EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
Assure Energy, Inc.
I, the person hereinafter named as incorporator, for the purpose of
forming a corporation, under the provisions and subject to the requirements of
Title 7, Chapter 78 of Nevada Revised Statutes, and the acts amendatory thereof,
and hereinafter sometimes referred to as the General Corporation Law of the
State of Nevada, do hereby adopt and make the following Articles of
Incorporation:
FIRST: The name of the corporation (hereinafter called the corporation)
is Assure Energy, Inc.
SECOND: The name of the corporation's resident agent in the State of
Nevada is CSC Services of Nevada, Inc., and the street address of the said
resident agent where process may be served on the corporation is 502 East John
Street, Carson City 89706. The mailing address and the street address of the
said resident agent are identical.
THIRD: (a) Authorized Capital. The total number of shares of stock
which the corporation shall have authority to issue is 105,000,000 of which
100,000,000 shares are designated as common stock, par value $.001 per share,
4,977,250 shares are designated as blank check preferred stock, par value $.001
per share, 17,500 shares are designated as Series A Preferred Stock, par value
$.001 per share and 5,250 shares are designated as Series B Preferred Stock, par
value $.001 per share. The blank check preferred stock may be issued from time
to time in one or more series or classes. The Board of Directors is hereby
expressly authorized to provide by resolution or resolutions duly adopted prior
to issuance, for the creation of each such series and class of preferred stock
and to fix the designation and the powers, preferences, rights, qualifications,
limitations, and restrictions relating to the shares of each such series. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, determining the following:
(1) the designation of such series, the number of shares to constitute
such series and the stated value thereof if different from the par
value thereof;
(2) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the term of
such voting rights, which may be general or limited;
(3) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
1
(4) whether the shares of such series shall be subject to redemption by
the Corporation, and, if so, the times, prices and other conditions of
such redemption;
(5) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(6) whether the shares of such series shall be subject to the operation
of a retirement or sinking fund and, if so, the extent to and manner in
which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or
other Corporation purposes and the terms and provisions relating to the
operation thereof;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other
series of Preferred Stock or any other securities and, if so, the price
or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(8) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of Preferred Stock or of any other class; and
(9) any other powers, preferences and relative, participating, options
and other special rights, and any qualifications, limitations and
restrictions, thereof.
The powers, preferences and relative, participating optional and other
special rights of each series of blank check Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding. All shares of any one
series of Preferred Stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereof shall be
cumulative.
(b) Series A Preferred Stock
(1) Designation and Amount. This Series consists of Seventeen
Thousand Five Hundred (17,500) shares of Series A Preferred Stock, with a stated
value of One Hundred U.S. Dollars ($100.00) per share (the "Stated Value").
(2) Dividends.
(i) The holders of the shares of Series A Preferred Stock as they
appear on the stock records of the Company ("Holder" or "Holders") shall be
entitled to receive, the board of directors shall be obligated to declare and
the Company shall be obligated to pay,
2
out of funds legally available for the payment of dividends, dividends in cash
or (as provided herein) shares of Common Stock at the rate of five percent (5%)
per annum (computed on the basis of a 360-day year) (the "Dividend Rate") on the
Stated Value of each share of Series A Preferred Stock. Dividends on the Series
A Preferred Stock shall be cumulative from the date of issuance.
(ii) Dividends shall be payable annually as of each anniversary of
the date of issuance until the earlier of redemption or conversion, to the
Holders of record of shares of the Series A Preferred Stock, as they appear on
the stock records of the Company. An additional dividend shall be payable with
respect to converted or redeemed shares of Series A Preferred Stock, which shall
be payable as of the date of conversion or redemption, as the case may be. The
annual anniversary date as of which dividend payments are due or the date of
conversion or redemption as of which an additional dividend payment is due is
hereafter referred to as the Dividend Payment Date.
(iii) The dividend shall be paid in (i) cash or (ii) through the
issuance of duly and validly authorized and issued, fully paid and
non-assessable, shares of Common Stock valued at the average closing bid price
of the Company's common stock during the 10 trading day period immediately
preceding the Dividend Payment Date.
(iv) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities (as
defined herein) for any period unless full cumulative dividends required to be
paid in cash have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Series A Preferred Stock for all dividend payment periods terminating on or
prior to the date of payment of the dividend on such class or series of Pari
Passu Securities. When dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon shares
of the Series A Preferred Stock and all dividends declared upon any other class
or series of Pari Passu Securities shall be declared ratably in proportion to
the respective amounts of dividends accumulated and unpaid on the Series A
Preferred Stock and accumulated and unpaid on such Pari Passu Securities.
(v) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities (as defined herein),
nor shall any Junior Securities be redeemed, purchased or otherwise acquired
(other than a redemption, purchase or other acquisition of shares of Common
Stock made for purposes of an employee incentive or benefit plan (including a
stock option plan) of the Company or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Company, directly or indirectly, unless in
each case (i) the full cumulative dividends required to be paid in cash on all
outstanding shares of the Series A Preferred Stock and any other Pari Passu
Securities shall have been paid or set apart for payment for all past dividend
periods with respect to the Series A Preferred Stock and all past dividend
periods with respect to such Pari Passu Securities, and (ii) sufficient funds
shall have been paid or set apart for the payment of the dividend for the
current dividend period with respect to the Series A Preferred Stock and the
current dividend period with respect to such Pari Passu Securities.
3
(3) Conversion.
(i) The outstanding shares of Series A Preferred Stock shall be
convertible into Company units (the "Units") as is determined by dividing the
Stated Value by the Conversion Price, as defined below, at the option of the
Holder in whole or in part, within 15 days of the Holder's receipt of a notice
of redemption from the Company or at any time during the three year period
commencing on the second anniversary of the Issuance Date (the "Holder
Conversion Period"). Each Unit consists of one share of Common Stock (the "Unit
Shares") and one common stock purchase warrant (the "Unit Warrants") which may
be exercised for the purchase of one additional share of Common Stock (the
"Warrant Shares") at an exercise price of $1.75 per share at any time during the
four year period commencing one year after the date of issuance of the Units.
Any conversion under this section shall be for a minimum Stated Value of $25,000
of Series A Preferred Stock. The Holder shall effect conversions by sending a
conversion notice (the "Notice of Conversion") in the manner set forth herein.
Each Notice of Conversion shall specify the Stated Value of Series A Preferred
Stock to be converted, and the date on which such conversion is to be effected
(the "Conversion Date"). Except as provided herein, each Notice of Conversion,
once given, shall be irrevocable. If the Holder is converting less than all of
the Stated Value represented by a certificate for the Series A Preferred Stock
tendered by the Holder in the Notice of Conversion, the Company shall deliver to
the Holder a new Series A Preferred Stock certificate for such Stated Value as
has not been converted within seven (7) Business Days of the Company's receipt
of the original Series A Preferred Stock and Notice of Conversion.
(ii) Not later than seven (7) Business Days after the Company's
receipt of the certificate or certificates for the Series A Preferred Stock and
the original of the Notice of Conversion, the Company will deliver to the Holder
(i) a certificate or certificates representing the number of Unit Shares and
Unit Warrants being acquired upon the conversion of Series A Preferred Stock and
(ii), if applicable, Series A Preferred Stock in principal amount equal to the
principal amount of Series A Preferred Stock not converted. In the case of a
conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required, the Holder shall be
entitled by providing 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 Series A
Preferred Stock tendered for conversion.
(iii) The Conversion Price for the conversion of a share of Series
A Preferred Stock into Units shall be $1.50 of Stated Value (the "Conversion
Price").
(iv) If the Company, at any time while any shares of Series A
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of its capital stock (whether payable in shares of its Common Stock or
of capital stock of any class), (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 Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock of the Company 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 shall become effective
immediately after the record date for the
4
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 reclassification.
(v) If the Company, at any time while any shares of Series A
Preferred Stock are outstanding, shall issue or sell shares of Common Stock, or
options, warrants or other rights to subscribe for or purchase shares of Common
Stock, (excluding shares of Common Stock issuable upon exercise of options,
warrants or conversion rights granted prior to the date hereof and shares of
Common Stock issuable upon exercise of options which may be issued subsequent to
the date hereof to Company employees, officers, or directors) at a price per
share less than the Conversion Price then in effect, the Conversion Price
designated herein shall be reduced to the price at which the shares of Common
Stock are issued or the price at which the options, warrants or other rights may
be exercised for the purchase of Common Stock. Such adjustment shall be made as
of the date such Common Stock, options, rights or warrants are issued.
(vi) If the Company, at any time while shares of Series A
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to Holders of Series A Preferred Stock) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Section (b)(3)(v) above) then in each such case
the Conversion Price at which each Series A 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, 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 of the principal amount of the Series A
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 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 Holder and all
other Holders of Series A 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.
(vii) All calculations hereunder shall be made to the nearest
1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any
calculation over .005 shall be rounded up to the next cent or share and any
calculation less than .005 shall be rounded down to the previous cent or share.
5
(viii) Whenever the Conversion Price is adjusted pursuant to
Section (b)(3)(iv), (v) or (vi), the Company shall within two (2) days after the
determination of the new Conversion Price mail and fax to the Holder and to each
other Holder of Series A Preferred Stock, a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(ix) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, 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, then each holder of Series A Preferred Stock
then outstanding shall have the right thereafter to convert such Series A
Preferred Stock only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange
(except in the event the property is cash, then the Holder shall have the right
to convert the Series A Preferred Stock and receive cash in the same manner as
other stockholders), and the Holder shall be entitled upon such event to receive
such amount of securities or property as the shares of the Common Stock into
which such Series A Preferred Stock could have been converted immediately prior
to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. 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 the right to receive the securities or property set forth in
this section upon any conversion following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(x) 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 (other than a subdivision or combination
of the outstanding shares of Common Stock), 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, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; or
6
(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 mailed and faxed to the Holders of Series A
Preferred Stock at their last addresses as it shall appear upon the Series A
Preferred Stock register, at least thirty (30) 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, share exchange, dissolution, liquidation or winding-up
is expected to become effective, 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 or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; 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.
(xi) 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 Series A Preferred Stock as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders of Series A Preferred Stock, such
number of shares of Common Stock as shall be issuable (taking into account the
adjustments and restrictions hereof) upon the conversion of the aggregate
principal amount of all outstanding Series A Preferred Stock. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issuance, be duly and validly authorized, issued and fully paid and
nonassessable.
(xii) No fractional Units shall be issuable upon a conversion
hereunder and the number of Unit Shares and Unit Warrants to be issued shall be
rounded up to the nearest whole number. Accordingly, if a fractional Unit
interest arises upon any conversion hereunder, the Company shall eliminate such
fractional Unit interest by issuing Holder an additional full Unit.
(xiii) The issuance of certificates for Unit Shares and Unit
Warrants on conversion of Series A Preferred Stock shall be made without charge
to the Holder for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, 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 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.
(xiv) Series A Preferred Stock converted into Units shall be
canceled upon conversion.
7
(xv) Each Notice of Conversion shall be given by facsimile to the
Company no later than 4:00 pm New York Time. In the event that the Company
receives the Notice of Conversion after 4:00 p.m. New York Time, the Conversion
Date shall be deemed to be the next business day. In the event that the Company
receives the Notice of Conversion after the end of the business day, notice will
be deemed to have been given the next business day.
(4) Default and Remedies.
(i) "Event of Default", wherever used herein, means any one of the
following events:
(A) the Company shall fail to observe or perform any material
covenant, agreement or warranty contained in Section (b)(3) of Article Third of
these Articles of Incorporation, and such failure shall not have been remedied
within ten (10) Business Days after the date on which written notice of such
failure shall have been given;
(B) the occurrence of any event or breach or default by the
Company under the Purchase Agreement and such failure or breach shall not have
been remedied within ten (10) Business Days after the date on which written
notice of such failure shall have been given;
(C) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and the Company fails
to pursue dismissal of the case within sixty (60) days after commencement of the
case; or the Company commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or there is commenced against the Company any
such proceeding and the Company fails to pursue dismissal of the case within
sixty (60) days after commencement of the case; or the Company suffers any
appointment of any custodian or the like for it or any substantial part of its
property and the Company fails to pursue dismissal of the custodian within sixty
(60) days after the appointment; or the Company makes a general assignment for
the benefit of creditors; or any corporate or other action is taken by the
Company for the purpose of effecting any of the foregoing;
(D) the Company shall voluntarily have its Common Stock deleted or
delisted, as the case may be, from the OTCBB or other national securities
exchange or market on which such Common Stock is listed for trading or suspended
from trading thereon, and shall not have its Common Stock relisted or have such
suspension lifted, as the case may be, within twenty (20) trading days of such
deletion or delisting;
(E) the Company shall issue a press release, or otherwise make
publicly known, that it is not honoring properly executed Notice of Conversions
for any reason whatsoever;
(ii) If any Event of Default occurs and continues, beyond any cure
period, if any, then so long as such Event of Default shall then be continuing
any Holder may,
8
by notice to the Company demand redemption of the Shares of Series A Preferred
Stock at the price of 105% of the Stated Value of each Share of Series A
Preferred Stock being redeemed plus accrued but unpaid dividends thereon,
whereupon the Stated Value and all accrued but unpaid Dividends shall be
immediately due and payable, and such Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by such Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon. This shall include, but
not be limited to the right to temporary, preliminary and permanent injunctive
relief without the requirement of posting any bond or undertaking.
(iii) Such Holder may thereupon proceed to protect and enforce its
rights either by suit in equity, or by action at law, or by other
appropriate proceedings whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in
Section (b)(3) of Article Third of these Articles of Incorporation or
in aid of the exercise of any power granted in Section (b)(3) of
Article Third of these Articles of Incorporation, and proceed to
enforce the redemption of any of the Series A Preferred Stock held by
it, and to enforce any other legal or equitable right of such Holder.
(iv) As a non-exclusive remedy, in the Event of a Default, the Holder
can convert the outstanding shares of Series A Preferred Stock at the
Conversion Price upon giving a Notice of Conversion to the Company.
(5) Redemption.
(i) The shares of Series A Preferred Stock are redeemable at the
sole option of the Company at any time prior to the Company's receipt of a
Notice of Conversion to the extent funds are legally available therefor, at any
time and from time to time, in whole or in part, at a redemption price equal to
105% of the Stated Value of each share of Series A Preferred Stock being
redeemed plus accrued and unpaid dividends thereon ("Redemption Price"). The
Holder may provide the Company with a Notice of Conversion within 15 days after
Holder's receipt of a notice of redemption from the Company. The Company is not
obligated to provide for redemption of the Series A Preferred Stock through a
sinking fund. The Company must redeem the shares of Series A Preferred Stock at
the Redemption Price on the fifth anniversary of the Issuance Date.
(ii) The Company shall not optionally redeem the Series A
Preferred Stock or any other Pari Passu Securities in whole or in part without
redeeming, on a pro rata basis, all outstanding Pari Passu Securities in
accordance with the relative amounts due the holders of Pari Passu Securities on
redemption.
(iii) Shares of Series A Preferred Stock which have been redeemed
or converted shall be deemed retired and shall thereafter resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series,
and may be redesignated and reissued as part of any new series of Preferred
Stock other than Series A Preferred Stock.
9
(iv) Notwithstanding the foregoing provisions of this Section
(b)(3), unless the full cumulative dividends on all outstanding shares of Series
A Preferred Stock shall have been paid or contemporaneously are declared and
paid for all past dividend periods, none of the shares of Series A Preferred
Stock may be redeemed.
(v) No redemption shall be made and no sum set aside for such
redemption unless at the time thereof (i) all accrued and unpaid dividends
payable on any Senior Securities (as defined in Section (b)(6) herein) have been
paid in full, (ii) all required mandatory redemptions on Senior Securities have
been made in full and (iii) all optional redemptions of Senior Securities, if
any, previously declared, have been made in full. No redemption shall be made
and no sum set aside for such redemption at any time that the terms or
provisions of any indenture or agreement of the Company, including any agreement
relating to indebtedness, specifically prohibits such redemption or setting
aside or provides that such redemption or setting aside would constitute a
breach or default thereunder (after notice or lapse of time or both), except
with the written consent of the lender or other parties to said agreement as the
case may be.
(vi) If any redemption shall at any time be prohibited by the
Nevada Revised Statues, the same shall be deferred until such time as the
redemption can occur in full compliance with such statute.
(vii) In the event the Company shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, or by confirmed facsimile transmission, not less than
twenty-one (21) days prior to the date fixed by the Board for redemption to each
holder of Series A Preferred Stock at the address that appears on the Company's
stock record books; provided, however, that no failure to provide such notice
nor any defect therein shall affect the validity of the redemption proceeding
except as to the Holder to whom the Company has failed to send such notice or
whose notice was defective. Each notice shall state (i) the redemption date,
(ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the
Redemption Price; (iv) the place or places where certificates for shares of
Series A Preferred Stock are to be surrendered for payment and (v) that
dividends on the redeemed shares shall cease to accrue on such redemption date.
When notice has been provided as aforesaid then from and after the redemption
date (unless default shall be made by the Company in providing money for the
payment of the Redemption Price of the shares called for redemption) dividends
on the shares called for redemption shall cease to accrue and said shares shall
no longer be deemed to be outstanding and all rights of the holders thereof
shall cease (other than the right to receive the Redemption Price). Upon
surrender of the certificates for Series A Preferred Stock accompanied by
appropriate stock powers, the shares shall be redeemed by the Company at the
Redemption Price. In case fewer than all shares represented by any such
certificate are redeemed, a new certificate representing the shares of Series A
Preferred Stock not so redeemed shall be issued to the holder without cost.
10
(6) Rank. The Series A Preferred Stock shall, as to dividends,
redemptions, and the distribution of assets upon liquidation, dissolution or
winding up of the Company, rank (i) prior to the Company's Common Stock; (ii)
prior to any class or series of capital stock of the Company hereafter created
that, by its terms, ranks junior to the Series A Preferred Stock ("Junior
Securities"); (iii) junior to any class or series of capital stock of the
Company hereafter created (with the consent of the holders of a majority of the
outstanding Series A Preferred Stock) which by its terms ranks senior to the
Series A Preferred Stock ("Senior Securities"); and (iv) pari passu with any
other series of preferred stock of the Company hereafter created (with the
consent of the Holders of a majority of the outstanding Series A Preferred
Stock) which by its terms ranks on a parity ("Pari Passu Securities") with the
Series A Preferred Stock.
(7) Liquidation Preference. If the Company shall commence a voluntary
case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or make an assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Company shall be entered by a court having jurisdiction in the premises in
an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60 consecutive days and,
on account of any such event, the Company shall liquidate, dissolve or wind up,
or if the Company shall otherwise liquidate, dissolve or wind up, including, but
not limited to, the sale or transfer of all or substantially all of the
Company's assets in one transaction or in a series of related transactions (a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Company (other than Senior Securities and Pari Passu
Securities) upon liquidation, dissolution or winding up unless, prior thereto,
the Holders of shares of Series A Preferred Stock shall have received the
Liquidation Preference (as defined below) with respect to each share. If, upon
the occurrence of a Liquidation Event, the assets and funds available for
distribution among the Holders of the Series A Preferred Stock and Holders of
Pari Passu Securities shall be insufficient to permit the payment to such
holders of the preferential amounts payable thereon, then the entire assets and
funds of the Company legally available for distribution to the Series A
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable
on each such share bears to the aggregate Liquidation Preference payable on all
such shares. The purchase or redemption by the Company of stock of any class, in
any manner permitted by law, shall not, for the purposes hereof, be regarded as
a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other entity nor the
sale or transfer by the Company of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company. The "Liquidation Preference" with respect to a share
of Series A Preferred Stock means an amount equal to the Stated Value thereof,
plus the accrued but unpaid dividends thereon through the date of final
distribution. The Liquidation Preference with respect to any Pari Passu
Securities shall be as set forth in the Certificate of Designation filed in
respect thereof.
11
(8) Voting Rights. The Holders of the Series A Preferred Stock have no
voting power whatsoever, except as otherwise provided by the Nevada Revised
Statutes. To the extent that under the Nevada Revised Statutes the vote of the
Holders of the Series A Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the Holders of at least a majority of the then
outstanding shares of the Series A Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the Holders of at
least a majority of the then outstanding shares of Series A Preferred Stock
(except as otherwise may be required under the Nevada Revised Statutes) shall
constitute the approval of such action by the class. To the extent that under
the Nevada Revised Statutes Holders of the Series A Preferred Stock are entitled
to vote on a matter with holders of Common Stock, voting together as one class,
each share of Series A Preferred Stock shall be entitled to a number of votes
equal to the number of shares of Common Stock into which it is then convertible
(subject to the limitations contained herein) using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated.
(9) Miscellaneous.
(i) If any shares of Series A Preferred Stock are converted, the
shares so converted shall be cancelled, shall return to the status of
authorized, but unissued preferred stock of no designated series, and shall not
be issuable by the Company as Series A Preferred Stock.
(ii) Upon receipt by the Company of (i) evidence of the loss,
theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii)
(y) in the case of loss, theft or destruction, of indemnity (without any bond or
other security) reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
certificate(s), the Company shall execute and deliver new Preferred Stock
certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost or stolen Preferred Stock certificate(s) if the
Holder contemporaneously requests the Company to convert such Series A Preferred
Stock.
(iii) Upon submission of a Notice of Conversion by a Holder of
Series A Preferred Stock, (i) the shares covered thereby shall be deemed
converted into Units and (ii) the Holder's rights as a Holder of such converted
shares of Series A Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for the Unit Shares and the Unit Warrants and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Company to comply with the terms of this
Certificate of Designation. Notwithstanding the foregoing, if a Holder has not
received certificates for all the Unit Shares and the Unit Warrants prior to the
tenth business day after the expiration of the delivery period with respect to a
conversion of Series A Preferred Stock for any reason, then (unless the Holder
otherwise elects to retain its status as a holder of the Unit Shares and the
Unit
12
Warrants by so notifying the Company within five business days after the
expiration of such 10 business day period) the Holder shall regain the rights of
a Holder of Series A Preferred Stock with respect to such unconverted shares of
Series A Preferred Stock and the Company shall, as soon as practicable, return
such unconverted shares to the Holder. In all cases, the Holder shall retain all
of its rights and remedies for the Company's failure to convert Series A
Preferred Stock.
(iv) The remedies provided herein shall be cumulative and in
addition to all other remedies available under this Certificate of Designation,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Company to comply with the terms of this
Certificate of Designation. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of Series A
Preferred Stock and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees, in the event of any such breach or
threatened breach, that the Holders of Series A Preferred Stock shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(c) Series B Preferred Stock.
(1) Designation and Amount. This Series consists of five thousand two
hundred fifty (5,250) shares of Series Preferred Stock, with a stated value of
One Hundred U.S. Dollars ($100.00) per share (the "Stated Value").
(2) Dividends.
(i) The holders of the shares of Series B Preferred Stock as they
appear on the stock records of the Company ("Holder" or "Holders") shall be
entitled to receive, the Board of Directors shall be obligated to declare and
the Company shall be obligated to pay, out of funds legally available for the
payment of dividends, dividends in cash or (as provided herein) shares of Common
Stock at the rate of five percent (5%) per annum (computed on the basis of a
360-day year) (the "Dividend Rate") on the Stated Value of each share of Series
B Preferred Stock. Dividends on the Series B Preferred Stock shall be cumulative
from the date of issuance.
(ii) Dividends shall be payable annually as of each anniversary
from the date of issuance until the earlier of redemption or conversion, to the
Holders of record of shares of the Series B Preferred Stock, as they appear on
the stock records of the Company. An additional dividend shall be payable with
respect to converted or redeemed shares of Series B Preferred Stock, which shall
be payable as of the date of conversion or redemption, as the case
13
may be. The annual anniversary date as of which dividend payments are due or the
date of conversion or redemption as of which an additional dividend payment is
due is hereafter referred to as the Dividend Payment Date.
(iii) The dividend shall be paid in (i) cash or (ii) through the
issuance of duly and validly authorized and issued, fully paid and
non-assessable, shares of Common Stock valued at the average closing bid price
of the Company's Common Stock during the 10 trading day period immediately
preceding the Dividend Payment Date.
(iv) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities (as
defined herein) for any period unless full cumulative dividends required to be
paid in cash have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Series B Preferred Stock for all dividend payment periods terminating on or
prior to the date of payment of the dividend on such class or series of Pari
Passu Securities. When dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon shares
of the Series B Preferred Stock and all dividends declared upon any other class
or series of Pari Passu Securities shall be declared ratably in proportion to
the respective amounts of dividends accumulated and unpaid on the Series B
Preferred Stock and accumulated and unpaid on such Pari Passu Securities.
(v) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities (as defined herein),
nor shall any Junior Securities be redeemed, purchased or otherwise acquired
(other than a redemption, purchase or other acquisition of shares of Common
Stock made for purposes of an employee incentive or benefit plan (including a
stock option plan) of the Company or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Company, directly or indirectly, unless in
each case (i) the full cumulative dividends required to be paid in cash on all
outstanding shares of the Series B Preferred Stock and any other Pari Passu
Securities shall have been paid or set apart for payment for all past dividend
periods with respect to the Series B Preferred Stock and all past dividend
periods with respect to such Pari Passu Securities, and (ii) sufficient funds
shall have been paid or set apart for the payment of the dividend for the
current dividend period with respect to the Series B Preferred Stock and the
current dividend period with respect to such Pari Passu Securities.
(3) Conversion.
(i) The outstanding shares of Series B Preferred Stock shall be
convertible into Company units (the "Units") as is determined by dividing the
Stated Value by the Conversion Price, as defined below, at the option of the
Holder in whole or in part, within 15
14
days of the Holder's receipt of a notice of redemption from the Company or at
any time during the three year period commencing on the second anniversary of
the Issuance Date (the "Holder Conversion Period"). Each Unit consists of one
share of Common Stock (the "Unit Shares") and one common stock purchase warrant
(the "Unit Warrants") which may be exercised for the purchase of one additional
share of Common Stock (the "Warrant Shares") at an exercise price of $2.00 per
share at any time during the four year period commencing one year after the date
of issuance of the Units. Any conversion under this section shall be for a
minimum Stated Value of $25,000 of Series B Preferred Stock. The Holder shall
effect conversions by sending a conversion notice (the "Notice of Conversion")
in the manner set forth herein. Each Notice of Conversion shall specify the
Stated Value of Series B Preferred Stock to be converted, and the date on which
such conversion is to be effected (the "Conversion Date"). Except as provided
herein, each Notice of Conversion, once given, shall be irrevocable. If the
Holder is converting less than all of the Stated Value represented by a
certificate for the Series B Preferred Stock tendered by the Holder in the
Notice of Conversion, the Company shall deliver to the Holder a new Series B
Preferred Stock certificate for such Stated Value as has not been converted
within seven (7) Business Days of the Company's receipt of the original Series B
Preferred Stock and Notice of Conversion.
(ii) Not later than seven (7) Business Days after the Company's
receipt of the certificate or certificates for the Series B Preferred Stock and
the original of the Notice of Conversion, the Company will deliver to the Holder
(i) a certificate or certificates representing the number of Unit Shares and
Unit Warrants being acquired upon the conversion of Series B Preferred Stock and
(ii), if applicable, Series B Preferred Stock in principal amount equal to the
principal amount of Series B Preferred Stock not converted. In the case of a
conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required, the Holder shall be
entitled by providing 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 Series B
Preferred Stock tendered for conversion.
(iii) The Conversion Price for the conversion of a share of Series
B Preferred Stock into Units shall be $1.75 of Stated Value (the "Conversion
Price").
(iv) If the Company, at any time while any shares of Series B
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of its capital stock (whether payable in shares of its Common Stock or
of capital stock of any class), (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 Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock of the Company 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 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
reclassification.
15
(v) If the Company, at any time while any shares of Series B
Preferred Stock are outstanding, shall issue or sell shares of Common Stock, or
options, warrants or other rights to subscribe for or purchase shares of Common
Stock, (excluding shares of Common Stock issuable upon exercise of options,
warrants or conversion rights granted prior to the date hereof and shares of
Common Stock issuable upon exercise of options which may be issued subsequent to
the date hereof to Company employees, officers, or directors) at a price per
share less than the Conversion Price then in effect, the Conversion Price
designated herein shall be reduced to the price at which the shares of Common
Stock are issued or the price at which the options, warrants or other rights may
be exercised for the purchase of Common Stock. Such adjustment shall be made as
of the date such Common Stock, options, rights or warrants are issued.
(vi) If the Company, at any time while shares of Series B
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to Holders of Series B Preferred Stock) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Section (c)(3)(v) above) then in each such case
the Conversion Price at which each Series B 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, 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 of the principal amount of the Series B
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 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 Holder and all
other Holders of Series B 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.
(vii) All calculations hereunder shall be made to the nearest
1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any
calculation over .005 shall be rounded up to the next cent or share and any
calculation less than .005 shall be rounded down to the previous cent or share.
(viii) Whenever the Conversion Price is adjusted pursuant to
Section (c)(3)(iv), (v) or (vi), the Company shall within two (2) days after the
determination of the new Conversion Price mail and fax to the Holder and to each
other Holder of Series B Preferred Stock, a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
16
(ix) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, 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, then each holder of Series B Preferred Stock
then outstanding shall have the right thereafter to convert such Series B
Preferred Stock only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange
(except in the event the property is cash, then the Holder shall have the right
to convert the Series B Preferred Stock and receive cash in the same manner as
other stockholders), and the Holder shall be entitled upon such event to receive
such amount of securities or property as the shares of the Common Stock into
which such Series B Preferred Stock could have been converted immediately prior
to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. 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 the right to receive the securities or property set forth in
this section upon any conversion following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(x) 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 (other than a subdivision or combination
of the outstanding shares of Common Stock), 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, or any compulsory share 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 mailed and faxed to the Holders of Series B
Preferred Stock at their last addresses as it shall appear upon the Series B
Preferred Stock register, at least thirty (30) 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
17
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,
share exchange, dissolution, liquidation or winding-up is expected to become
effective, 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 or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up; 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.
(xi) 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 Series B Preferred Stock as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders of Series B Preferred Stock, such
number of shares of Common Stock as shall be issuable (taking into account the
adjustments and restrictions hereof) upon the conversion of the aggregate
principal amount of all outstanding Series B Preferred Stock. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issuance, be duly and validly authorized, issued and fully paid and
nonassessable.
(xii) No fractional Units shall be issuable upon a conversion
hereunder and the number of Unit Shares and Unit Warrants to be issued shall be
rounded up to the nearest whole number. Accordingly, if a fractional Unit
interest arises upon any conversion hereunder, the Company shall eliminate such
fractional Unit interest by issuing Holder an additional full Unit.
(xiii) The issuance of certificates for Unit Shares and Unit
Warrants on conversion of Series B Preferred Stock shall be made without charge
to the Holder for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, 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 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.
(xiv) Series B Preferred Stock converted into Units shall be
canceled upon conversion.
(xv) Each Notice of Conversion shall be given by facsimile to the
Company no later than 4:00 pm New York Time. In the event that the Company
receives the Notice of Conversion after 4:00 p.m. New York Time, the Conversion
Date shall be deemed to be the next business day. In the event that the Company
receives the Notice of Conversion after the end of the business day, notice will
be deemed to have been given the next business day.
18
(4) Events of Default and Remedies.
(i) "Event of Default", wherever used herein, means any one of the
following events:
(A) the Company shall fail to observe or perform any
material covenant, agreement or warranty contained in
Series (c)(3) of Article Third of these Articles of
Incorporation, and such failure shall not have been
remedied within ten (10) Business Days after the date
on which written notice of such failure shall have
been given;
(B) the occurrence of any event or breach or default by
the Company under the Purchase Agreement and such
failure or breach shall not have been remedied within
ten (10) Business Days after the date on which
written notice of such failure shall have been given;
(C) the Company or any of its subsidiaries shall commence
a voluntary case under the United States Bankruptcy
Code as now or hereafter in effect or any successor
thereto (the "Bankruptcy Code"); or an involuntary
case is commenced against the Company under the
Bankruptcy Code and the Company fails to pursue
dismissal of the case within sixty (60) days after
commencement of the case; or the Company commences
any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in
effect relating to the Company or there is commenced
against the Company any such proceeding and the
Company fails to pursue dismissal of the case within
sixty (60) days after commencement of the case; or
the Company suffers any appointment of any custodian
or the like for it or any substantial part of its
property and the Company fails to pursue dismissal of
the custodian within sixty (60) days after the
appointment; or the Company makes a general
assignment for the benefit of creditors; or any
corporate or other action is taken by the Company for
the purpose of effecting any of the foregoing;
19
(D) the Company shall voluntarily have its Common Stock
deleted or delisted, as the case may be, from the
OTCBB or other national securities exchange or market
on which such Common Stock is listed for trading or
suspended from trading thereon, and shall not have
its Common Stock relisted or have such suspension
lifted, as the case may be, within twenty (20)
trading days of such deletion or delisting;
(E) the Company shall issue a press release, or otherwise
make publicly known, that it is not honoring properly
executed Notice of Conversions for any reason
whatsoever;
(ii) If any Event of Default occurs and continues, beyond any cure
period, if any, then so long as such Event of Default shall then be continuing
any Holder may, by notice to the Company demand redemption of the Shares of
Series B Preferred Stock at the price of 105% of the Stated Value of each Share
of Series B Preferred Stock being redeemed plus accrued but unpaid dividends
thereon, whereupon the Stated Value and all accrued but unpaid Dividends shall
be immediately due and payable, and such Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by such Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon. This shall include, but
not be limited to the right to temporary, preliminary and permanent injunctive
relief without the requirement of posting any bond or undertaking.
(iii) Such Holder may thereupon proceed to protect and enforce its
rights either by suit in equity, or by action at law, or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Section (c)(3) of Article
Third of these Articles of Incorporation or in aid of the exercise of any power
granted in Section (c)(3) of Article Third of these Articles of Incorporation,
and proceed to enforce the redemption of any of the Series B Preferred Stock
held by it, and to enforce any other legal or equitable right of such Holder.
(iv) As a non-exclusive remedy, in the Event of a Default, the
Holder can convert the outstanding shares of Series B Preferred Stock at the
Conversion Price upon giving a Notice of Conversion to the Company.
(5) Redemption.
(i) The shares of Series B Preferred Stock are redeemable at the sole
option of the Company at any time prior to the Company's receipt of a
Notice of Conversion to the extent funds are legally available therefor, at
any time and from time to time, in whole or in part, at a redemption price
equal to 105% of the Stated Value of each share of Series B Preferred Stock
20
being redeemed plus accrued and unpaid dividends thereon ("Redemption
Price"). The Holder may provide the Company with a Notice of Conversion
within 15 days after Holder's receipt of a notice of redemption from the
Company. The Company is not obligated to provide for redemption of the
Series B Preferred Stock through a sinking fund. The Company must redeem
the shares of Series B Preferred Stock at the Redemption Price on the fifth
anniversary of the Issuance Date.
(ii) The Company shall not optionally redeem the Series B
Preferred Stock or any other Pari Passu Securities in whole or in part without
redeeming, on a pro rata basis, all outstanding Pari Passu Securities in
accordance with the relative amounts due the holders of Pari Passu Securities on
redemption.
(iii) Shares of Series B Preferred Stock which have been redeemed
or converted shall be deemed retired and shall thereafter resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series,
and may be redesignated and reissued as part of any new series of Preferred
Stock other than Series B Preferred Stock.
(iv) Notwithstanding the foregoing provisions of this Section
(c)(3), unless the full cumulative dividends on all outstanding shares of Series
B Preferred Stock shall have been paid or contemporaneously are declared and
paid for all past dividend periods, none of the shares of Series B Preferred
Stock may be redeemed.
(v) No redemption shall be made and no sum set aside for such
redemption unless at the time thereof (i) all accrued and unpaid dividends
payable on any Senior Securities (as defined in Section (c)(6) herein) have been
paid in full, (ii) all required mandatory redemptions on Senior Securities have
been made in full and (iii) all optional redemptions of Senior Securities, if
any, previously declared, have been made in full. No redemption shall be made
and no sum set aside for such redemption at any time that the terms or
provisions of any indenture or agreement of the Company, including any agreement
relating to indebtedness, specifically prohibits such redemption or setting
aside or provides that such redemption or setting aside would constitute a
breach or default thereunder (after notice or lapse of time or both), except
with the written consent of the lender or other parties to said agreement as the
case may be.
(vi) If any redemption shall at any time be prohibited by the
Nevada Revised Statutes, the same shall be deferred until such time as the
redemption can occur in full compliance with such statute.
(vii) In the event the Company shall redeem shares of Series B
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, or by confirmed facsimile transmission, not less than
twenty-one (21) days prior to the date fixed by the Board for redemption to each
holder of Series B Preferred Stock at the address that appears on the Company's
stock record books; provided, however, that no failure to provide such notice
nor any defect therein shall affect the validity of the redemption proceeding
except as to the
21
Holder to whom the Company has failed to send such notice or whose notice was
defective. Each notice shall state (i) the redemption date, (ii) the number of
shares of Series B Preferred Stock to be redeemed; (iii) the Redemption Price;
(iv) the place or places where certificates for shares of Series B Preferred
Stock are to be surrendered for payment and (v) that dividends on the redeemed
shares shall cease to accrue on such redemption date. When notice has been
provided as aforesaid then from and after the redemption date (unless default
shall be made by the Company in providing money for the payment of the
Redemption Price of the shares called for redemption) dividends on the shares
called for redemption shall cease to accrue and said shares shall no longer be
deemed to be outstanding and all rights of the holders thereof shall cease
(other than the right to receive the Redemption Price). Upon surrender of the
certificates for Series B Preferred Stock accompanied by appropriate stock
powers, the shares shall be redeemed by the Company at the Redemption Price. In
case fewer than all shares represented by any such certificate are redeemed, a
new certificate representing the shares of Series B Preferred Stock not so
redeemed shall be issued to the holder without cost.
(6) Rank. The Series B Preferred Stock shall, as to dividends,
redemptions, and the distribution of assets upon liquidation, dissolution or
winding up of the Company, rank (i) prior to the Company's Common Stock; (ii)
prior to any class or series of capital stock of the Company hereafter created
that, by its terms, ranks junior to the Series B Preferred Stock ("Junior
Securities"); (iii) junior to any class or series of capital stock of the
Company hereafter created (with the consent of the holders of a majority of the
outstanding Series A Preferred Stock and the holders of a majority of the
outstanding Series B Preferred Stock) which by its terms ranks senior to the
Series B Preferred Stock ("Senior Securities"); and (iv) pari passu with the
Company's Series A Preferred Stock and any other series of preferred stock of
the Company hereafter created (with the consent of the holders of a majority of
the outstanding Series A Preferred Stock and the holders of a majority of the
outstanding Series B Preferred Stock) which by its terms ranks on a parity
("Pari Passu Securities") with the Series B Preferred Stock.
(7) Liquidation Preference. If the Company shall commence a voluntary
case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or make an assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Company shall be entered by a court having jurisdiction in the premises in
an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60 consecutive days and,
on account of any such event, the Company shall liquidate, dissolve or wind up,
or if the Company shall otherwise liquidate, dissolve or wind up, including, but
not limited to, the sale or transfer of all or substantially all of the
Company's assets in one transaction or in a series of related transactions (a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Company (other than Senior Securities and Pari Passu
Securities) upon liquidation, dissolution or winding up unless, prior thereto,
the Holders of shares of Series B Preferred Stock shall have received the
Liquidation Preference (as defined below) with respect
22
to each share. If, upon the occurrence of a Liquidation Event, the assets and
funds available for distribution among the Holders of the Series B Preferred
Stock and Holders of Pari Passu Securities shall be insufficient to permit the
payment to such holders of the preferential amounts payable thereon, then the
entire assets and funds of the Company legally available for distribution to the
Series B Preferred Stock and the Pari Passu Securities shall be distributed
ratably among such shares in proportion to the ratio that the Liquidation
Preference payable on each such share bears to the aggregate Liquidation
Preference payable on all such shares. The purchase or redemption by the Company
of stock of any class, in any manner permitted by law, shall not, for the
purposes hereof, be regarded as a liquidation, dissolution or winding up of the
Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. The "Liquidation Preference" with
respect to a share of Series B Preferred Stock means an amount equal to the
Stated Value thereof, plus the accrued but unpaid dividends thereon through the
date of final distribution. The Liquidation Preference with respect to any Pari
Passu Securities shall be as set forth in the Certificate of Designation filed
in respect thereof.
(8) Voting Rights. The Holders of the Series B Preferred Stock have no
voting power whatsoever, except as otherwise provided by the Nevada Revised
Statutes. To the extent that under the Nevada Revised Statutes the vote of the
Holders of the Series B Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the Holders of at least a majority of the then
outstanding shares of the Series B Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the Holders of at
least a majority of the then outstanding shares of Series B Preferred Stock
(except as otherwise may be required under the Nevada Revised Statutes) shall
constitute the approval of such action by the class. To the extent that under
the Nevada Revised Statutes Holders of the Series B Preferred Stock are entitled
to vote on a matter with holders of Common Stock, voting together as one class,
each share of Series B Preferred Stock shall be entitled to a number of votes
equal to the number of shares of Common Stock into which it is then convertible
(subject to the limitations contained herein) using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated.
(9) Miscellaneous.
(i) If any shares of Series B Preferred Stock are converted, the
shares so converted shall be cancelled, shall return to the status of
authorized, but unissued preferred stock of no designated series, and shall not
be issuable by the Company as Series B Preferred Stock.
(ii) Upon receipt by the Company of (i) evidence of the loss,
theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii)
(y) in the case of loss, theft or destruction, of indemnity (without any bond or
other security) reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
certificate(s), the Company shall execute and deliver new Preferred Stock
certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost or stolen
23
Preferred Stock certificate(s) if the Holder contemporaneously requests the
Company to convert such Series B Preferred Stock.
(iii) Upon submission of a Notice of Conversion by a Holder of
Series B Preferred Stock, (i) the shares covered thereby shall be deemed
converted into Units and (ii) the Holder's rights as a Holder of such converted
shares of Series B Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for the Unit Shares and the Unit Warrants and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Company to comply with the terms of this
Certificate of Designation. Notwithstanding the foregoing, if a Holder has not
received certificates for all the Unit Shares and the Unit Warrants prior to the
tenth business day after the expiration of the delivery period with respect to a
conversion of Series B Preferred Stock for any reason, then (unless the Holder
otherwise elects to retain its status as a holder of the Unit Shares and the
Unit Warrants by so notifying the Company within five business days after the
expiration of such 10 business day period) the Holder shall regain the rights of
a Holder of Series B Preferred Stock with respect to such unconverted shares of
Series B Preferred Stock and the Company shall, as soon as practicable, return
such unconverted shares to the Holder. In all cases, the Holder shall retain all
of its rights and remedies for the Company's failure to convert Series B
Preferred Stock.
(iv) The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit a
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Certificate of Designation. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the
Holders of Series B Preferred Stock and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees, in the event of any such
breach or threatened breach, that the Holders of Series B Preferred Stock shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
(d) Preemptive Rights. No holder of any of the shares of any
class of the corporation shall be entitled as of right to subscribe
for, purchase, or otherwise acquire any shares of any class of the
corporation which the corporation proposes to issue or any rights or
options which the corporation proposes to grant for the purchase of
shares of any class of the corporation or for the purchase of any
shares, bonds, securities, or obligations of the corporation which are
convertible into or exchangeable for, or which carry any rights, to
subscribe for, purchase, or otherwise acquire shares of any class of
the corporation; and any and all of such shares, bonds, securities, or
obligations of the corporation, whether now or hereafter authorized or
created, may be issued, or may be reissued or transferred if the same
have been reacquired and have treasury status, and any and all of such
rights and options may be granted by the Board of Directors to such
persons, firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder.
24
FOURTH: The governing board of the corporation shall be styled as a
"Board of Directors", and any member of said Board shall be styled as a
"Director."
The number of members constituting the first Board of Directors of the
corporation is 2; and the name and the post office box or street address, either
residence or business, of each of said members are as follows:
NAME ADDRESS
---- -------
Harvey Lalach 275 Alberta Court
Kelowna, British Columbia V1W 2X8
James Golla 829 Terlin Boulevard
Mississauga, Ontario L5H 1T1
The number of directors of the corporation may be increased or
decreased in the manner provided in the Bylaws of the corporation; provided,
that the number of directors shall never be less than one. In the interim
between elections of directors by stockholders entitled to vote, all vacancies,
including vacancies caused by an increase in the number of directors and
including vacancies resulting from the removal of directors by the stockholders
entitled to vote which are not filled by said stockholders, may be filled by the
remaining directors, though less than a quorum.
FIFTH: The name and the post office box or street address, either
residence or business, of the incorporator signing these Articles of
Incorporation are as follows:
NAME ADDRESS
---- -------
Scott E. Rapfogel 488 Madison Avenue
New York, NY 10022
SIXTH: The corporation shall have perpetual existence.
SEVENTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the General Corporation Law
of the State of Nevada, as the same may be amended and supplemented.
EIGHTH: The corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
NINTH: The nature of the business of the corporation and the objects or
the purposes to be transacted, promoted, or carried on by it are as follows:
25
To engage in any lawful activity.
TENTH: The corporation reserves the right to amend, alter, change, or
repeal any provision contained in these Articles of Incorporation in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation
on September 3, 2003
/s/ Scott E. Rapfogel
--------------------------------
Scott E. Rapfogel, Incorporator
STATE OF New York )
) SS.:
COUNTY OF New York )
On this September 3, 2003, personally appeared before me, a Notary
Public in and for the State and County aforesaid, Scott E. Rapfogel, known to me
to be the person described in and who executed the foregoing Articles of
Incorporation, and who acknowledged to me that he executed the same freely and
voluntarily and for the uses and purposes therein mentioned.
WITNESS my hand and official seal, the day and year first above
written.
/s/ Salvatore Fichera
-------------------------------
Notary Public
(Notarial Seal)
26