Exhibit 4.2
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES A VOTING CONVERTIBLE PREFERRED STOCK
OF
HIGHLAND HOLDINGS INTERNATIONAL, INC.
Pursuant to Section 151 of the General Corporation Law of Delaware
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Highland Holdings International, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that, pursuant to the authority conferred
upon the Board of Directors of the Corporation by its Certificate of
Incorporation, as amended, the Board of Directors of the Corporation, as
required by Section 151 of the General Corporation Law of Delaware (the
"DGCL:"), duly adopted the following resolution by unanimous written consent as
of July 16, 2001:
RESOLVED, that pursuant to the authority granted to the Board of
Directors of the Corporation (hereinafter, the "Board of Directors") by the
provisions of the Corporation's Certificate of Incorporation, the Board of
Directors hereby creates a new series of the Corporation's previously authorized
preferred stock, par value $.001 per share (the "Preferred Stock")authorized to
issue 4,000,000 shares of Series A Voting Convertible Preferred Stock (the
"Series A Preferred Stock"), $0.001 par value per share, of the Corporation, and
hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof, as follows:
A. DESIGNATION AND NUMBER
The shares of such series shall be designated as "Series A Voting
Convertible Preferred Stock," of Highland Holdings International, Inc., a
Delaware corporation (the "Corporation"), and the number of shares constituting
the Series A Voting Convertible Preferred Stock shall be four million
(4,000,000) shares, par value $.001 per share (the "Series A Preferred Stock");
provided, however, that such number of shares, which number may be increased or
decreased by the Board of Directors, but shall not be decreased below the number
of shares of Series A Preferred Stock then outstanding nor increased so as to
exceed, together with the number of shares of any other class or series of
Preferred Stock authorized for issuance by the Board of Directors, of the
Corporation (the "Board of Directors"), the total number of shares of Preferred
Stock which the Board of Directors then has authority to issue.
B. PURPOSE
The Series A Preferred Stock has been designated in connection with
certain contractual obligations of the Corporation to issue common stock of the
Corporation, par value $.001 per share ("Common Stock"), to third parties, at a
time when the Corporation does not have a sufficient number of authorized but
unissued shares of Common Stock for such purpose. Accordingly, the Corporation
is issuing one share of Series A Preferred Stock in exchange for every five
shares tendered to the Corporation of common stock of E Street Access, Inc. ("E
Street"), which will be a subsidiary of the Corporation. Each share of Series A
Preferred Stock (1) shall, except as otherwise set forth in this Certificate of
Designations, have the same voting and other rights as Common Stock, taking into
account that each share of Preferred Stock in
effect represents five shares of Common Stock and (2) shall, upon stockholder
approval of an increase in the number of authorized shares of Common Stock, be
automatically converted into the same number of shares of Common Stock as such
holders would have received had the Corporation issued Common Stock to such
stockholders in exchange for their shares of E Street common stock, as more
particularly set forth in Section G hereof.
C. RANK
1. Distributions Upon Liquidation, Dissolution of the Corporation. The
Series A Preferred Stock shall rank prior to (a) the Series B Convertible
Preferred Stock of the Corporation, par value $.001 per share ("Series B
Preferred Stock"), if and when shares thereof are issued, and (b) the
Common Stock, with respect to any payment or distribution to be made to
the holders of the Corporation's capital stock upon the liquidation,
dissolution or winding up of the Corporation, with the amount so payable
to the holders of Series A Preferred Stock to be adjusted in the event of
any recapitalization and otherwise as provided in Section G hereof.
2. Dividends. The Series A Preferred Stock shall rank on a par with the
Common Stock, as more fully described in Section F hereof, and junior to
any other series of Preferred Stock of the Corporation, with respect to
the rights of the holders of the Series A Preferred Stock to receive
dividends.
D. VOTING RIGHTS
Except as otherwise provided by law, the holders of Series A Preferred
Stock shall have the following voting rights:
1. Number of Votes. Each holder of Series A Preferred stock shall be
entitled to a number of votes equal to the Conversion Ratio (as defined in
Section G hereof), then in effect for each share of Series A Preferred
Stock held of record on each matter on which holders of the Common Stock
or stockholders generally are entitled to vote, whether at a meeting of
stockholders or by written consent
2. Class Voting. Except as otherwise provided by law or this
Certificate of Designations, the holders of the Series A Preferred Stock
and the holders of the Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
E. DIVIDEND RIGHTS
1. Restriction on Dividends. The Board of Directors shall not declare
and pay any cash dividends to the holders of the Common Stock unless it
also simultaneously declares and pays, pursuant to paragraph 2 of this
Section E, an equivalent cash dividend to the holders of the Series A
Preferred Stock. If and when declared, such dividends shall be payable out
of any source lawfully available for the payment of dividends.
2. Non-Cumulative Dividends. The holders of shares of the Series A
Preferred Stock shall be entitled to an annual dividend as determined by
the Board of Directors and payable annually on April 30 of each year
commencing in the year 2002. Such dividends
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shall not be cumulative and shall be payable by the Corporation in cash
out of any source lawfully available for the payment of dividends.
F. LIQUIDATION RIGHTS
1. Series A Preferred Stock Liquidation Value. After payments in the
event of any voluntary or involuntary liquidation, dissolution, or winding
up of the Corporation (hereinafter referred to as a "Liquidation"), but
before any distribution or payment may be made to or set aside for the
holders of the Series B Preferred Stock or the Common Stock, the holders
of the Series A Preferred Stock shall be entitled to receive from the
assets of the Corporation the sum of $.001 per share in cash or other
property (the "Series A Preferred Stock Liquidation Value"), such amount
to be appropriately adjusted, upward or downward in the event of any stock
dividend, stock split or combination, or similar recapitalization
(hereinafter referred to as a "Recapitalization"). If, upon any such
Liquidation, the assets of the Corporation to be distributed among the
holders of the Series A Preferred Stock are insufficient to permit payment
to all such holders of the aggregate Series A Preferred Stock Liquidation
Value for all shares held of record by each such holder, then the assets
available to be distributed to such holders shall be distributed ratably
among such holders, based upon the number of shares of Series A Preferred
Stock held by each such holder.
2. Series B Preferred Stock Liquidation Value. After payments shall
have been made to the holders of Series A Preferred Stock, before any
distribution or payment may be made to or set aside for the holders of the
Common Stock, the holders of the Series B Convertible Preferred Stock (the
"Series B Preferred Stock") shall be entitled to receive from the assets
of the Corporation the sum of $.001 per share in cash or other property
(the "Series B Preferred Stock Liquidation Value"), such amount to be
appropriately adjusted, upward or downward in the event of any
Recapitalization. If upon any Liquidation, the assets of the Corporation
to be distributed among the holders of the Series B Preferred Stock are
insufficient to permit payment to such holders of the aggregate Series B
Preferred Stock Liquidation Value, then the assets available to be
distributed to such holders will be distributed ratably among such
holders, based upon the aggregate Series B Preferred Stock Liquidation
Value held by each such holder of Series B Preferred Stock.
3. Common Stock Liquidation Value. After payment shall have been made
in full of the Series A Preferred Stock Liquidation Value and the Series B
Preferred Stock Liquidation Value, the holders of the Common Stock shall
be entitled to receive from the remaining assets of the Corporation,
before any further distribution or payment is made to any other party, the
sum of $.001 per share of Common Stock in cash or other property such
amount to be appropriately adjusted in the event of any Recapitalization
(such amount, as the same may be adjusted, the "Common Stock Liquidation
Value"). If the assets of the Corporation to be so distributed among the
holders of the Common Stock are insufficient to permit payment of the
aggregate Common Stock Liquidation Value to such holders, then the
remaining assets shall be distributed ratably among such holders based
upon the number of shares of Common Stock held by such holders.
4. Balance of Distribution Payments. Any assets of the Corporation
remaining after the payments required by paragraphs 1 through 3 of this
Section F shall have been made in full to the holders of the Series A
Preferred Stock, the Series B Preferred Stock and the Common Stock shall
be distributed with respect to the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock pro rata without regard to
class.
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5. Application of Conversion Ratio. For purposes all of distributions
made pursuant to this Section 5, the Series A Preferred Stock shall be
entitled to receive the amount payable in respect of the number of shares
of Common Stock into which such Series A Preferred Stock would then be
convertible, based upon the then existing Conversion Ratio (as defined in
Section G below).
6. Events Not Constituting Liquidation. None of the following
transactions, if entered into by the Corporation, shall be deemed to be a
Liquidation within the meaning of this Section F: Any consolidation,
merger, combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or securities, cash
and/or any other property (each such transaction, a "Business
Combination"), any reduction in the capital stock of the Corporation, and
any transaction in which the Corporation sells assets not constituting all
or substantially all of its assets.
7. Notice of Liquidation. The Corporation shall mail written notice of
any Liquidation to each record holder of Series A Preferred Stock not less
than thirty (30) days prior to the payment date stated therein.
G. CONVERSION OF PREFERRED STOCK
The rights and obligations of the Corporation and the holders of the
Series A Preferred Stock to convert their shares of Series A Preferred Stock
into shares of Common Stock and the terms and conditions of such conversion
shall be as follows:
1. Automatic Conversion. No later than the second business day
Immediately following: approval by the stockholders of the Corporation of
an amendment to its Certificate of Incorporation increasing the number of
shares of Common Stock which the Corporation is authorized to issue to a
number sufficient to convert all shares of Series A Preferred Stock into
Common Stock at the Conversion Ratio (as defined below) then in effect
(the "Amendment"); the Corporation shall file the Amendment with the
Secretary of State of Delaware, the date of such filing shall be the
Conversion Date. Effective as of the Conversion Date, each share of Series
A Preferred Stock shall be automatically converted into shares of Common
Stock at the Conversion Ratio in effect on the Conversion Date (such
conversion, the "Automatic Conversion"). The holders of the Series A
Preferred Stock shall not be entitled to convert shares thereof into
Common Stock or any other security under any circumstances other than an
Automatic Conversion, a de facto conversion in connection with a Business
Combination (a "De Facto Conversion," as defined in each of subparagraphs
(d) and (e) of paragraph 5 of this Section G, or an amendment to this
Certificate of Designations so providing.
2. Mechanics of Automatic Conversion. On the Conversion Date, all
shares of Series A Preferred Stock then outstanding shall be automatically
converted into the number of shares of Common Stock determined in
accordance with the provisions of this Section G, and the Corporation
shall cause its books and records or those of its transfer agent relating
to the issuance and ownership of capital stock of the Corporation to show
the each holder of record of any outstanding shares of Series A Preferred
Stock on the Filing Date as the holder of the appropriate number of shares
of Common Stock on the Conversion Date, whether or not any such holder of
Series A Preferred Stock shall have first tendered to the Corporation or
its transfer agent the certificate or certificate representing all such
holder's shares of Series A
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Preferred Stock. No holder of Series A Preferred Stock that becomes a
holder of record of any shares of Common Stock on the Conversion Date
("Conversion Shares") shall be entitled to receive any stock certificate
representing any Conversion Shares until such holder surrenders the stock
certificate or certificates representing all of such holder's shares of
Series A Preferred Stock to the Corporation at its office or the office of
the Corporation's transfer agent. The person or persons entitled to
receive the shares of Common Stock issuable upon effectiveness of the
Automatic Conversion on the Conversion Date shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on
said date.
3. Legend on Conversion Shares; Stop Transfer orders. The Corporation
shall: (a) place upon such each certificate issued to represent any
Conversion Shares an appropriate legend required by either United States
law, the regulations of the U. S. Securities and Exchange Commission,
and/or the securities laws or regulations of any State of the United
States or by the terms of the Agreement and Plan of Reorganization, dated
June 29, 2001, among the Corporation, E-Street Access, Inc. ("E Street"),
and certain shareholders of E Street, as amended or any subscription
agreement that may be entered into between the Corporation and any other
person to whom any shares of Series A Preferred Stock may be issued; and
(b) direct its transfer agent to place an appropriate stop transfer order
against the shares represented by each such certificate.
4. Conversion Ratio. Each share of Series A Preferred Stock shall be
convertible into five (5) shares of Common Stock, subject to adjustment
from time to time as provided below in this Section G (as so adjusted, the
"Conversion Ratio"):
5. Adjustments in Conversion Ratio Based Upon Certain Events.
(a) Subdivisions. If the Corporation at any time or from time to time
during the period from July 16, 2001 through the Conversion Date
(the "Adjustment Period") effects any subdivision of the
outstanding Common Stock into a greater number of shares, without a
corresponding subdivision of the Series A Preferred Stock, the
Conversion Ratio, as in effect on the day immediately prior to
effectiveness of such subdivision, shall be proportionately
increased;
(b) Combinations (Other than Business Combinations). If the Corporation
at any time or from time to time prior during the Adjustment Period
combines the outstanding Common Stock into a smaller number of
shares without a corresponding combination of the Series A
Preferred Stock, the Conversion Ratio, as in effect immediately
prior to effectiveness of such combination, shall be
proportionately reduced;
(c) Common Stock Dividends and Distributions. If the Corporation at any
time and from time to time during the Adjustment Period makes, or
fixes a record date for, determination of holders of outstanding
Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock, or in securities
convertible into or exercisable for shares or otherwise directly or
indirectly having rights to receive any shares of Common Stock, the
Conversion Ratio as in effect immediately prior to (i) the making
of such dividend or distribution or (ii) the close of business on
any record date fixed therefor shall be increased (the "Prior
Conversion Ratio"), so that if the Series A Preferred Stock were
thereupon
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converted, the holders thereof would be entitled to receive the
number of shares of Common Stock and other securities equal to the
Prior Conversion Ratio plus the number of shares or other
securities subject to such dividend or distribution on the Common
Stock, multiplied by the Prior Conversion Ratio.
(d) Adjustment for Reclassification, Exchange and Substitution. If, at
any time or from time to time during the Adjustment Period, the
Common Stock is changed into the same or a different number of
shares of any class or class of stock of the Corporation, whether
by recapitalization, reclassification or otherwise, other than
pursuant to any transaction or event subject to subparagraph (a),
(b), (c), (e) or (f) of this paragraph 5, in each such event, each
share of Series A Preferred Stock shall be converted into the
number and kind of securities and other property that would have
been received by the holders thereof had such holder converted such
share of Series A Preferred Stock into Common Stock immediately
prior to the recapitalization, reclassification or change described
in this paragraph (d) (each such conversion, a "De Facto
Conversion").
(e) Business Combinations. If the Corporation enters into any Business
Combination, then, in each such event, each share of Series A
Preferred Stock shall, contemporaneously with the exchange or
change of Common Stock, be exchanged or changed into the number and
type of securities and amount of cash or other property that such
share of Series A Preferred Stock would have been exchanged for or
changed into had such share of Series A Preferred Stock been
converted into Common Stock pursuant to the Conversion Ratio in
effect immediately prior to Business Combination (any such
conversion, a "De Facto Conversion").
5. Notice of Adjustment. Upon each adjustment referred to in paragraph
4 of this Section G, the Corporation shall forthwith give written notice
thereof to the record holders of Series A Preferred Stock in the form of a
certificate (a) executed by a duly authorized officer of the Corporation,
(b) stating the new number of shares so receivable, and (c) setting forth
in reasonable detail the method of calculation and the facts upon which
such calculation is based.
6. Reacquired Shares. Except as otherwise provided in an amendment to
this Certificate of Designations or by law, all shares of Series A
Preferred Stock which are converted into shares of Common Stock or other
securities, cash and/or property pursuant to this Section G shall be
retired at such time provided that such shares shall return to the status
of authorized but unissued shares of Preferred Stock and be available for
reissuance by the Board of Directors as shares of Preferred Stock of any
class or series duly designated by the Board of Directors.
7. Effective Time of Adjustments; Notices. Adjustments to the
Conversion Ratio or other adjustments required by the provisions hereof
shall be effective as of the time of occurrence of the event requiring
such adjustment.
H. CONVERTED SHARES
Upon any Automatic Conversion or De Facto Conversion, all shares of
Series A Preferred stock shall be retired and cancelled. Upon their
cancellation, all such shares (1) shall be authorized but unissued shares of
Preferred Stock, without designation as to series and (2)
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may be reissued as part of a new series of Preferred Stock, subject to the
conditions and restrictions set forth in the DGCL, or the Certificate of
Incorporation of the Corporation as amended, including any certificate of
designations or amendment thereto creating a series of Preferred Stock or as
otherwise required by law.
I. NOTICES
Any notices or certificates required by the Certificate of
Incorporation of the Corporation or this Certificate of Designations to be
delivered to any holder of shares of Series A Preferred Stock shall be deemed
duly given when personally delivered to such holder or upon deposit thereof in
the United States mail, certified or registered mail, return receipt requested,
postage prepaid, and addressed to such holder at its address appearing on the
books of the Corporation.
IN WITNESS WHEREOF, Highland Holdings International, Inc. has caused
this Certificate of Designations to be signed by its President and attested to
by its Secretary as of the 16th day of July, 2001.
HIGHLAND HOLDINGS INTERNATIONAL, INC.
By: /s/ John P. Demoleas
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John P. Demoleas
President
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