CERTIFICATE OF DESIGNATION
OF
SERIES C $100 REDEEMABLE 9% CONVERTIBLE PREFERRED STOCK
OF
TANGIBLE ASSET GALLERIES, INC.
The Board of Directors (the "Board") of Tangible Asset Galleries, Inc. (the
"Corporation"), a corporation organized under the laws of the State of Nevada,
pursuant to authority conferred upon the Board, adopted the following resolution
authorizing the creation and issuance of 7,000 shares of Series C $100
Redeemable 9% Convertible Preferred Stock:
RESOLVED, that pursuant to authority expressly granted to and vested in the
Board by the Articles of Incorporation, as amended, of the Corporation, the
Board hereby creates 7,000 shares of Series C $100 Redeemable 9% Convertible
Preferred Stock of the Corporation and authorizes the issuance thereof, and
hereby fixes the designation, preferences, relative, participating, optional and
other special rights, and qualifications, limitations or restrictions thereof or
thereon (in addition to the designation, preferences and relative, participating
and other special rights, and the qualifications, limitations or restrictions
thereof or thereon, set forth in the Articles of Incorporation, as amended, of
the Corporation, which are applicable to the preferred stock, if any) as
follows:
1. Designation. The series of preferred stock shall be designated and known
as "Series C $100 Redeemable 9% Convertible Preferred Stock" (the "Series C
Preferred Stock"). The number of shares constituting the Series C Preferred
Stock shall be 7,000. Each share of the Series C Preferred Stock shall have a
stated value equal to $100 (the "Stated Value").
2. Conversion Rights. The Series C Preferred Stock shall be convertible into
the $0.001 par value common stock of the Corporation (the "Common Stock") as
follows:
a. Optional Conversion. Subject to and upon compliance with the provisions
of this Section 2, a holder of shares of the Series C Preferred Stock (a
"Holder") shall have the right at such Holder's option at any time, to convert
any of such shares of the Series C Preferred Stock held by such Holder into
fully paid and non-assessable shares of the Common Stock at the then Conversion
Rate (as defined herein).
b. Conversion Rate. The number of shares of the Common Stock into which
each share of the Series C Preferred Stock is convertible into shall be
calculated by dividing the Stated Value by $0.22 (as adjusted from time to time
pursuant hereto, the "Conversion Price"; the conversion rate so calculated, the
"Conversion Rate"), subject to adjustment as set forth in Section 2(e) hereof.
c. Mechanics of Conversion. A Holder may exercise the conversion right
specified in Section 2(a) by giving 7 days' written notice to the Corporation,
that such Holder elects to convert a stated number of shares of the Series C
Preferred Stock into a stated number of shares of the Common Stock, and by
surrendering the certificate or certificates representing the Series C Preferred
Stock to be converted, duly endorsed to the Corporation or in blank, to the
Corporation at its principal office (or at such other office as the Corporation
may designate by written notice, postage prepaid, to all Holders) at any time
during its usual business hours, together with a statement of the name or names
(with addresses) of the person or persons in whose name or names the certificate
or certificates for the Common Stock shall be issued.
d. Conversion Rate Adjustments. The Conversion Rate shall be subject to
adjustment from time to time as follows:
1. Consolidation, Merger, Sale, Lease or Conveyance. In case of any
consolidation with or merger of the Corporation with or into another
corporation, or in case of any sale, lease or conveyance to another corporation
of the assets of the Corporation as an entirety or substantially as an entirety,
each share of the Series C Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of such share of the Series C Preferred Stock would
have been entitled upon such consolidation, merger, sale, lease or conveyance;
and in any such case, if necessary, the provisions set forth herein with respect
to the rights and interests thereafter of such Holder of the shares of the
Series C Preferred Stock shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares of the Series C
Preferred Stock.
2. Stock Dividends, Subdivisions, Reclassification, or Combinations. If the
Corporation shall (i) declare a dividend or make a distribution on the
Common Stock in shares of the Common Stock, (ii) subdivide or reclassify the
outstanding shares of the Common Stock into a greater number of shares, or (iii)
combine or reclassify the outstanding shares of the Common Stock into a smaller
number of shares, at a price which is less than the Conversion Price; the
Conversion Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination, or
reclassification shall be proportionately adjusted so that the Holder of any
shares of the Series C Preferred Stock surrendered for conversion after such
date shall be entitled to receive the number of shares of the Common Stock that
he would have owned or been entitled to receive had such shares of the Series C
Preferred Stock been converted immediately prior to such date. Successive
adjustments in the Conversion Rate shall be made whenever any event specified
above shall occur.
3. Issuances of Securities. If the Corporation shall (i) sell or otherwise
issue shares of the Common Stock at a purchase price per share less than the
Conversion Price, or (ii) sell or otherwise issue the Corporation's securities
which are convertible into or exercisable for shares of the Corporation's Common
Stock at a conversion or exercise price per share less than the Conversion
Price, then immediately upon such issuance or sale, the Conversion Price shall
be adjusted to a price determined by multiplying the Conversion Price
immediately prior to such issuance by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance or sale (excluding shares held in the treasury), plus the number of
shares of Common Stock that the aggregate of the amounts of all consideration
received by the Corporation for such issuance or sale would purchase at such
Conversion Price; and the denominator of which shall be the number of shares of
the Common Stock outstanding immediately prior to such issuance plus the number
of the additional shares to be issued at such issuance or sale.
4. Excluded Transactions. No adjustment to the Conversion Price shall be
required under this Section 2(e) in the event of any of the following excluded
transactions: (i) shares of the Common Stock and/or securities convertible into
or exercisable for shares of the Common Stock to be issued pursuant to strategic
arrangements, which shares or convertible securities are issued at a price
per-share and/or an exercise or conversion price of less than the then
applicable Conversion Price, or (ii) the issuance of shares of the Common Stock
by the Corporation upon the conversion or exercise of or pursuant to any
outstanding stock options or stock option plan now existing or hereafter
approved by the stockholders which stock options have an exercise or conversion
price per share of less than the then applicable Conversion Price.
f. Approvals. If any shares of the Common Stock to be reserved for the
purpose of conversion of shares of the Series C Preferred Stock require
registration with or approval of any governmental authority under any Federal or
state law before such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
If, and so long as, the Common Stock into which the shares of the Series C
Preferred Stock are then convertible is listed on any national securities
exchange, the Corporation will, if permitted by the rules of such exchange, list
and keep listed on such exchange, upon official notice of issuance, all shares
of such Common Stock issuable upon conversion.
g. Valid Issuance. All shares of the Common Stock that may be issued upon
conversion of shares of the Series C Preferred Stock will upon issuance be duly
and validly issued, fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof, and the Corporation shall
take no action that will cause a contrary result; provided, however, the
Corporation shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any Holder in connection with any such conversion or any
taxes based upon a stockholder's income.
3. Liquidation.
a. Liquidation Preference. In the event of liquidation, dissolution or
winding up of the Corporation (each a "Liquidation Event"), a Holder of the
Series C Preferred Stock shall be entitled to receive, before any distribution
of assets shall be made to the holders of the Common Stock, but after the
liquidation preference of the Series A $5.00 convertible preferred stock and
after the liquidation preference of the Series B $1.00 convertible preferred
stock, an amount equal to the Stated Value per share of the Series C Preferred
Stock held by such Holder (the "Liquidation Pay Out"). After payment of the
Liquidation Pay Out to each Holder and the payment of the respective liquidation
preferences of the other preferred stock of the Corporation, other than the
Series A convertible preferred stock and the Series B convertible preferred
stock, pursuant to the Corporation's Articles of Incorporation, as amended, and
Certificates of Designation, each such Holder shall be entitled to share with
the holders of the Common Stock the remaining assets of the Corporation
available for distribution to the Corporation's stockholders.
b. Ratable Distribution. If upon any liquidation, dissolution or winding up
of the Corporation, the net assets of the Corporation to be distributed
among the Holders shall be insufficient to permit payment in full to the
Holders, then all remaining net assets of the Corporation after the provision
for the payment of the Corporation's debts and distribution to any stockholders
senior to the Holders in liquidation preferences shall be distributed ratably in
proportion to the full amounts to which they would otherwise be entitled to
receive among the Holders.
4. Mandatory Redemption. Notwithstanding any other provision contained
herein, on and as of December 31, 2004 (the "Redemption Date"), the Corporation
shall pay in cash to the Holders as of the Redemption Date the Stated Value for
each share of the Series C Preferred Stock outstanding as of the Redemption Date
and such stock shall be retired by the Corporation as of the Redemption Date and
of no further force or effect. If the Company does not make payment to the
Holders on the Redemption Date, the Corporation shall, for each share of the
Series C Preferred Stock outstanding as of the Redemption Date, issue to the
Holders a warrant to purchase Four (4) shares of the Common Stock at an exercise
price per share equal to 25% of the then applicable Conversion Price with an
exercise period of five (5) years from the Redemption Date.
5. Voting Rights. Except as otherwise required under the laws of the State
of Nevada, the Holders of the Series C Preferred Stock shall be entitled to vote
at any meeting of stockholders of the Corporation (or any written actions of
stockholders in lieu of meetings) with respect to any matters presented to the
stockholders of the Corporation for their action or consideration. For the
purposes of such stockholder votes, each share of the Series C Preferred Stock
shall be entitled to such number of votes as represented by 454 shares of the
Common Stock. Notwithstanding the foregoing, so long as any shares of the Series
C Preferred Stock remain outstanding, the Corporation shall not, without first
obtaining the approval of the holders of at least a majority of the then
outstanding shares of the Series C Preferred Stock (i) alter or change the
rights, preferences or privileges of the Series C Preferred Stock as outlined
herein, or (ii) create any new class of series of capital stock having a
preference over the Series C Preferred Stock as to the payment of dividends or
the distribution of assets upon the occurrence of a Liquidation Event ("Senior
Securities"), or (iii) alter or change the rights, preferences or privileges of
any Senior Securities so as to adversely affect the Series C Preferred Stock.
6. Dividends. The Holders shall be entitled to receive dividends in cash at
the annual rate of 9%. Such dividend is payable to Holders of record on each of
September 30, December 31, March 31, and June 30 (each such date is the "Record
Date") for so long as any share of the Series C Preferred Stock shall be
outstanding on such Record Date. Payment of such dividend shall be made as soon
as practicable following the Record Date, but in no event more than thirty (30)
days following the Record Date ("Dividend Payment Date"). If any such dividend
is paid after the Dividend Payment Date, the Corporation shall issue to the
Holders, for each share of the Series C Preferred Stock, a warrant to purchase
one share of the Common Stock at an exercise price per share equal to 50% of the
then applicable Conversion Price with an exercise period of five (5) years from
the Dividend Payment Date.
7. No Preemptive Rights. No Holder of the Series C Preferred Stock, whether
now or hereafter authorized, shall, as such Holder, have any preemptive right
whatsoever to purchase, subscribe for or otherwise acquire, stock of any class
of the Corporation nor of any security convertible into, nor of any warrant,
option or right to purchase, subscribe for or otherwise acquire, stock of any
class of the Corporation, whether now or hereafter authorized.
8. Exclusion of Other Rights. Except as may otherwise be required by law,
the shares of the Series C Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Corporation's Articles of Incorporation, as
amended. The shares of the Series C Preferred Stock shall have no preemptive or
subscription rights.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
10. Severability of Provisions. If any right, preference or limitation of
the Series C Preferred Stock set forth in this Certificate (as such Certificate
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this Certificate (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
11. Status of Reacquired Shares. Shares of the Series C Preferred Stock
which have been issued and reacquired in any manner shall (upon compliance with
any applicable provisions of the laws of the State of Nevada) have the status of
authorized and unissued shares of the Series C Preferred Stock and may be
re-designated and reissued.
(SIGNATURE ON THE FOLLOWING PAGE)
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed in its name and on its behalf by its Chief Executive Officer and attested
to this third day of April 2002.
TANGIBLE ASSET GALLERIES, INC.
By: /s/ Silvano DiGenova
Silvano DiGenova
Secretary