days
of such failure the Preferred Stock not converted as a result of the
provisions of this Section in accordance with the provisions of clause (2)
above. If the Company is obligated to redeem shares of Preferred Stock
pursuant to this Section and the Company fails for any reason to pay the
redemption price within the time periods set forth above, the Company will
pay a late fee on such redemption price at a rate of 15% per annum to the
converting Holder of Preferred Stock, accruing from the Conversion Date until
the redemption price plus any accrued late fees thereon is paid in full. The
entire redemption price, including late fees thereon, shall be paid in cash.
"SHAREHOLDER APPROVAL" means the approval by a majority of the total votes
cast on the proposal, in person or by proxy, at a meeting of the shareholders
of the Company held in accordance with the Company's Articles of
Incorporation and by-laws, of the issuance by the Company of shares of Common
Stock exceeding the Issuable Maximum as a consequence of the conversion of
Preferred Stock and exercise of the Warrants into Common Stock at a price
less than the greater of the book or market value on the Original Issue Date
as and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock
Market or Rule 713 of the American Stock Exchange (or any successor or
replacement provision thereof), as applicable.
(b) Not later than three Trading Days after any Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1(b) of the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of
shares of Preferred Stock (subject to reduction pursuant to Section 5(a)(iii)
and Section 3.16 of the Purchase Agreement), (ii) one or more certificates
representing the number of shares of Preferred Stock not converted, (iii) a
bank check in the amount of accrued and unpaid dividends, if any (if the
Company has elected to pay accrued dividends in cash) and (iv) if the Company
has elected to pay accrued dividends in shares of Common Stock, certificates,
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1 (b) of the Purchase Agreement),
representing such number of Shares of Common Stock as equals such dividend
divided by the Conversion Price on the Dividend Payment Date; PROVIDED,
HOWEVER, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares
of Preferred Stock until certificates evidencing such shares of Preferred
Stock are either delivered for conversion to the Company or any transfer
agent for the Preferred Stock or Common Stock, or the Holder of such
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of
the Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions, if available. If in the case of
any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of Common Stock to be issued on the Conversion
Date on account of accrued but unpaid dividends hereunder, are not delivered
to or as directed by the applicable Holder by the third Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing the shares of
Preferred Stock tendered for conversion. If the Company fails to deliver to
the Holder such certificate or certificates pursuant to this Section,
including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, on or
prior to the third Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a
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penalty, $5,000 for each day after such third Trading Day until such
certificates are delivered. If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section prior to the 10th
day after the Conversion Date, the Company shall, at the Holder's option (i)
redeem, from funds legally available therefor at the time of such redemption,
such number of shares of Preferred Stock then held by such Holder, as
requested by such Holder, and (ii) pay all accrued but unpaid dividends on
account of the Preferred Stock for which the Company shall have failed to
issue Common Stock certificates hereunder, in cash. The redemption price
shall be equal to the sum of (A) the aggregate of all accrued but unpaid
dividends, plus (B) the number of shares of Preferred Stock then held by such
Holder multiplied by (1) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (x) the Conversion Date or (y) the date of
payment in full by the Company of such prepayment price, whichever is
greater, multiplied by, (2) the Conversion Ratio calculated on the Conversion
Date. If the Holder has requested that the Company redeem shares of
Preferred Stock pursuant to this Section and the Company fails for any reason
to pay the redemption price under (2) above within seven days after such
notice is deemed delivered pursuant to Section 5(i), the Company will pay a
late fee on the redemption price at a rate of 15% per annum, in cash to such
Holder, accruing from such seventh day until the redemption price and any
accrued late fees thereon is paid in full. Nothing herein shall limit a
Holder's right to pursue actual damages for the Company's failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein (including, without limitation, damages relating to
any purchase of shares of Common Stock by such Holder to make delivery on a
sale effected in anticipation of receiving certificates representing shares
of Common Stock upon conversion, such damages to be in an amount equal to (A)
the aggregate amount paid by such Holder for the shares of Common Stock so
purchased MINUS (B) the aggregate amount of net proceeds, if any, received by
such Holder from the sale of the shares of Common Stock issued by the Company
pursuant to such conversion), and such Holder shall have the right to pursue
all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
(c)(i) The conversion price for each share of Preferred Stock
(the "CONVERSION PRICE") in effect on any Conversion Date shall be the lesser
of (a) 110% of the Per Share Market Value for the Trading Day immediately
preceding the Original Issue Date (the "INITIAL CONVERSION PRICE") provided
that the Initial Conversion Price shall not be less than $3.47 or (b) 82% of
the average of fifteen (15) closing bid prices of the Common Stock on the
Nasdaq Stock Market or other market or exchange on which the Common Stock is
then listed or traded, during the forty five (45) Trading Days prior to the
date of the applicable Conversion Notice, which fifteen closing bid prices
shall be chosen by the Holder converting such shares of Preferred Stock;
PROVIDED, HOWEVER, that, (a) if the Underlying Shares Registration Statement
(as defined in the Registration Rights Agreement) is not filed on or prior to
March 15, 1998, or (b) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 12d1-2 promulgated under the
Securities Exchange Act of 1934, as amended, within five (5) days of the date
that the Company is notified (orally or in writing, whichever is earlier) by
the Commission that an Underlying Shares Registration Statement will not be
"reviewed," or not subject to further review, or (c) if the Underlying Shares
Registration Statement is not declared effective by the Commission on or
prior to the 90th day after the Original Issue Date, or (d) if such
Underlying Shares Registration Statement is filed with and declared effective
by the Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at
any time prior to the expiration of the "EFFECTIVENESS PERIOD" (as such term
as defined in the Registration Rights Agreement), without being succeeded
within 10 Trading Days by a subsequent Underlying Shares Registration
Statement filed with and declared effective by the Commission, or (e) if
trading in the Common Stock shall be suspended for more than three (3)
consecutive Trading Days or five (5) Trading Days in the aggregate, or (f) if
the conversion rights of the Holders are suspended for any reason, or (g) if
the Company breaches in a material respect any covenant or other material
term or condition to this Agreement, the Purchase Agreement (other than a
representation or warranty contained therein), the Warrants, the Registration
Rights Agreement or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated
thereby, and such breach continues for a period of thirty (30) days after
written notice thereof to the Company, or (h)
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if the Company is required to convene a shareholders meeting pursuant to
Section 5(a)(iii) and fails to convene a meeting of shareholders within the
time periods specified in Section 5(a)(iii) or does so convene a meeting of
shareholders within such time period but fails to obtain Shareholder Approval
at such meeting, or (i) if the Company has breached Section 3(p) of the
Registration Rights Agreement (any such failure or breach being referred to
as an "EVENT," and for purposes of clauses (a), (c) and (f) the date on which
such Event occurs, or for purposes of clause (b) the date on which such five
(5) day period is exceeded, or for purposes of clause (d) the date which such
10 Trading Day-period is exceeded, or for purposes of clause (e) the date on
which such three Trading Day period is exceeded, or for clause (g) the date
on which such thirty (30) day period is exceeded, being referred to as "EVENT
DATE"), the Conversion Price shall be decreased by 2% each month (i.e., the
Conversion Price would decrease by 2% as of the Event Date and an additional
2% as of each monthly anniversary of the Event Date) until the earlier to
occur of the second month anniversary after the Event Date and such time as
the applicable Event is cured. Commencing the second month anniversary after
the Event Date, the Company shall pay to the Holders $50,000 (each Holder
being entitled to receive such portion of such amount as equals its pro rata
portion of the Preferred Stock then outstanding) in cash as liquidated
damages, and not as a penalty on the first day of each monthly anniversary of
the Event Date until such time as the applicable Event, is cured. Any
decrease in the Conversion Price pursuant to this Section shall continue
notwithstanding the fact that the Event causing such decrease has been
subsequently cured.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or
pari passu securities (other than with respect to the Series B Preferred
Stock) payable in shares of Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made pursuant
to this Section 5(c)(ii) shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value of
Common Stock at the record date mentioned below, the Initial Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Initial Conversion
Price pursuant to this Section 5(c)(iii), the Initial Conversion Price shall
immediately upon such expiration be recomputed, and effective immediately
upon such expiration, be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made
pursuant to the provisions of this SECTION 5 after the issuance of such
rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of that
number of shares of Common Stock actually purchased upon the exercise of such
rights or warrants.
-8-
(iv) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and
not to Holders of Preferred Stock) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii) and (iii) above), then in each such case the
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value of Common Stock determined as of the
record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith; PROVIDED,
HOWEVER, that in the event of a distribution exceeding ten percent (10%) of
the net assets of the Company, if the Holders of a majority in interest of
the Preferred Stock dispute such valuation, such fair market value shall be
determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company) (an "APPRAISER") selected in good faith by the
Holders of a majority in interest of the shares of Preferred Stock then
outstanding; and PROVIDED, FURTHER, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal
to the average of the determinations by each such Appraiser. In either case
the adjustments shall be described in a statement provided to the Holders of
Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.
(v) All calculations under this SECTION 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(i),(ii),(iii) or (iv), the Company shall promptly mail to each
Holder of Preferred Stock, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person pursuant
to which (i) a majority of the Company's Board of Directors will not
constitute a majority of the board of directors of the surviving entity or
(ii) less than 50% of the outstanding shares of the capital stock of the
surviving entity will be held by the same shareholders of the Company prior
to such reclassification, consolidation or merger, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other
securities, cash or property, the Holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into
the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange,
and the Holders of the Preferred Stock shall be entitled upon such event to
receive such amount of securities, cash or property as the shares of the
Common Stock of the Company into which such shares of Preferred Stock could
have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled; PROVIDED, HOWEVER, that if such reclassification, consolidation or
merger is (i) approved by the Company's Board of Directors, and (ii) would
not prevent the Company from obtaining a pooling of interest treatment as
evidenced by a certificate to this effect provided to the Holder by the
Company's independent accountants, each Holder shall have the option to
require the Company to redeem, from funds legally available therefor at the
time of such redemption, its shares of Preferred Stock at a price per share
equal to the product of (i) the average Per Share Market Value for the five
(5) Trading Days immediately preceding (1) the effective date, the date of
the closing or the date of the announcement, as the case may be, of the
reclassification, consolidation, merger, sale, transfer or share
-9-
exchange the triggering such redemption right or (2) the date of payment in
full by the Company of the redemption price hereunder, whichever is greater,
and (ii) the Conversion Ratio calculated on the date of the closing or the
effective date, as the case may be, of the reclassification, consolidation,
merger, sale, transfer or share exchange triggering such redemption right, as
the case may be. The entire redemption price shall be paid in cash, and the
terms of payment of such redemption price shall be subject to the provisions
set forth in Section 6(b). The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue
to give to the Holder of Preferred Stock the right to receive the securities,
cash or property set forth in this Section 5(c)(vii) upon any conversion or
redemption following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall
be required in connection with any reclassification of
the Common Stock of the Company, any consolidation or
merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of
the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Preferred Stock, and shall cause to be
mailed to the Holders of Preferred Stock at their last addresses as they
shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights
or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer
or share exchange; PROVIDED, HOWEVER, that the failure to mail such notice or
any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. Holders are
entitled to convert shares of Preferred Stock during the 20-day period
commencing the date of such notice to the effective date of the event
triggering such notice.
(ix) If the Company (i) makes a public announcement that it
intends to enter into a Change of Control Transaction (as defined below) or
(ii) any person, group or entity (including the Company, but
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excluding a Holder or any affiliate of a Holder) publicly announces a bona
fide tender offer, exchange offer or other transaction to purchase 50% or
more of the Common Stock (such announcement being referred to herein as a
"MAJOR ANNOUNCEMENT" and the date on which a Major Announcement is made, the
"ANNOUNCEMENT DATE"), then, in the event that a Holder seeks to convert
shares of Preferred Stock on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and continuing
through the earlier to occur of the consummation of the proposed transaction
or tender offer, exchange offer or other transaction and the Abandonment Date
(as defined below), be equal to the lower of (x) the average Per Share Market
Value on the five Trading Days immediately preceding (but not including) the
Announcement Date and (y) the Conversion Price in effect on the Conversion
Date for such Preferred Stock. "ABANDONMENT DATE" means with respect to any
proposed transaction or tender offer, exchange offer or other transaction for
which a public announcement as contemplated by this paragraph has been made,
the date upon which the Company (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,
exchange offer or another transaction which caused this paragraph to become
operative.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than
the Holders of Preferred Stock, not less than such number of shares of Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5(a) and
Section 5(c)) upon the conversion of all outstanding shares of Preferred
Stock and payment of dividends hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder of
a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such shares of
Preferred Stock so converted and the Company shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
(g) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(h) Any and all notices or other communications or deliveries to
be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the Chief Executive Officer of the
Company at the facsimile telephone number or address of the principal place
of business of the Company as set forth in the Purchase Agreement. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile
or sent
-11-
by a nationally recognized overnight courier service, addressed to each
Holder of Preferred Stock at the facsimile telephone number or address of
such Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of
the Holder. Any notice or other communication or deliveries hereunder shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 8:00 p.m.
(Eastern Standard Time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (Eastern
Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard
Time) on such date, (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given.
Section 6. REDEMPTIONS.
(a) All outstanding and unconverted shares of Preferred Stock on
the fifth anniversary of the Original Issue Date may be redeemed at any time
thereafter by the Company pursuant to this Section 6(a), from funds legally
available therefor at a price per share equal to the product of (i) the
average Per Share Market Value for the five (5) Trading Days immediately
preceding (1) the fifth anniversary of the Original Issue Date or (2) the
date of payment in full by the Company of the redemption price hereunder,
whichever is greater, and (ii) the Conversion Ratio calculated on the fifth
anniversary of the Original Issue Date. Thereafter, all shares of Preferred
Stock shall cease to be outstanding and shall have the status of authorized
but undesignated stock. The entire redemption price shall be paid in cash.
(b) If any portion of the applicable redemption price under Section
6(a) shall not be paid by the Company within seven (7) calendar days after
the date due, late fees shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such late fees are paid in full (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more
than 7 calendar days after the date due, the Holder of the Preferred Stock
subject to such redemption may elect, by written notice to the Company given
within 30 days after the date due, to either (i) demand conversion in
accordance with the formula and the time frame therefor set forth in Section
5 of all of the shares of Preferred Stock for which such redemption price,
plus accrued liquidated damages thereof, has not been paid in full (the
"UNPAID REDEMPTION SHARES"), in which event the Per Share Market Price for
such shares shall be the lower of the Per Share Market Price calculated on
the date such redemption price was originally due and the Per Share Market
Price as of the Holder's written demand for conversion, or (ii) invalidate AB
INITIO such redemption, notwithstanding anything herein contained to the
contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days of its receipt of such election deliver to the Holder
the shares of Common Stock issuable upon conversion of the Unpaid Redemption
Shares subject to such Holder conversion demand and otherwise perform its
obligations hereunder with respect thereto; or, if the Holder elects option
(ii) above, the Company shall promptly, and in any event not later than three
(3) Trading Days from receipt of Holder's notice of such election, return to
the Holder all of the Unpaid Redemption Shares.
Section 7. PAYMENT RESTRICTIONS. Notwithstanding any provision
to the contrary contained herein, if payment of any amounts payable by the
Company to the Holders hereunder, including, without limitations, any amounts
payable as dividends, penalties or upon redemption of Preferred Stock would
be prohibited in the absence of consent from Sumitomo Bank of California
pursuant to the Company's Credit Agreement dated August 15, 1997 with
Sumitomo Bank of California, as the same may be amended, supplemented,
superseded or replaced from time to time, or any replacement facility, then
the Company shall use its best efforts to obtain such consent as promptly as
practicable after any such payment is required, and any amounts payable by
the Company with respect to its obligation to pay any such dividends,
penalties, or redemption payments shall continue to accrue until such
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consent is obtained. Nothing contained in this Section 7 shall be construed
as a waiver by the Holders of any rights they may have hereunder.
Section 8. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"COMMON STOCK" means the Company's common stock, no par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid late fees thereon) but only to the extent not paid in
shares of Common Stock in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation
preference to the Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
Stock Market or other stock exchange or quotation system on which the Common
Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (b) if the Common Stock is not listed then on the
Nasdaq Stock Market or any stock exchange or quotation system, the closing
bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Stock Market or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the
Holders of a majority in interest of the shares of the Preferred Stock;
PROVIDED, HOWEVER, that the Company, after receipt of the determination by
such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser; and PROVIDED, FURTHER that all
determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such period.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated as of February 2, 1998, among the Company and the original
Holders of the Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of February 2, 1998, by and among the Company and the
original Holders.
-13-
"TRADING DAY" means (a) a day on which the Common Stock is traded
on the Nasdaq Stock Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
PROVIDED, HOWEVER, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or
a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"UNDERLYING SHARES" means the number of shares of Common Stock into
which the Shares are convertible and the shares or Common Stock issuable upon
payment of dividends thereon, in accordance with the terms hereof and the
Purchase Agreement .
Section 9. REDEMPTION OPTION UPON TRIGGERING EVENT. In
addition to all other rights of the Holders contained herein, after a
Triggering Event (as defined below), each Holder shall have the right, at
such Holder's option, to require the Company to redeem all or a portion of
such Holder's Preferred Stock at a price per share of Preferred Stock equal
to the product of (i) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (1) the date of the Triggering Event or
(2) the date of payment in full by the Company of such redemption price,
whichever is greater, and (ii) the Conversion Ratio calculated on the date of
the Triggering Event. A "Triggering Event" shall be deemed to have occurred
at such time as any of the following events:
(i) the failure of the Registration Statement to be
declared effective by the Commission on or prior to the date that is 180 days
after the Original Issue Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the Holder of the Preferred Stock for sale of the Registrable
Securities (as defined in the Registration Rights Agreement) other than in
accordance with the terms of the Registration Rights Agreement, provided that
the cause of such lapse or unavailability is not due to factors solely within
the control of such Holder seeking to be redeemed pursuant to this Section 8;
(iii) the failure of the Common Stock to be listed on the
Nasdaq Stock Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. for a period of seven consecutive days; or
(iv) the Company's notice to any Holder of Preferred Stock,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Preferred Stock into shares
of Common Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
-14-
J. That the authorized number of shares of Preferred Stock of the
Corporation is 2,000,000, the number of shares constituting Series A
Convertible Preferred Stock (that is the series created by this Certificate
and the resolution set forth above) is 100,000 and that no such Preferred
Stock has been issued.
-15-
We further declare under penalty of perjury under the laws of this State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Date: February 2, 1998.
/s/ MARY F. BOBEL
-------------------------------
Mary F. Bobel, Executive Vice
President and Chief Financial
Officer
/s/ MARIO M. ROSATI
-------------------------------
Mario M. Rosati, Secretary
-16-
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of Common Stock, no
par value (the "Common Stock"), of Genus, Inc. (the "Company") according to
the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
-------------------------------------------------------
Date to Effect Conversion
-------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------
Signature
-------------------------------------------------------
Name
-------------------------------------------------------
Address
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Genus, Inc. (the "COMPANY")
hereby notifies the addressee hereof that the Company hereby elects to
exercise its right to convert [ ] shares of its 6% Series A Convertible
Preferred Stock (the "PREFERRED STOCK") held by the Holder into shares of
Common Stock, no par value (the "COMMON STOCK") of the Company according to
the terms hereof, as of the date written below. No fee will be charged to
the Holder for any conversion hereunder, except for such transfer taxes, if
any which may be incurred by the Company if shares are to be issued in the
name of a person other than the person to whom this notice is addressed.
Conversion calculations:
-------------------------------------------------------
Date to effect Conversion
-------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------
Name of Holder
-------------------------------------------------------
Address of Holder