Exhibit 4.1
RCG COMPANIES INCORPORATED
CERTIFICATE OF DESIGNATION
OF PREFERENCES, RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE 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:
A. They are the President and Secretary, respectively, of RCG Companies
Incorporated, a Delaware corporation (the "Company").
B. The Certificate of Incorporation of the Company, as amended to date,
provides for a class of 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.
C. 6,000 shares of preferred stock of the Company have been designated
as Series A 6% Convertible Preferred Stock, and 3,000,000 shares of preferred
stock of the Company have been designated Series B 6% Redeemable Participating
Preferred Stock.
D. The Board of Directors of the Company is authorized to fix the
rights, preferences, restrictions and other matters of any wholly unissued
series of preferred stock of the Company, and the number of shares constituting
ay such series and the designation thereof.
E. The following resolutions were duly adopted by the Board of
Directors:
RESOLVED, that the undersigned approve the designation of up to 450
shares of preferred stock as Series C Preferred Stock, with the preferences and
rights as follows:
TERMS OF PREFERRED STOCK
1. Designation, Amount and Par Value. The series of preferred stock
shall be designated the Series C Convertible Preferred Stock (the "PREFERRED
STOCK") and the number of shares so designated shall be 450. Each share of
Preferred Stock shall have a par value of $.001 per share and a stated value
equal to the sum of $100,000 plus all accumulated and unpaid dividends to the
date of determination (the "STATED VALUE").
2. Definitions. As used in this Certificate of Designation, the
following terms shall have the meanings set forth in this Section 2:
"ALTERNATE CONSIDERATION" shall have the meaning set forth in
Section 6(f)(iii).
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"AUTOMATIC CONVERSION DATE" shall have the meaning set forth in
Section 6(a).
"AUTOMATIC NOTICE" shall have the meaning set forth in Section
6(a).
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary 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 Company or any Subsidiary
thereof; (b) there is commenced against the Company or any Subsidiary
thereof any such case or proceeding that is not dismissed within 60
days after commencement; (c) the Company or any 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 Company or
any 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 Company or any Subsidiary
thereof makes a general assignment for the benefit of creditors; (f)
the Company or any Subsidiary thereof fails to pay, or states that it
is unable to pay or is unable to pay, its debts generally as they
become due; (g) the Company or any Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any 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.
"BLOOMBERG" means Bloomberg L.P. (or any successor providing the
service of reporting share prices).
"BUY-IN" shall have the meaning set forth in Section 6(d).
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
the following in one or a series of related transactions: (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) under the Exchange Act) of
more than one-half of the voting rights or equity interests in the
Company; (ii) a replacement of more than one-half of the members of the
Company's board of directors in a single election of directors that is
not approved by those individuals who are members of the board of
directors on the date hereof (or other directors previously approved by
such individuals or such directors also so approved); (iii) a
Fundamental Transaction, a merger or consolidation of the Company or
any Subsidiary or a sale of more than one-half of the assets of the
Company in one or a series of related transactions, unless following
such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to
hold at least one-half of the voting rights and equity interests in the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any
Subsidiary that constitutes or results in a transfer of more than
one-half of the voting rights or equity interests in the Company,
unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction
continue to hold at least one-half of the voting rights and equity
interests in the surviving entity or acquirer of such assets; (v)
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consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3
under the Exchange Act with respect to the Company, or (vi) the
execution by the Company or its controlling shareholders of an
agreement providing for or reasonably likely to result in any of the
foregoing events.
"CLOSING DATE" shall have the meaning set forth in the Purchase
Agreement.
"CLOSING PRICE" 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 Trading Market (other than the OTC Bulletin
Board), the closing sale price per share of the Common Stock for such
date (or if the Common Stock did not trade on such date the nearest
preceding date on which the Common Stock traded) on the primary Trading
Market (other than the OTC Bulletin Board) on which the Common Stock is
then listed or quoted; (b) if prices for the Common Stock are then
quoted on the OTC Bulletin Board, the closing sale price per share of
the Common Stock for such date (or the nearest preceding date) so
quoted; (c) 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 sale price per share of the Common
Stock so reported; or (d) 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 Holders holding a majority of the shares of
Preferred Stock then outstanding and reasonably acceptable to the
Company.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, par value $.04
per share, and stock of any other class into which such shares may be
reclassified or changed.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
any Subsidiary which entitle the holder thereof to acquire Common Stock
at any time, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exchangeable or exercisable for, or otherwise
entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly,
Common Stock.
"CONVERSION PRICE" means $0.55 (subject to adjustment in
accordance with Section 6(f)).
"CONVERSION RATIO" means, at any time, a fraction, the numerator
of which is Stated Value subject to conversion and the denominator of
which is the Conversion Price at such time.
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in
Section 3.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EQUITY CONDITIONS ARE SATISFIED" means, with respect to a
specified issuance of Common Stock, that each of the following
conditions is satisfied: (i) the number of authorized but unissued and
otherwise unreserved shares of Common Stock is sufficient for such
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issuance; (ii)(a) the Company shall have complied in all material
respects, and not be in default with its obligations under the
Transaction Documents, (b) the Common Stock shall at all times be
listed or quoted (and is not suspended from trading) on a Trading
Market, and (b) if required under the rules or regulation of such
Trading Market, such shares of Common Stock are approved for listing on
Trading Market upon issuance; (iii) such issuance would be permitted in
full without violating the rules or regulations of the Trading Market
on which such shares are listed or quoted; (iv) no Bankruptcy Event has
occurred; and (v) no public announcement of a pending or proposed
Change of Control Transaction has occurred that has not been abandoned,
terminated or consummated.
"FAREQUEST NOTE" means that certain promissory note dated
February 1, 2004, which the Company issued to the Farequest
stockholders representative in connection with that certain Agreement
and Plan of Merger dated November 30, 2004 by and among the Company,
WTI Acquisition, Inc., Farequest and the other parties set forth
therein.
"FAREQUEST VOTING AGREEMENT" means that certain voting agreement
and proxy, by and between the Investors' voting representative and the
Farequest stockholders' representative as holder of the Farequest Note,
dated as of April 14, 2005.
"FUNDAMENTAL TRANSACTION" any (i) merger or consolidation of the
Company with or into another Person, (ii) any sale of all or
substantially all of its assets in one or a series or related
transactions in one or a series of related transactions, (iii) any
tender offer or exchange offer (whether by the Company or another
Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property,
or (iv) 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" means a holder of one or more shares of Preferred Stock.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities and Common Stock Equivalents of the Company, including any
existing or hereinafter created class of preferred stock of the
Company, other than the Series A 6% Convertible Preferred Stock (which
shall rank pari passu with the Preferred Stock).
"LIQUIDATION" means for any Person, any liquidation, dissolution
or winding-up of such Person, whether voluntary or involuntary, by
operation or law or otherwise.
"ORIGINAL ISSUE DATE" means 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.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
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"PURCHASE AGREEMENT" means the Securities Purchase Agreement,
dated as of April 14, 2005, to which the Company and the original
Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"REDEMPTION DATE" shall have the meaning set forth in Section 7.
"REDEMPTION PRICE" shall have the meaning set forth in Section 7.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of April 14, 2005, to which the Company and the
original Holders are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION STATEMENT" means a registration statement meeting
the requirements of the Registration Rights Agreement and covering the
resale of all Underlying Shares by the Holders, who shall be named as
"selling stockholders" thereunder.
"RESET AMOUNT" shall have the meaning set forth in Section
6(f)(ii).
"RESET PERIOD" shall have the meaning set forth in Section
6(f)(ii).
"REVERSE STOCK SPLIT" means a 1-10 reverse stock split of the
Company's Common Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHORT SALES" include, without limitation, all "short sales" as
defined in Rule 200 promulgated under Regulation SHO under the Exchange
Act and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other transactions
through non-US broker dealers or foreign regulated brokers.
"STOCKHOLDER APPROVAL" shall have the meaning set forth in the
Purchase Agreement.
"SUBSIDIARY" means any "significant subsidiary" as defined in
Rule 1-02(w) of the Regulation S-X promulgated by the Commission under
the Exchange Act.
"TRADING DAY" means (i) a day on which the Common Stock is traded
on a Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded or quoted in
the over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on a Trading Market, a day on
which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting
prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
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"TRADING MARKET" means whichever of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or the OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"UNDERLYING SHARES" means, collectively, the shares of Common
Stock issuable upon conversion of the Preferred Stock.
"VOTING AGREEMENT" means collectively those certain voting
agreements and proxies, by and between the Investors' voting
representative and the stockholders identified therein, dated as of
April 14, 2005.
"VWAP" means, with respect to any date of determination, the
daily volume weighted average price (as reported by Bloomberg using the
VAP function) of the Common Stock on such date of determination, or if
there is no such price on such date of determination, then the daily
volume weighted average price on the date nearest preceding such date.
"WARRANTS" shall have the meaning set forth in the Purchase
Agreement.
3. Dividends. Each Holder shall be entitled to receive, out of funds
legally available therefor, and the Company shall pay, cumulative dividends on
the Preferred Stock on an as converted basis with the Common Stock when, and as
if, declared by the Board of Directors, in arrears within three days of each
March 31, June 30, September 30 and December 31, commencing June 30, 2005 except
if such date is not a Trading Day, in which case such dividend shall be payable
on the next succeeding Trading Day (each, a "DIVIDEND PAYMENT DATE"). Dividends
on each share of Preferred Stock shall be calculated on the basis of a 360-day
year, shall accumulate daily commencing on the Original Issue Date (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
shares of Preferred Stock), 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 Company legally available for the payment of dividends. The Company
will pay dividends to each Holder in the same manner as such dividends are paid
to the holders of Common Stock (i.e., if the Company paid cash to the holders of
Common Stock to satisfy a dividend payment then the Company shall be obligated
to pay cash to each Holder in satisfaction thereof). Any dividends to be paid
hereunder that are not paid by the date due to such Holders shall continue to
accumulate and shall entail a late fee, which must be paid in cash, at the rate
of 10% per annum or if such rate would violate applicable law, the lesser
maximum rate as permitted by applicable law (such fees to accrue daily, from the
date such dividend is due hereunder through and including the date of payment).
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4. Certain Protective Rights.
For so long as any of the shares of Preferred Stock are
outstanding, neither the Company nor any Subsidiary shall, without the
affirmative vote of the Holders of at least a majority of the shares of
Preferred Stock then outstanding:
(i) alter or change the powers, preferences or rights
given to the Preferred Stock or alter or amend this Certificate of Designation;
(ii) authorize or create (by reclassification or
otherwise) any class of equity security or Common Stock Equivalent ranking as to
dividends or distribution of assets upon a Liquidation senior to the Preferred
Stock;
(iii) directly or indirectly pay or declare any
dividend or make any distribution (other than dividends due and paid in the
ordinary course on preferred stock of the Company at such times when the Company
is in compliance with its payment obligations to the Preferred Stock) 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 Junior Securities or securities pari passu
with the Preferred Stock;
(iv) alter, amend or waive any provision of the
Voting Agreement or the Farequest Voting Agreement;
(v) amend or waive any provision in its Certificate
of Incorporation in a manner adverse to the Preferred Stock; or
(vi) enter into any agreement with respect to the
foregoing clauses.
5.Liquidation. Upon any Liquidation, the Holders shall be entitled to
receive out of the assets of the Company, whether such assets are capital or
surplus, for each share of Preferred Stock an amount equal to the Stated Value
per share before any distribution or payment shall be made to the holders of any
Junior Securities, and if the assets of the Company shall be insufficient to pay
in full such amounts to all Holders, then the entire assets to be distributed to
the Holders shall be distributed among the Holders ratably in accordance with
the respective Stated Values represented by the Preferred Stock then held by
them. The Company shall mail written notice of any such Liquidation, not less
than 45 days prior to the payment date stated therein, to each record Holder. A
Change of Control Transaction shall not constitute a Liquidation.
6. Conversion.
(a) Automatic Conversion. Within one (1) Trading Day following
the date on which the Company obtains the Stockholder Approval, the Company
shall deliver to each Holder a notice ("AUTOMATIC NOTICE") as to all of the then
outstanding Preferred Stock, notifying the Holders that all of the then
outstanding Preferred Stock shall be converted on the date which is the later of
(i) the 25th Trading Day following delivery of the Automatic Notice and (ii) the
21st Trading Day following the filing of a Current Report on Form 8-K disclosing
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the effectiveness of the Reverse Stock Split on the American Stock Exchange
(such later date, the "AUTOMATIC CONVERSION DATE").
(b) Mechanics of Conversion. The number of Underlying Shares
issuable upon any conversion hereunder shall be determined by the Conversion
Ratio.
(c) On the Automatic Conversion Date the Company shall
promptly (but in no event later than three Trading Days after such Automatic
Conversion Date), issue and deliver to the applicable Holder, a certificate for
the Underlying Shares issuable in such conversion against receipt of the
certificate representing such Holder's Preferred Stock (if the Company does not
receive such certificate within three Trading Days of the Automatic Conversion
Date, it shall send a notice to such Holder stating that they have not yet
received such Preferred Stock certificate and requesting the same) and convert
such Holder's Preferred Stock, whereupon such Holder's Preferred Stock shall be
cancelled and no longer outstanding.
(d) If by the third Trading Day after the Automatic Conversion
Date the Company fails to deliver the required number of Underlying Shares in
the manner required pursuant to Section 6(c), and if after such third Trading
Day and prior to the receipt of such Underlying Shares, the applicable Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Underlying Shares which
such Holder anticipated receiving upon such conversion (a "BUY-IN"), then the
Company shall (1) pay in cash to such Holder the amount by which (x) such
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Underlying Shares that the Company was required to
deliver to the Holder in connection with the conversion at issue by (B) the
Closing Price on the Automatic Conversion Date and (2) deliver to such Holder
the number of shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations hereunder. Such
Holder shall provide the Company written notice indicating the amounts payable
to such Holder in respect of the Buy-In.
(e) The Company's obligations to issue and deliver Underlying
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by a 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 such Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by such Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to such Holder in connection with the issuance of
Underlying Shares. Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon conversions of Preferred Stock as required pursuant
to the terms hereof.
(f) Adjustments to Conversion Price. The Conversion Price in
effect on the Automatic Conversion Date shall be subject to adjustments in
accordance with this Section 6(f):
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(i) Stock Dividends and Splits. If the Company, at
any time while shares of Preferred Stock are outstanding: (1) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (2) subdivides
outstanding shares of Common Stock into a larger number of shares, or (3)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (1) of this paragraph shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clause
(2) or (3) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.
(ii) Adjustment Upon Reverse Stock Split. Pursuant to
the Purchase Agreement, the Company has agreed to effectuate a Reverse Stock
Split. If the average of the VWAP for the 20 Trading Days immediately following
the filing of a Current Report on Form 8-K disclosing the effectiveness of the
Reverse Stock Split on the American Stock Exchange (such average VWAP, the
"RESET AMOUNT" and such period, the "RESET PERIOD") is less than the Conversion
Price then in effect, the Conversion Price shall automatically adjust to the
Reset Amount. The Company shall notify the Holders in writing within one (1)
Trading Day should such adjustment occur. Each Holder covenants that neither it
nor any Person acting on its behalf or pursuant to any understanding with it
will engage in or close out any transactions in the securities of the Company
(including Short Sales) prior to the Trading Day following the Reset Period.
(iii) Fundamental Transactions. If, at any time while
shares of Preferred Stock are outstanding the Company engages in a Fundamental
Transaction, then each Holder shall have the right thereafter to receive, upon
conversion of shares of such Holder's Preferred Stock, the same amount and kind
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 number of Underlying Shares
then issuable upon conversion of all of such Holder's shares of Preferred Stock
(the "ALTERNATE CONSIDERATION"). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of 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 each Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of such Holder's
Preferred Stock following such Fundamental Transaction. At each Holder's option
and request, any successor to the Company or surviving entity in such
Fundamental Transaction shall, either (1) issue to such Holder shares of
preferred stock having rights, privileges and preferences substantially similar
to the rights, privileges and preferences of the Preferred Stock and consistent
with the foregoing provisions and evidencing such Holder's right to receive the
Alternate Consideration for the Conversion Price upon conversion thereof, or (2)
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purchase the Preferred Stock from such Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the sum of (1) the greater of (A)
the Stated Value of the Preferred Stock held by such Holder and (B) the Stated
Value of the Preferred Stock divided by the Conversion Price on the Trading Day
immediately preceding (x) the date of such Fundamental Transaction or (y) the
date the amount set forth in this section is paid in full, whichever is less,
multiplied by the Closing Price on (x) the date of the Fundamental Transaction
or (y) the date the amount set forth in this section is paid in full, whichever
is greater and (2) all then accrued and unpaid dividends, liquidated damages and
other amounts owing in respect of such Preferred Stock. 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 paragraph and insuring that the Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
(iv) Calculations. All calculations under this
Section 6 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
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(v) Notice of Adjustments. Upon the occurrence of
each adjustment pursuant to the terms hereof, the Company at its expense will
promptly compute such adjustment in accordance with the terms hereof and prepare
a certificate setting forth such adjustment, including a statement of the
Conversion Price and adjusted number or type of Underlying Shares or other
securities issuable upon conversion of a share of Preferred Stock (as
applicable), describing the transactions giving rise to such adjustments and
showing in detail the facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
each Holder and to the Company's Transfer Agent.
(vi) Reclassifications; Share Exchanges. In case of
any reclassification of the Common Stock, or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (other than compulsory share exchanges which constitute Change of
Control Transactions), each Holder of the Preferred Stock then outstanding shall
have the right thereafter to convert such shares only into the shares of stock
and other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange, and
such Holders shall be entitled upon such event to receive such amount of
securities, cash or property as a holder of the number of shares of Common Stock
of the Company into which such shares of Preferred Stock could have been
converted immediately prior to such reclassification or share exchange would
have been entitled. This provision shall similarly apply to successive
reclassifications or share exchanges.
(g) The Company 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
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outstanding shares of Preferred Stock. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized and issued and be fully paid and nonassessable.
(h) Upon a conversion hereunder the Company 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 Closing Price on the Automatic Conversion
Date.
(i) 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 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 of such shares of Preferred
Stock so converted.
7.Redemption. All shares of Preferred Stock which remain outstanding on
the date which is twelve (12) months from the Closing Date (the "REDEMPTION
DATE") shall be redeemed by the Company for a redemption price equal to the
Stated Value plus accrued but unpaid dividends and any other amounts then owing
on the account thereof to the Holder (the "REDEMPTION PRICE"). The Redemption
Price will be paid in full on the Redemption Date in immediately available funds
to an account designated by the Holder for such purpose. If the Company does not
pay the Redemption Price in full on the Redemption Date, then in addition to any
other remedy the Holder may have under this Certificate of Designation or the
Purchase Agreement, the applicable Redemption Price payable to the Holder shall
bear interest at the rate of 1% per month (prorated for partial months) or such
lesser maximum amount as then permitted by applicable law, until paid in full.
8. Miscellaneous.
(a) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or Change of
Control Transaction or (iii) authorizes the voluntary dissolution, liquidation
or winding up of the affairs of the Company, then the Company shall deliver to
the Holders a notice describing the material terms and conditions of such
transaction, at least 10 calendar days prior to the applicable record or
effective date on which a Person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to convert its Preferred Stock prior to such time so
as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.
(b) Cancellation of Preferred Stock. Shares of Preferred Stock
converted into Common Stock or redeemed in accordance with the terms hereof
shall be canceled and may not be reissued.
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(c) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: RCG Companies Incorporated
6836 Morrison Boulevard, Suite 200
Charlotte, NC 28211
Attn: Chief Financial Officer
Facsimile: (704) 366-5056
With a copy to: Katten Muchin Zavis Rosenman
525 West Monroe Street
Chicago, IL 60661
Attn.: Matthew S. Brown
Facsimile: (312) 577-8726
If to a Holder: To the address or facsimile telephone number
of such Holder appearing on the books of the
Company, or if no such address or facsimile
telephone number appears, at the principal
place of business of the Holder;
(d) or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
* * *
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RESOLVED, that the proper officers of the Company, and any other person
from time to time designated by any such officers, are hereby authorized,
empowered and directed to take all steps and do all acts and things, including
the execution, delivery and filing of documents, agreements, certificates or
instruments, as are or may become necessary or appropriate to effect the
purposes and intents of the forgoing recitals and resolutions and the actions
contemplated thereby.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
13th day of April, 2005.
\s\ Michael D. Pruit \s\ Melinda Morris Zanoni
- ------------------------------- --------------------------
Name: Michael D. Pruitt Name: Melinda Morris Zanoni
Title: President Title: Secretary
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