EXHIBIT 3.1
RCG COMPANIES INCORPORATED
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B 6% REDEEMABLE PARTICIPATING PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Michael Pruitt, Chief Executive Officer and Melinda
Morris Zanoni, Secretary, do hereby certify that:
1. They are the President and Secretary, respectively, of RCG
Companies Incorporated, a Delaware corporation (the "Corporation").
2. The Corporation is authorized to issue 10,000,000 shares of
preferred stock, 6,000 of which have been designated Series A 6% Convertible
Preferred Stock.
3. The following resolutions were duly adopted by the Board of
Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for a class of its authorized stock known as preferred stock, comprised of
10,000,000 shares, $0.01 par value, issuable from time to time in one or more
series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix
the dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of
preferred stock and the number of shares constituting any Series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock,
which shall consist of up to 3,000,000 shares of the preferred stock which the
corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock pursuant to the Merger
Agreement and does hereby fix and determine the rights, preferences,
restrictions and other matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section 1. Designation, Amount and Ranking. The series of preferred
stock shall be designated as its Series B 6% Redeemable Participating Preferred
Stock (the "Preferred Stock") and the number of shares so designated shall be
3,000,000 (which shall not be subject to increase without the consent of the
holders of a majority of the outstanding Preferred Stock (each, a "Holder" and
collectively, the "Holders")). Each share of Preferred Stock shall have a stated
value equal to $8.18 (the "Stated Value"). Capitalized terms not otherwise
defined herein shall have the meaning given such terms in Section 8 hereof.
Section 2. Dividends.
(a) Holders shall be entitled to receive and the Corporation
shall pay, cumulative dividends at the rate per share (as a percentage
of the Stated Value per share) of 6% per annum from the Original Issue
Date, payable annually beginning with January 31, 2006 and at the
Conversion Time pursuant to the terms hereunder (except that, if such
date is not a Trading Day, the payment date shall be the next
succeeding Trading Day) ("Dividend Payment Date"); provided, however if
the Preferred Stock is converted into Common Stock pursuant to Section
5(a) hereof before 270 days have lapsed from the Effective Time under
the Merger Agreement then no dividend will be due or payable. The form
of dividend payments to each Holder shall be made at the option of the
Company either in cash or additional Shares of Preferred Stock with a
Stated Value equal to the amount of dividend being paid. Dividends on
the Preferred Stock shall be calculated on the basis of a 360-day year,
shall accrue daily commencing on the Original Issue Date, and shall be
deemed to accrue from such date whether or not earned or declared and
whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. Except as
otherwise provided herein, if at any time the Corporation pays
dividends partially in cash and partially in shares, then such payment
shall be distributed ratably among the Holders based upon the number of
shares of Preferred Stock held by each Holder. Any dividends, whether
paid in cash or shares, that are not paid within fifteen Trading Days
following a Dividend Payment Date shall continue to accrue and shall be
in default.
(b) So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly either (i) any
Junior Securities or Parity Securities, or (ii) Senior Securities other
than the Corporation's Series A 6% Convertible Preferred Stock in
accordance with the terms thereof as in effect on November 30, 2004 or
other Senior Securities that are issued, if any, after the Effective
Time under the Merger Agreement with the consent of the Holders of the
Preferred Stock or with Preferred Director Approval ("Approved Senior
Securities"). So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any subsidiary thereof shall directly or
indirectly pay or declare any dividend or make any distribution (other
than a dividend or distribution in Common Stock described in Section
5(b)) upon, nor shall any distribution be made in respect of, any
Junior Securities, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of any
(i) Junior Securities or Parity Securities or (ii) Senior Securities
other than Approved Senior Securities.
(c) The Corporation acknowledges and agrees that the capital
of the Corporation (as such term is used in Section 151 of the General
Corporation Law of Delaware) in respect of the Preferred Stock and any
future issuances of the Corporation's capital stock shall be equal to
the aggregate par value of such Preferred Stock or capital stock, as
the case may be, and that, on or after the date of the Merger
Agreement, it shall not increase the capital of the Corporation with
respect to any shares of the Corporation's capital stock issued and
outstanding on such date. The Corporation also acknowledges and agrees
that it shall not create any special reserves under Section 171 of the
General Corporation Law of Delaware without the prior written consent
of each Holder.
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Section 3. Voting Rights.
(a) Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights.
Except as expressly required under Delaware Law, on any matter on which
holders of shares of Preferred Stock shall be entitled to vote, they
shall be entitled to one vote per share, voting as a single class, and
any consent, approval or action to be taken by the Preferred Stock
shall require the consent or approval of a majority of the shares of
the outstanding Preferred Stock.
(b) So long as any shares of Preferred Stock are outstanding,
the Corporation shall not, without the written consent or affirmative
vote at a meeting called for that purpose of the holders of a majority
of the shares of Preferred Stock then outstanding, amend, alter or
repeal, whether by merger, consolidation, combination, reclassification
or otherwise, the Certificate of Incorporation, as may be amended or
restated to date, or any Certificate of Designation or Bylaws of the
Corporation or of any provision thereof (including the adoption of a
new provision thereof) which would result in an alteration or
circumvention of the voting powers, designation and preferences and
relative participating, optional and other special rights, and
qualifications, limitations and restrictions of the Preferred Stock.
(c) So long as any shares of Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote of the Holders
of the shares of the Preferred Stock then outstanding, (i) alter or
change adversely the powers, preferences or rights given to the
Preferred Stock or alter or amend this Certificate of Designation, (ii)
authorize or create any (A) Senior Securities other than Senior
Securities for the acquisition of any business including the Merger, on
terms approved by a Preferred Director Approval, (B) Parity Securities,
or (C) any Junior Securities other than Common Stock, (iii) amend its
certificate of incorporation except to decrease the authorized Common
Stock (but not below an amount required to be maintained under Section
10(b) hereof), (iv) increase the authorized number of shares of
Preferred Stock or the number of shares of the Company Series A 6%
Convertible Preferred Stock, (v) unless authorized by a Preferred
Director Approval, create, incur, assume, maintain or permit to exist,
except as may be in existence at the Effective Time under the Merger
Agreement, any long-term debt or any short-term debt for borrowed money
other than under lines of credit existing on November 30, 2004 (which
amounts permitted or drawn thereunder shall not be increased), or
relating to purchase money security interests or obligations as a
lessee under leases recorded as capital leases, each as incurred in the
ordinary course of business and in amounts less than $25,000; (vi)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other Person other than a subsidiary of the Company; or (vii) make
any loans, advances or capital contributions to, or investments in, any
other Person other than a subsidiary of the Company; (viii) authorize,
recommend, propose or announce an intention to authorize, recommend or
propose, or enter into any agreement in principle or an agreement with
respect to, any (A) plan of liquidation or dissolution, (B) unless
authorized by a Preferred Director Approval, acquisition of an amount
of assets or securities in excess of $500,000, (C) unless authorized by
a Preferred Director Approval, disposition of assets or securities in
amounts greater than $500,000, or (D) unless authorized by a Preferred
Director Approval, merger or combination to which the Company or any
subsidiary of the Company is a party, (ix) unless authorized by a
Preferred Director Approval, engage in any unusual or novel method of
transacting business or change any accounting procedure or practice or
its financial structure; or (x) enter into any agreement with respect
to the foregoing. Notwithstanding the foregoing, in no event shall the
consent of the Holders or a Preferred Director Approval be required for
the issuance of any Common Stock which is issuable upon exercise or
conversion of warrants, options or convertible securities that are
outstanding at the Effective Time under the Merger Agreement or that
are otherwise permitted to be issued in connection with transactions
authorized pursuant to the foregoing provision.
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(d) The consent or votes required in Sections 3(b) and 3(c)
above shall be in addition to any approval of stockholders of the
Corporation which may be required by law or pursuant to any provision
of the Corporation's certificate of incorporation or bylaws.
(e) At the Effective Time under the Merger Agreement, the
Directors shall be constituted and established pursuant to the Merger
Agreement and the holders of shares of Preferred Stock, voting as a
single class, shall be entitled to elect three directors to serve on
the Board of Directors at any annual meeting of stockholders or special
meeting held in place thereof, or at a special meeting of the holders
of the Preferred Stock called as hereinafter provided. If a vacancy
shall exist in the office of a director elected by the holders of
Preferred Stock, a proper officer of the Corporation may, and upon the
written request of the holders of record of at least twenty-five
percent (25%) of the shares of Preferred Stock then outstanding to the
Secretary of the Corporation shall, call a special meeting of the
holders of Preferred Stock, for the purpose of electing the director
which such holders are entitled to elect. If such meeting shall not be
called by proper officer of the Corporation within twenty (20) days
after personal service of said written request upon the Secretary of
the Corporation, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the Secretary
of the Corporation at its principal executive offices, then the holders
of at least twenty-five percent (25%) of the outstanding shares of
Preferred Stock may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting may be
called by the person so designated upon the notice required for the
annual meeting of stockholders of the Corporation and shall be held at
the place for holding the annual meetings of stockholders. Any holder
of Preferred Stock so designated shall have, and the Corporation shall
provide, access to the lists of stockholders to be called pursuant to
the provisions thereof.
Section 4. Liquidation. Upon any liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary (a "Liquidation"), the
Holders shall be entitled to receive out of the assets of the Corporation,
whether such assets are capital or surplus, for each share of Preferred Stock an
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amount equal to the greater of (i) Stated Value per share plus any accrued and
unpaid dividends thereon and any other fees owing thereon before any
distribution or payment shall be made to the holders of any Junior Securities,
or (ii) the Participating Value per Share (the greater of the two being
"Liquidation Value"), and if the assets of the Corporation shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the
Holders shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. The Corporation shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each record Holder.
Section 5. Conversion.
(a) Automatic Conversion to Common Stock.
(i) If a Stockholder Approval Event shall occur and the Equity
Conditions are satisfied, or with the consent of the Holders waived,
each outstanding share of Preferred Stock, and fractions thereof, shall
automatically and immediately convert, into the Conversion Ratio number
of shares of Common Stock and (ii) unless the conversion has occurred
within 270 days of the Original Issue Date, any right to obtain any
then accrued but unpaid dividends on each share of Preferred Stock
shall be due and payable. After such conversion, upon surrender to the
Corporation for cancellation of a certificate previously representing
outstanding shares of Preferred Stock, together with instruments of
transfer in form satisfactory to the Corporation, the holder of such
certificate shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Common Stock equal to
the Conversion Ratio multiplied by the number of shares of Preferred
Stock previously represented by the surrendered certificate plus
payment of any accrued and unpaid dividend (payable at the option of
the Company either in cash or Common Stock valued at the VWAP as of the
Conversion Time). Until so surrendered, each outstanding certificate
that, prior to the time of the conversion of the Preferred Stock into
Common (the "Conversion Time"), represented outstanding shares of
Preferred Stock will be deemed from and after the Conversion Time, for
all corporate purposes, to evidence the ownership of the applicable
number of shares of Common Stock.
(ii) Not later than ten Trading Days after a Holder has
delivered to the Company its Preferred Stock Certificates for
conversion or a certificate from the Holder attesting to the loss or
destruction thereof and agreeing to indemnify the Company with respect
to the replacement thereof (the "Share Delivery Date"), the Corporation
shall deliver to the Holder (A) a certificate or certificates which, if
the Effective Date has occurred, shall be free of restrictive legends
and trading restrictions, except as may be applicable to any
"Affiliate" of the Company (as defined under Rule 144 of the Securities
and Exchange Commission) representing the number of shares of Common
Stock being acquired upon the conversion of shares of Preferred Stock,
and (B) a bank check in the amount of accrued and unpaid dividends (if
the Corporation has elected or is required to pay accrued dividends in
cash and is permitted to make such payment).
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(iii) The Corporation's obligations to issue and deliver the
Conversion Shares upon conversion of Preferred Stock in accordance with
the terms hereof are absolute and unconditional, irrespective of any
action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation of
law by the Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the
Corporation to the Holder in connection with the issuance of such
Conversion Shares.
(iv) Nothing herein shall limit a Holder's right to pursue
actual damages for the Corporation's failure to deliver certificates
representing shares of Common Stock upon conversion within the period
specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(b) Conversion Ratio. (i) The conversion ratio shall equal ten (the
"Conversion Ratio"), subject to the following adjustment. If the
Corporation, at any time while the Preferred Stock is outstanding: (A)
shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock, (B)
subdivide outstanding shares of Common Stock into a larger number of
shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or
(D) issue by reclassification of shares of the Common Stock any shares
of capital stock of the Corporation, then the Conversion Ratio shall be
multiplied by a fraction of which the denominator shall be the number
of shares of Common Stock Outstanding before such event and of which
the numerator 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.
(ii) All calculations under this Section 5(b) shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Corporation, and the disposition of any such shares shall be considered
an issue or sale of Common Stock. For purposes of this Section 5(b),
the number of shares of Common Stock deemed to be outstanding (the
"Common Stock Outstanding") as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
issued and outstanding.
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(iii) Whenever the Conversion Ratio is adjusted pursuant to
this Section the Corporation shall promptly mail to each Holder, a
notice setting forth the Conversion Ratio after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
Section 6. Subscription Rights. If the Corporation, at any time while
the Preferred Stock is outstanding, shall issue rights, options or warrants to
all holders of Common Stock entitling them to subscribe for or purchase shares
of Common Stock or, subject to approval by the Holders, other securities of the
Company, then the Corporation shall issue to the Holders the same rights,
options or warrants to which they would have been entitled had the Preferred
Stock been converted into the Conversion Shares immediately before the date on
which a record is taken for the grant, issuance or sale of such rights, options
or warrants or if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
such rights, options or warrants.
Section 7. Redemption Upon Triggering Events.
(a) Upon the occurrence of a Triggering Event, the Holders
shall (in addition to all other rights they may have hereunder or under
applicable law) have the right, exercisable at the sole option of the
Holders, to require the Corporation to redeem all of the outstanding
Preferred Stock for a redemption price, in cash, equal to the
Liquidation Value. The Liquidation Value shall be due and payable
within 5 Trading Days of the date on which the notice for the payment
therefor is provided by the Holders (the "Triggering Redemption Payment
Date"). If the Corporation fails to pay the Liquidation Value hereunder
in full pursuant to this Section on the date such amount is due in
accordance with this Section, the Corporation will pay interest thereon
at a rate of 12% per annum (or such lesser amount permitted by
applicable law), accruing daily from such date until the Liquidation
Value, plus all such interest thereon, is paid in full. For purposes of
this Section, a share of Preferred Stock is outstanding until such date
as the Holder shall have received the Liquidation Value plus all
accrued but unpaid dividends or interest in cash.
(b) "Triggering Event" means the occurrence of any Change of
Control Transaction or Fundamental Transaction to which the Holders
have not given their prior consent, or a Bankruptcy Event (whatever the
reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or
governmental body).
Section 8. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Bankruptcy Event" means any of the following events: (a) the
Corporation or any Significant Subsidiary (as such term is hereinafter
defined) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Corporation or any Significant Subsidiary
thereof; (b) there is commenced against the Corporation or any
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Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Corporation or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or
any order of relief or other order approving any such case or
proceeding is entered; (d) the Corporation or any Significant
Subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property that is not discharged
or stayed within 60 days; (e) the Corporation or any Significant
Subsidiary thereof makes a general assignment for the benefit of
creditors; (f) the Corporation or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (g) the
Corporation or any Significant Subsidiary thereof, by any act or
failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other
action for the purpose of effecting any of the foregoing. For purposes
hereof Significant Subsidiary shall mean FS SunTours, Inc. and
FareQuest Holdings, Inc., or their respective successors.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 25% of the
voting securities of the Corporation, or (b) a replacement at one time
or within a one year period of more than one-half of the members of the
Corporation's board of directors which is not approved by a majority of
those individuals who are members of the board of directors named by
FareQuest Holdings, Inc. immediately following the Effective Time of
the Merger (or by those individuals who are serving as members of the
board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of
directors named by FareQuest Holdings, Inc., immediately following the
Effective Time of the Merger, or (c) the execution by the Corporation
of an agreement to which the Corporation is a party or by which it is
bound, providing for any of the events set forth above in (a) or (b).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's common stock, par value
$0.04 per share, and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"Common Stock Outstanding" shall have the meaning set forth in
Section 5(b)(ii).
"Conversion Shares" means, collectively, the shares of Common
Stock into which the shares of Preferred Stock are convertible in
accordance with the terms hereof.
"Conversion Shares Registration Statement" means a
registration statement that meets the requirements of the Registration
Rights Agreement and registers the resale of all Conversion Shares by
the Holder, who shall be named as a "selling stockholder" thereunder,
all as provided in the Registration Rights Agreement.
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"Dividend Payment Date" shall have the meaning set forth in
Section 2(a).
"Effective Date" means the date that the Conversion Shares
Registration Statement is declared effective by the Commission.
"Equity Conditions" Unless waived by the Holders of the
Preferred Stock as to a particular event (which waiver shall apply only
to such event), as of such event date, the following conditions have
been met: (i) there is an effective Conversion Shares Registration
Statement pursuant to which the Holders are permitted to utilize the
prospectus thereunder to resell all of the Conversion Shares issued to
the Holders and all of the Conversion Shares as are issuable to the
Holders upon conversion in full of the Preferred Stock or the
Conversion Shares are available for resale under Rule 144(k) (and the
Corporation believes, in good faith, that such effectiveness will
continue for the foreseeable future), (iii) the Common Stock is listed
for trading on the Trading Market, (iv) all amounts owing including
dividends in respect of the Preferred Stock shall have been paid or
will, concurrently with the issuance of the Conversion Shares, be paid;
(v) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all the
Conversion Shares as are issuable to the Holder upon conversion in full
of the Preferred Stock; and (vi) no Triggering Event has occurred and
is continuing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" means the occurrence after the date
hereof of any of (a) the Corporation effects any merger or
consolidation of the Corporation or a subsidiary with or into another
Person, in which the Corporation is not the surviving entity, or the
Corporation's then existing shareholders will own less than 51% of the
surviving entity or less than 51% of its stock which is entitled to
ordinarily elect its directors (b) the Corporation effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (c) any tender offer or exchange offer (whether by the
Corporation or another Person) is completed pursuant to which holders
of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, the result of which to the
Corporation's shareholders at such time own less than 51% of the shares
of Common Stock of the Corporation, or (d) the Corporation effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property.
"Holder" shall have the meaning given such term in Section 1
hereof.
"Junior Securities" means the Common Stock and a class or
series of stock to which the Holders of the Preferred Stock shall be
entitled by the terms thereof to receipt of dividends and amounts
distributed upon liquidation, dissolution or winding up in preference
or priority to the holders of shares of such class or series,
(including, but not limited to preferences as to payment of dividends
or other amounts distributable upon liquidation).
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"Merger Agreement" means the Agreement and Plan of Merger,
dated as of November 30, 2004, as amended, by among FareQuest Holdings,
Inc., William A. Goldstein, the Corporation, and WTI Acquisition, Inc.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the number
of transfers of any particular shares of Preferred Stock and regardless
of the number of certificates which may be issued to evidence such
Preferred Stock, and shall be the day of the Effective Time under the
Merger Agreement with regard to the shares first issued in connection
with the merger thereunder.
"Parity Securities" means a class or series of stock for which
the holders of the Preferred Stock and of such class or series of stock
shall be entitled by the terms thereof to the receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding up,
or both, in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation preferences (including, but
not limited to preferences as to payment of dividends or other amounts
distributable upon liquidation), without preference or priority one
over the other and such class of stock or series is not a class of
Senior Securities.
"Person" means a corporation, an association, a partnership,
an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Preferred Director Approval" means approval by a majority of
the Directors named by FareQuest Holdings, Inc. under the Merger
Agreement or elected by the Holders.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Effective Time under the Merger Agreement,
to which the Corporation and the original Holders are parties, as
amended, modified or supplemented from time to time in accordance with
its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Securities" means any class or series of stock of the
Corporation if the holders of such class or series shall be entitled by
the terms thereof to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up, in
preference or priority to the holders of Preferred Stock.
"Stockholder Approval Event" means the approval by the
stockholders of the Corporation of the issuance of the Conversion
Shares and the Conversion of the Preferred Stock into the Conversion
Shares pursuant to Section 5 hereof.
"Trading Day" shall mean any day during which the Trading
Market shall be open for business.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
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"Triggering Event" shall have the meaning set forth in Section
7(b).
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a principal market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Principle Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on
a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a principal
market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holders and reasonably
acceptable to the Company.
"Participating Value" means, the Fair Value of the Common
Stock multiplied by the number of shares of Common Stock into which the
Preferred Stock outstanding as of any determination date are
convertible, assuming such shares were convertible at such time, plus
any remaining Additional RCG Shares (as defined in the Merger
Agreement) which upon conversion of the then remaining Series A 6%
Convertible Preferred Stock would be issued pursuant to the terms of
the Merger Agreement following such date of determination.
"Participating Value per Share" means, the Participating Value
divided by the number of shares of Preferred Stock outstanding.
"Fair Value of Common Stock" means, the highest of the
following:
(1) If applicable the highest per share price (including
commissions, transfer taxes and soliciting dealers
fees) paid by the Interested Stockholder in acquiring
any shares of Common Stock;
(2) the VWAP per share of Common Stock on the
Announcement Date;
(3) the VWAP per share of Common Stock on the
Determination Date.
"Announcement Date" means, the date of the first public
announcement of the terms of the transaction or proposal which will
constitute the Change of Control Transaction or the Fundamental
Transaction.
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"Determination Date" means, the date on which a Change of
Control Transaction occurs (including the date on which the Interested
Stockholder becomes an Interested Stockholder) or a Fundamental
Transaction is consummated.
"Interested Stockholder" means the party or parties described
in clause (a) of the definition of "Change of Control Transaction".
The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or
options exercisable or exchangeable for or convertible into any of the
Senior Securities, Junior Securities or Parity Securities.
Section 9. Fundamental Transactions. If a Fundamental Transaction
occurs, then upon any subsequent conversion of shares of Preferred Stock, the
Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion absent such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of the
Conversion Shares into which such Preferred Stock is convertible under Section 5
hereof (the "Alternate Consideration"). If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of shares of Preferred Stock
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Corporation or surviving entity
in such Fundamental Transaction shall issue to the Holder new preferred stock
consistent with the foregoing provisions and evidencing the Holder's right to
convert such preferred stock into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 9 and insuring that the Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
Section 10. Miscellaneous.
(a) Without in any way limiting the approval rights of the
Holders otherwise provided under this Certificate of Designation, if
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock, (ii) the Corporation shall declare a
special nonrecurring cash dividend on or a redemption of the Common
Stock, (iii) the Corporation shall authorize the granting to all
holders of Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (iv) the
approval of any stockholders of the Corporation shall be required in
connection with any Fundamental Transaction or Change of Control
Transaction, or (v) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Corporation; then the Corporation shall file a press release or
Current Report on Form 8-K to disclose such occurrence and notify the
Holders at their last addresses as they shall appear upon the stock
books of the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on
which any such Fundamental Transaction or Change of Control Transaction
is expected to become effective or close, and the date as of which it
is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities, cash or other property
deliverable upon any such Fundamental Transaction or Change of Control
Transaction
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(b) The Corporation covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of
Common Stock solely for the purpose of issuance upon conversion of
Preferred Stock, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than
the Holders, not less than such number of shares of Common Stock as
shall be issuable upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid and nonassessable.
(c) Upon a conversion hereunder the Corporation shall not be
required to issue stock certificates representing fractions of shares
of Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the VWAP at such
time. If any fraction of a Conversion Share would, except for the
provisions of this Section, be issuable upon a conversion hereunder,
the Corporation shall at its option either pay an amount in cash equal
to the VWAP immediately prior to the applicable conversion multiplied
by such fraction or round up to the next whole share.
(d) The issuance of certificates for Common Stock on
conversion of Preferred Stock shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided that the Corporation shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such shares of Preferred Stock so converted.
(e) Any and all notices or other communications or deliveries
to be provided by the Holders of the Preferred Stock hereunder,
including, without limitation, any Conversion Notice, shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the
Chief Financial Officer of the Corporation addressed to WILLIAM HODGE,
FAX NUMBER: (704) 366 5056 or to such other address or facsimile number
as shall be specified in writing by the Corporation for such purpose.
Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the
Corporation, which address shall initially be the address of such
Holder set forth on the Company's records, or such other address as the
Corporation or a Holder may designate by ten days advance written
notice to the other parties hereto. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or
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communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 5:00 p.m. (New York City
time) (with confirmation of transmission), (ii) the date after the date
of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section
later than 5:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date (with confirmation of
transmission), (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, (iv) one day
after deposit with a nationally recognized overnight courier service,
specifying next day delivery, with written verification of service, or
(v) upon actual receipt by the party to whom such notice is required to
be given.
* * * * * * * * * * * * * * * * * * * * * *
RESOLVED, FURTHER, that the Chairman, the president or any
vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file a Certificate
of Designation of Preferences, Rights and Limitations in accordance with the
foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
___ day of __________ 2005.
- -------------------------- --------------------------
Name: Name:
Title: Title:
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