EXHIBIT NO.
4.2
Rights and Preferences of Preferred Stock
64
Certificate of Designation of Rights and Preferences
SMD Group Inc., a Delaware corporation, whose address is 15 East North
Street, Dover, DE 19901 ("Corporation") hereby designates the following rights
and Preferences for its Convertible Preferred Stock, Class A ("Convertible
Preferred Stock").
1. Conversion and Issuance of Convertible Preferred Stock. The Holder shall have
the right (the "Right") in its sole and absolute discretion to convert 17.847
shares of Convertible Preferred Stock - Series A issued by the Corporation (the
"Share") into 17,847 common shares of Corporation (the "Equity") as payment to
Holder pursuant to the terms of the October 5 , 1998 Consulting Agreement
between Holder and Corporation.
2. Time of Conversion. The Share shall be convertible at any time, in whole or
in part, at any time for period commencing on the date hereof and ending on
December 31, 2010. No additional consideration is payable upon conversion.
3. Method of Conversion. The conversion shall be effected by a written note
signed by an authorized representative of Holder or its assigns which shall (a)
state Holder's election to exercise the Right; (b) the person in whose name the
common share certificate is to be registered, its address and social security
number; (c) be delivered in person or by certified mail to Corporation.
4. Assignability of Share; Forfeiture; Liquidation Preference. The Share may be
assigned by Holder at any time by providing to Corporation a written notice of
assignment. The Right shall not be exercisable until the Corporation completes a
Transaction defined herein as a (i) private placement of not less than a
cumulative $1,000,000, and (ii) a public listing of its common shares. The Share
shall be forfeited to Corporation for no consideration if a Transaction is not
completed within two years of the date of issuance of this Share. The Share
shall have a preference over holders of Common Stock of the Corporation upon
liquidation equal to its par value.
5. Representations and Warranties of Corporation. Upon exercise of the Right,
the Equity interest in Corporation shall be free and clear of all liens, claims,
charges and encumbrances. The amount of Equity subject to the Right shall be
adjusted for splits, dividend, recapitalization, or similar events just as if it
had been converted into common shares. Corporation agrees to indemnify and hold
harmless Holder in connection with any claim, loss, damage or expense, including
attorneys' fees, trial and appellate levels, in connection with any breach of
the foregoing.
65
Certificate of Designation of Rights and Preferences
SMD Group Inc., a Delaware corporation, whose address is 15 East North
Street, Dover, DE 19901 ("Corporation") hereby designates the following rights
and Preferences for its Convertible Preferred Stock, Class B ("Convertible
Preferred Stock").
1. Conversion and Issuance of Convertible Preferred Stock. The Holder shall have
the right (the "Right") in its sole and absolute discretion to convert 100
shares of Convertible Preferred Stock - Series B issued by the Corporation (the
"Share") with a face value of $138,000 into common shares of Corporation (the
"Equity") at a conversion price for said shares at the lower of (i) the average
of the high trading price plus the low trading price for the common shares at
the date of conversion, or (ii) two dollars and fifty cents (US$2.50) per common
share at the date of conversion.. The Convertible Preferred Stock is for payment
to Holder pursuant to the terms of the December 31, 1998 Development Agreement
between Holder and Corporation.
2. Time of Conversion. The Share shall be convertible at any time, in whole or
in part, at any time for period commencing on the date hereof and ending on July
30, 1999. No additional consideration is payable upon conversion.
3. Method of Conversion. The conversion shall be effected by a written note
signed by an authorized representative of Holder or its assigns which shall (a)
state Holder's election to exercise the Right; (b) the person in whose name the
common share certificate is to be registered, its address and social security
number; (c) be delivered in person or by certified mail to Corporation.
4. Assignability of Share; Forfeiture; Liquidation Preference. The Share may be
assigned by Holder at any time by providing to Corporation a written notice of
assignment. The Right shall not be exercisable until the Corporation completes a
Transaction defined herein as a (i) private placement of not less than a
cumulative $2,000,000, or (ii) a public listing of its common shares. The Share
shall be forfeited to Corporation for no consideration if a Transaction is not
completed within two years of the date of issuance of this Share. The Share
shall have a preference over holders of Common Stock of the Corporation upon
liquidation equal to its par value.
5. Representations and Warranties of Corporation. Upon exercise of the Right,
the Equity interest in Corporation shall be free and clear of all liens, claims,
charges and encumbrances. The amount of Equity subject to the Right shall be
adjusted for splits, dividend, recapitalization, or similar events just as if it
had been converted into common shares. Corporation agrees to indemnify and hold
harmless Holder in connection with any claim, loss, damage or expense, including
attorneys' fees, trial and appellate levels, in connection with any breach of
the foregoing.
66
Certificate of Designation of Rights and Preferences
SMD Group Inc., a Delaware corporation, whose address is 15 East North
Street, Dover, DE 19901 ("Corporation") hereby designates the following rights
and Preferences for its Convertible Preferred Stock, Class C ("Convertible
Preferred Stock").
1. Conversion and Issuance of Convertible Preferred Stock. The Holder shall have
the right (the "Right") in its sole and absolute discretion to convert 50,000
shares of Convertible Preferred Stock - Series C issued by the Corporation (the
"Share") into 500,000 common shares of Corporation (the "Equity") as payment to
Holder pursuant to the terms of the October 15 , 1998 Agreement of Purchase and
Sale between Holder and Corporation.
2. Time of Conversion. The Share shall be convertible at any time, in whole or
in part, at any time for period commencing on the date hereof and ending on
December 31, 2010. No additional consideration is payable upon conversion.
3. Method of Conversion. The conversion shall be effected by a written note
signed by an authorized representative of Holder or its assigns which shall (a)
state Holder's election to exercise the Right; (b) the person in whose name the
common share certificate is to be registered, its address and social security
number; (c) be delivered in person or by certified mail to Corporation.
4. Assignability of Share; Forfeiture; Liquidation Preference. The Share may be
assigned by Holder at any time by providing to Corporation a written notice of
assignment. The Right shall not be exercisable until the Corporation completes a
Transaction defined herein as a (i) private placement of not less than a
cumulative $1,000,000, and (ii) a public listing of its common shares. The Share
shall be forfeited to Corporation for no consideration if a Transaction is not
completed within two years of the date of issuance of this Share. The Share
shall have a preference over holders of Common Stock of the Corporation upon
liquidation equal to its par value.
5. Representations and Warranties of Corporation. Upon exercise of the Right,
the Equity interest in Corporation shall be free and clear of all liens, claims,
charges and encumbrances. The amount of Equity subject to the Right shall be
adjusted for splits, dividend, recapitalization, or similar events just as if it
had been converted into common shares. Corporation agrees to indemnify and hold
harmless Holder in connection with any claim, loss, damage or expense, including
attorneys' fees, trial and appellate levels, in connection with any breach of
the foregoing.
67