EXHIBIT 3.4
Certificate of Designation
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
SEW CAL LOGO, INC.
Pursuant to Section 78.1955 of the State of Nevada Revised Statutes
We, the undersigned duly authorized officers of SEW CAL LOGO, INC., a
Nevada corporation (the "Corporation"), in accordance with the provisions of NRS
78.1955, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors (the
"Board") by the Certificate of Incorporation of the Corporation (the
"Certificate"), on February 24, 2004, the Board adopted the following resolution
creating a series of preferred stock, par value $.001 per share, of the
Corporation (the "Preferred Stock") designated as "Series A Convertible
Preferred Stock":
RESOLVED, that, pursuant to the authority vested in the Board in accordance
with the provisions of its Certificate of Incorporation, a series of Preferred
Stock of the Corporation be, and it hereby is, created, and that the designation
and amount thereof and the voting powers, preferences and relative,
participating, optional or other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
(A) The shares of such series shall be designated as "Series A Convertible
Preferred Stock" ("Series A Preferred Stock") and the number of shares
constituting such series shall be 300,000.
(B) Shares of Series A Preferred Stock shall be issued to officers,
directors, employees and consultants to the Corporation. Notwithstanding the
foregoing provisions of this paragraph (B) of Section 1, shares of Series A
Preferred Stock (i) may be converted into shares of Common Stock when the
Corporation has met sales of at least $10,000,000 in any fiscal year as reported
in the Corporation's audited financial statements for such fiscal year and as
provided by Section 5 hereof and the shares of Common Stock issued upon such
conversion may be transferred by the holder thereof as permitted by law and (ii)
shall be redeemable by the Corporation upon the terms and conditions provided by
Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive
dividends, when, as and if declared by the Board of Directors out of funds
legally available therefor. Dividends may be paid in (i) cash, (ii) additional
shares of Series A Preferred Stock (valued at the then Liquidation Preference
(as hereinafter defined)), or (iii) shares of Common Stock (valued at the
Current Market Price (as hereinafter defined)).
(B) So long as any shares of Series A Preferred Stock shall be outstanding,
no cash dividends shall be declared or paid or set apart for payment on any
other series of stock ranking on a parity with the Series A Preferred Stock as
to dividends ("Parity Stock"), unless there shall also be or have been declared
and paid or set apart for payment on the Series A Preferred Stock, dividends for
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Section 2. Dividends and Distributions - continued
all dividend payment periods of the Series A Preferred Stock ending on or before
the dividend payment date of such Parity Stock, ratably in proportion to the
respective amounts of dividends accumulated and unpaid through such dividend
period on the Series A Preferred Stock and accumulated and unpaid on such Parity
Stock through the dividend payment period on such Parity Stock next preceding
such dividend payment date. In the event that full cumulative dividends on the
Series A Preferred Stock have not been declared and paid or set apart for
payment when due, the Corporation shall not declare or pay or set apart for
payment any dividends or make any other distributions on, or make any payment on
account of the purchase, redemption or other retirement of any other class of
stock or series thereof of the Corporation ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-up of the
Corporation, junior to the Series A Preferred Stock ("Junior Stock") until full
cumulative dividends on the Series A Preferred Stock shall have been paid or
declared and set apart for payment; provided, however, that the foregoing shall
not apply to (i) any dividend payable solely in any shares of any stock ranking,
as to dividends or as to distributions in the event of a liquidation,
dissolution or winding-up of the Corporation, junior to the Series A Preferred
Stock either (A) pursuant to any employee or director incentive or benefit plan
or arrangement (including any employment, severance or consulting agreement) of
the Corporation or any subsidiary of the Corporation heretofore or hereinafter
adopted or (B) in exchange solely for shares of any other stock ranking, as to
dividends and as to distributions in the event of a liquidation, dissolution or
winding-up of the Corporation, junior to the Series A Preferred Stock.
Section 3. Voting Rights.
The shares of Series A Preferred Stock have voting powers equal to the
voting powers of the Common Stock. Each share of Series Preferred Stock shall
have one hundred (100) votes on all matters to be voted upon by shareholders.
Section 4. Liquidation, Dissolution or Winding-Up.
(A) Upon any voluntary or involuntary, dissolution or winding-up of the
Corporation, the holders of Series A Preferred Stock shall be entitled to
receive out of assets of the Corporation which remain after satisfaction in full
of all valid claims of creditors of the Corporation and which are available for
payment to stockholders and subject to the rights of the holders of any stock of
the Corporation ranking senior to or on a parity with the Series A Preferred
Stock in respect to distributions upon liquidation, dissolution or winding-up of
the Corporation before any amount shall be paid or distributed among the holders
of Common Stock or any other shares ranking junior to the Series A Preferred
Stock in respect of distributions upon liquidation, dissolution or winding-up of
the Corporation, liquidating distributions in the amount of $100 per share (the
"Series A Liquidation Preference"), plus an amount equal to all accrued and
unpaid dividends thereon to the date fixed for distribution and no more. If upon
any liquidation, dissolution or winding-up of the Corporation, the amounts
payable with respect to the Series A Preferred Stock and any other stock ranking
as to any such distribution on a parity with the Series A Preferred Stock are
not paid in full, the holders of the Series A Preferred Stock and such other
stock shall share ratably in any distribution of assets in proportion to the
full respective preferential amounts to which they are entitled. After payment
of the full amount to which they are entitled as provided by the foregoing
provisions of this paragraph 4(A), the holders of shares of Series A Preferred
Stock shall not be entitled to any further right or claim to any of the
remaining assets of the Corporation.
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Section 4. Liquidation, Dissolution or Winding-Up - continued
(B) Neither the merger nor consolidation of the Corporation with or into
any other corporation, nor the merger or consolidation of any other corporation
with or into the Corporation, nor the sale, lease, exchange or other transfer of
all or any portion of the assets of the Corporation, shall be deemed to be a
dissolution, liquidation or winding-up of the affairs of the Corporation for
purposes of this Section 4, but the holders of Series A Preferred Stock shall
nevertheless be entitled in the event of any such merger or consolidation to the
rights provided by Section 7 hereof.
(C) Written notice of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation stating the payment date or dates when, and the
place or places where, the amounts distributable to holders of Series A
Preferred Stock in such circumstances shall be payable, shall be given by hand
delivery or by first-class mail, postage pre-paid, delivered or mailed not less
than twenty (20) days prior to any payment stated therein to the holders of
Series A Preferred Stock at the address shown on the books of the Corporation or
any transfer agent for the Series A Preferred Stock.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series A Preferred Stock shall be entitled at any
time to cause any or all of such shares to be converted into shares of Common
Stock at a rate ("Conversion Rate") initially equivalent to one hundred (100)
shares of Common Stock for each share of Series A Preferred Stock so converted,
which is subject to adjustment as the Conversion Rate is adjusted as hereinafter
provided in Section 8.
(B) A holder of shares of Series A Preferred Stock desiring to convert such
shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of Series A Preferred Stock being
converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for the
Series A Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be designated by
notice to the holders of the Series A Preferred Stock by the Corporation or the
transfer agent for the Series A Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series A Preferred Stock to be converted in the name or names in which such
holder wishes the certificate or certificates for Common Stock and for any
shares of Series A Preferred Stock not to be so converted to be issued and (ii)
the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series A Preferred Stock for conversion, the Corporation shall issue and send by
hand delivery (with receipt to be acknowledged), Federal Express or similar
service, or by first class mail, postage prepaid, to the holder thereof or to
such holder's designee, at the address designated by such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled upon conversion. In the event that there shall have been
surrendered a certificate or certificates representing shares of Series A
Preferred Stock, only part of which are converted, the Corporation shall issue
and deliver to such holder or such holder's designee, in the manner set forth in
the preceding sentence, a new certificate or certificates representing the
number of shares of Series A Preferred Stock which shall not have been
converted.
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Section 5. Conversion into Common Stock - continued
(D) The issuance by the Corporation of shares of Common Stock upon a
conversion of shares of Series A Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon the conversion thereof or
(ii) the commencement of business on the second business day after the surrender
of the certificate or certificates for the shares of Series A Preferred Stock to
be converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto) as provided by this
Certificate of Designations, Preferences and Rights (the "Certificate of
Designation"). On and after the effective day of conversion, the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock, but no allowance or adjustment shall be made in respect of
dividends payable to holders of Common Stock in respect of any period prior to
such effective date. The Corporation shall not be obligated to pay any dividends
which shall have been declared and shall be payable to holders of shares of
Series A Preferred Stock on a Dividend Payment Date if such Dividend Payment
Date for such dividend is subsequent to the effective date of conversion of such
shares.
(E) The Corporation shall not be obligated to deliver to holders of Series
A Preferred Stock any fractional share of Common Stock issuable upon any
conversion of such shares of Series A Preferred Stock, but in lieu thereof may
issue a whole share or make a cash payment in respect thereof in any manner
permitted by law.
(F) The Corporation shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of Series A Preferred Stock as herein provided, free from
any preemptive rights, such number of shares of Common Stock as shall from time
to time be issuable upon the conversion of all the shares of Series A Preferred
Stock then outstanding. Nothing contained herein shall preclude the Corporation
from issuing shares of Common Stock held in its treasury upon the conversion of
shares of Series A Preferred Stock into Common Stock pursuant to the terms
hereof. The Corporation shall prepare and shall use its best efforts to obtain
and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all requirements
as to registration or qualification of the Common Stock, in order to enable the
Corporation lawfully to issue and deliver to each holder of record of Series A
Preferred Stock such number of shares of its Common Stock as shall from time to
time be sufficient to effect the conversion of all shares of Series A Preferred
Stock then outstanding and convertible into shares of Common Stock.
Section 6. Consolidation, Merger, etc.
(A) In the event that the Corporation shall consummate any consolidation or
merger or similar business combination, pursuant to which the outstanding shares
of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting
corporation (including, and, if applicable, for a cash payment in lieu of
fractional shares, if any, the shares of Series A Preferred Stock of such holder
shall, in connection with such consolidation, merger or similar business
combination, be assumed by and shall become preferred stock of such successor or
resulting corporation, having in respect of such corporation, insofar as
possible, the same powers, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions
thereon, that the Series A Preferred Stock had immediately prior to such
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Section 6. Consolidation, Merger, etc - continued
transaction, except that after such transaction each share of the Series A
Preferred Stock shall be convertible, otherwise than on the terms and conditions
provided by Section 5 hereof, into the number and kind of securities receivable
by a holder of the number of shares of Common Stock into which such shares of
Series A Preferred Stock could have been converted immediately prior to such
transaction; provided, however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by the holders of the
Series A Preferred Stock, then the shares of Series A Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by a holder
of the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election to
receive any kind or amount of stock, securities, cash or other property (other
than such securities and a cash payment, if applicable, in lieu of fractional
shares) receivable upon such transaction (provided that, if the kind or amount
of securities receivable upon such transaction is not the same for each
non-electing share of Common Stock, then the kind and so amount so receivable
upon such transaction for each non-electing share of Common Stock shall be, for
purposes of this proviso, deemed to be the kind and amount so receivable per
share by the plurality of the non-electing shares of Common Stock); and provided
further that in the event the consideration such a holder of Common Stock into
which such shares of Series A Preferred Stock could have been converted
immediately prior to such transaction if such holder of Common Stock failed to
exercise any such rights of election consists solely of securities and a cash
payment, if applicable, in lieu of fractional shares, then the shares of Series
A Preferred Stock shall be assumed by and become preferred stock of the
successor resulting corporation and shall be convertible after such transaction,
all as provided in the provisions of this paragraph of this paragraph (A) prior
to the first proviso hereto. The rights of the Series A Preferred Stock as
preferred stock of such successor or resulting corporation shall successively be
subject to adjustments pursuant to Sections 3 and 7 hereof after any such
transaction as nearly equivalent as practicable to the adjustment provided for
by such section prior to such transaction. The Corporation shall not consummate
any such merger, consolidation or similar transaction unless all then
outstanding shares of Series A Preferred Stock shall be assumed and authorized
by the successor or resulting corporation as aforesaid.
(B) In the event that the Corporation shall consummate any consolidation or
merger or similar business combination pursuant to which the outstanding shares
of Common Stock are by operation of law exchanged for or changed, reclassified
or converted into other stock or securities or cash or any other property, or
any combination thereof, outstanding shares of Series A Preferred Stock shall,
without any action on the part of the Corporation or any holder thereof (but
subject to paragraph (C) of this Section 8) be automatically converted by virtue
of such merger, consolidation or similar transaction immediately prior to such
consummation into the number of shares of Common Stock into which such shares of
Series A Preferred Stock could have converted at such time so that each share of
Series A Preferred Stock shall by virtue of such transaction on the same terms
as apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property (payable in like
kind) receivable by a holder of the aggregate number of shares of Common Stock
into which such shares of Series A Preferred Stock could have been converted
immediately prior to such transaction; provided, however, that if by virtue of
the structure of such transaction, a holder of Common Stock is required to make
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Section 6. Consolidation, Merger, etc - continued
an election with respect to the nature and kind of consideration to be received
in such transaction, which election cannot practicably be made by the holders of
the Series A Preferred Stock, then the shares of Series A Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by a holder
of the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election as to
the kind or amount of stock, securities, cash or other property receivable upon
such transaction (provided, that, if the kind or amount of stock, securities,
cash or other property receivable upon such transaction is not the same for each
non-electing share of Common Stock, then the kind and amount of stock,
securities, cash or other property receivable upon such transaction for each
non-electing share of Common Stock shall be, for purposes of this proviso,
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares of Common Stock).
(C) In the event the Corporation shall enter into any agreement providing
for any consolidation or merger or similar transaction described in paragraph
(B) of this Section 6, then the Corporation shall as soon as practicable
thereafter (and in any event at least ten (10) business days before consummation
of such transaction) give notice of such agreement and the material terms
thereof to each holder of Series A Preferred Stock and each such holder shall
have the right to elect by written notice to the Corporation to receive upon
consummation of such transaction (if and when such transaction is consummated)
from the Corporation or the successor of the Corporation, in redemption and
retirement of such Series A Preferred Stock, a cash payment equal to the amount
payable in respect of shares of Series A Preferred Stock upon liquidation of the
Corporation pursuant to Section 4 hereof. No such notice of redemption shall be
effective unless given to the Corporation prior to the close of business on the
fifth business day prior to consummation of such transaction, unless the
Corporation or the successor of the Corporation shall waive such prior notice,
with any notice of redemption so given prior to such time may be withdrawn by
notice of withdrawal given to the Corporation prior to the close of business on
the fifth business day prior to consummation of such transaction.
Section 7. Anti-dilution Adjustments.
(A) In the event the Corporation shall, at any time or from time to time
while any of the shares of the Series A Preferred Stock are outstanding (i) pay
a dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Corporation (including a recapitalization effected by a merger or consolidation
to which Section 6 hereof does not apply) or otherwise, subject to the
provisions of paragraphs (E) and (F) of this Section 7, the Conversion Rate in
effect immediately prior to such action shall be adjusted by multiplying such
Conversion Rate by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this paragraph
(7)(A) shall be given effect upon payment of such a dividend or distribution as
of the record date for the determination of stock holders entitled to receive
such dividend or distribution (on a retroactive basis) and in the case of a
subdivision or combination shall become effective immediately as of the
effective date hereof.
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Section 7. Anti-dilution Adjustments - continued
(B) In the event that the Corporation shall, at any time or from time to
time while any of the shares of Series A Preferred Stock are outstanding, issue
to all holders of shares of Common Stock as a dividend or distribution,
including by way of a recapitalization of shares or a recapitalization of the
Corporation, any right or warrant to purchase shares of Common Stock (but not
including as such a right or warrant any security convertible into or
exchangeable for shares of Common Stock) at a purchase per share less than the
Fair Market Value (as hereinafter defined) of a share of Common Stock on the
date of issuance of such right or warrant, then, subject to the provisions of
paragraphs (E) and (F) of this Section 7, the Conversion Rate shall be adjusted
by multiplying such Conversion Rate by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately before such
issuance of rights or warrants plus the number of shares of Common Stock which
could be purchased at the Fair Market Value of a share of Common Stock at the
time of such issuance for the maximum aggregate consideration payable upon
exercise in full of all such rights and warrants, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Common
Stock that could be acquired upon exercise in full of all such rights and
warrants.
(C) In the event the Corporation shall, at any time or from time to time
while any of the shares of Series A Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 6 hereof
does not apply) or effect a Pro Rata Repurchase (as hereinafter defined) of
Common Stock, the Conversion Rate in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
(D) and (E) of this Section 7, be adjusted by multiplying such Conversion Rate
by a fraction, the numerator of which shall be the remainder of (i) the product
of (x) the number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the Fair
Market Value of a share of Common Stock on the day before the ex-dividend date
for the Extraordinary Distribution (unless there is no such ex-dividend date, in
which case on the day before the distribution date for the Extraordinary
Distribution) or on the applicable expiration date (including all extensions
thereof) of any tender offer which is a Pro Rata Repurchase, or on the date of
purchase with respect to any Pro Rata Repurchase which is not a tender offer, as
the case may be, minus (ii) the Fair Market Value of the Extraordinary
Distribution or the aggregate purchase price of the Pro Rata Repurchase, as the
case may be, and the denominator of which shall be the product of (a) the number
of shares of Common Stock outstanding immediately before such Extraordinary
Dividend or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase, the
number of shares of Common Stock repurchased by the Corporation multiplied by
(b) the Fair Market Value of a share of Common Stock on the day before the
ex-dividend date for the Extraordinary Distribution (unless there is no such
ex-dividend date, in which case the day before the distribution date for the
Extraordinary Distribution) or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata Repurchase or on the
date of purchase with respect to any Pro Rata Repurchase which is not a tender
offer, as the case may be. The Corporation shall send the holder of Series A
Preferred Stock (i) notice of the declaration of any dividend or distribution
and (ii) notice of any offer by the Corporation to make a Pro Rata Repurchase,
in each case at the same time as or as soon as practicable after, such dividend,
distribution or offer is first communicated (including by announcement of a
record date in accordance with the rules of any stock exchange on which the
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Section 7. Anti-dilution Adjustments - continued
Common Stock is listed or admitted to trading) to holders of Common Stock. Such
notice shall indicate the intended record date and the amount and nature of such
dividend or distribution, or the number of shares subject to such offer for a
Pro Rata Repurchase and the purchase price payable by the Corporation pursuant
to such offer, as well as the Conversion Rate and the number of shares of Common
Stock into which a share of Series A Preferred Stock may be converted at such
time.
(D) Notwithstanding any other provisions of this Section 7, the Corporation
shall not be required to make any adjustment to the Conversion Rate unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Rate. Any lesser adjustment shall be carried forward and shall be
made no later than the time of, and together with, the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) in
the Conversion Rate.
(E) If the Corporation shall make any dividend or distribution on the
Common Stock or issue any Common Stock, other capital stock or other security of
the Corporation or any rights or warrants to purchase or acquire any such
security which transaction does not result in any adjustment to the Conversion
Rate pursuant to the foregoing provisions of this Section 7, the Board shall
consider whether such action is of such a nature that an adjustment to the
Conversion Rate should equitably be made in respect of such transaction. If in
such case the Board determines that an adjustment to the Conversion Rate should
be made, an adjustment shall be made effective as of such date, as determined by
the Board. The determination of the Board as to whether an adjustment to the
Conversion Rate should be made pursuant to the foregoing provisions of this
paragraph 8(B), and, if so, as to what adjustment should be made and when, shall
be final and binding on the Corporation and all stockholders of the Corporation.
The Corporation shall be entitled to make such additional adjustments in the
Conversion Rate in addition to those required by the foregoing provisions of
this Section 8, as shall be necessary in order that any dividend or distribution
in shares of capital stock of the Corporation, subdivision, reclassification or
combination of shares of stock of Corporation or any recapitalization of the
Corporation shall be not be taxable to the holders of the Common Stock.
(F) For purposes of this Certificate, the following definitions shall
apply:
"Business Day" shall mean each day that is not a Saturday, Sunday or a day
on which state or federally chartered banking institutions in Los Angeles,
California are not required to be open.
"Board" shall mean the Board of Directors of the Corporation acting in
accordance with the By-laws of the Corporation.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sales price, regular way, or in
the event that no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either cases reported on the New
York Stock Exchange Composite Tape or, if such security is not admitted or
listed or admitted to trading on the New York Stock Exchange on the principal
national securities exchange on which such security is listed or admitted to
trading or if not listed or admitted to trading on any national securities
exchange, on the NASDAQ National Market System or, if such security is not
quoted on such national market system, the average of the closing bid and asked
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Section 7. Anti-dilution Adjustments - continued
prices on each such day in the over-the-counter market as reported by NASDAQ or,
if bid and asked prices for such security on each such day shall not have been
reported through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board or a committee thereof,
in each case, on each trading day during the. "Adjustment Period" shall mean the
period of five (5) consecutive trading days preceding the date as of which the
Fair Market Value of a security is to be determined. The "Fair Market Value" of
any security which is not publicly traded or any other property shall mean fair
value thereof as determined by an independent investment banking or appraisal
firm experienced in the valuation of such securities or property selected in
good faith by the Board or a committee thereof or if no such investment banking
or appraisal firm is in the good faith judgment of the Board or such committee
available to make such determination as determined in good faith by the Board or
such committee.
"Extraordinary Distribution" shall mean any dividend or other distribution
to holders of Common Stock (effected while any of the shares of Series A
Preferred Stock are outstanding) (i) of cash (other than dividends not exceeding
the greater of (A) $.10 per annum or (B) 125% of the aggregate quarterly
dividends paid during the preceding 12 months, neither of which shall be deemed
to be an Extraordinary Distribution) where the aggregate amount of such cash
dividend or distribution together with the amount of all cash dividends and
distributions made during the preceding period of 12 months when combined with
the aggregate amount of all Pro Rata Repurchases during such time period (for
this purpose, including only that portion of the aggregate purchase price of
such Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the applicable expiration date
(including all extensions thereof) of any tender offer or exchange offer which
is a Pro Rata Repurchase, or the date of purchase with respect to any other Pro
Rata Repurchase which is not a tender offer or exchange offer made during such
period) exceeds ten percent (10%) of the close of the aggregate Fair Market
Value of all shares of Common Stock outstanding on the day before the
ex-dividend date with respect to such Extraordinary Distribution which is paid
in cash and/or (ii) of any shares of capital stock of the Corporation (other
than shares of Common Stock), other securities of the Corporation (other than
securities of the type referred to in paragraph (B) or (C) of this Section 7,
evidences of indebtedness of the Corporation or any other person or any other
property (including shares of any subsidiary of the Corporation) or any
combination thereof. The Fair Market Value of an Extraordinary Distribution for
purposes of paragraph (D) of this Section 7 shall be equal to the sum of the
Fair Market Value of such Extraordinary Distribution plus the amount of any cash
dividends (other than dividends not exceeding the greater of (i) $.10 per annum
or (ii) 125% of the aggregate quarterly dividends paid during the preceding 12
months) which are not Extraordinary Distributions made during such 12 month
period and not previously included in the calculation of an adjustment pursuant
to paragraph (D) of this Section 7.
"Fair Market Value" shall mean as to shares of Common Stock or any other
class of capital stock or securities of the Corporation or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares or securities for each day of the Adjustment Period.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by the
Corporation of any right or warrant to purchase or acquire shares of Common
Stock (including any security convertible into or exchangeable for shares of
Common Stock) shall mean the remainder of (i) the product of the Fair Market
Value of a share of Common Stock on the day preceding the first public
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Section 7. Anti-dilution Adjustments - continued
announcement of such issuance, sale or exchange multiplied by the maximum number
of shares of Common Stock which could be acquired on such date upon the exercise
in full of such rights and warrants (including upon the conversion or exchange
of all such convertible or exchangeable securities) whether or not exercisable
(or convertible or exchangeable) at such date, minus (ii) the aggregate amount
payable pursuant to such right or warrant to purchase or require such maximum
number of shares of Common Stock; provided, however, that in no case shall the
non-dilutive amount be less than zero. For purposes of the foregoing sentence in
the case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or require
shares of Common Stock shall be the Fair Market Value of such security on the
date of the issuance, sale or exchange of such security by the Corporation.
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by
the Corporation or any subsidiary thereof, whether for cash, shares of capital
stock of the Corporation, other securities of the Corporation, evidences of
indebtedness of the Corporation of any other person or any other property
(including shares of a subsidiary of the Corporation) or any combination
thereof, effected while any of the shares of Series A Preferred Stock are
outstanding, pursuant to any tender offer or exchange offer subject to Section
13(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
any successor provision of law or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no purchase
of shares by the Corporation or any subsidiary thereof made in open market
transactions shall be deemed a Pro Rata Repurchase. For purposes of this
paragraph (F) of this Section 7, shares shall be deemed to have been purchased
by the Corporation or any subsidiary thereof "in open market transactions" if
they have purchased substantially in accordance with the requirements of Rule
10b-18 as in effect under the Exchange Act, on the date shares of Series A
Preferred Stock are initially issued by the Corporation or on such other terms
and conditions as the Board or a committee thereof shall have determined are
reasonably designed to prevent such purchases from having a material effect on
the trading market for the Common Stock.
(G) Whenever an adjustment to the Conversion Rate and the related voting
rights of the Series A Preferred Stock is required pursuant to this Resolution,
the Corporation shall forthwith place on file with the transfer agent for the
Common Stock and the Series A Preferred Stock and with the Secretary of the
Corporation, a statement signed by two officers of the Corporation stating the
adjusted Conversion Rate determined as provided herein and the resulting
conversion ratio and the voting rights (as appropriately adjusted) of the Series
A Preferred Stock. Such statement shall set forth in reasonable detail such
facts as shall be necessary to show the reason and the manner of computing such
adjustment, including any determination of Fair Market Value involved in such
computation. Promptly after each adjustment to the Conversion Rate and the
related voting rights of the Series A Preferred Stock, the Corporation shall
mail a notice thereof and of the then prevailing conversion ratio to each holder
of shares of the Series A Preferred Stock.
Section 8. Ranking; Retirement of Shares
(A) The Series A Preferred Stock shall rank senior to the Common Stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution and winding-up of the Corporation and, unless otherwise provided in
the Certificate of Incorporation of the Corporation as the same may be amended,
or a Certificate of Designations relating to a subsequent series of Preferred
Stock, the Series A Preferred Stock shall rank pari passu to all series of the
Corporation's Preferred Stock as to the dividends and the distribution of assets
on liquidation, dissolution or winding-up.
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Section 8. Ranking; Retirement of Shares - continued
(B) Any shares of Series A Preferred Stock acquired by the Corporation by
reason of the conversion or redemption of such shares as provided herein or
otherwise so acquired, shall be retired as shares of Series A Preferred Stock
and restored to the status of authorized but unissued shares of Preferred Stock,
par value $.001 per share of the Corporation, undesignated as to series and may
thereafter be reissued as part of a new series of such Preferred Stock as
permitted by law.
Section 9. Miscellaneous
(A) All notices referred to herein shall be in writing and all notices
hereunder shall be deemed to have been given upon the earlier of receipt of
delivery thereof if by hand delivery, by courier or three (3) business days
after the mailing thereof if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms hereof) with
postage pre-paid, addressed: (i) if to the Corporation, to its office at 207 W.
138th Street, Los Angeles, California 90061 (Attention: Secretary) or to the
transfer agent for the Series A Preferred Stock or other agent of the
Corporation designated as permitted hereby or (ii) if to any holder of the
Series A Preferred Stock or Common Stock as the case may be, to such holder of
the address of such holder as listed in the stock record books of the
Corporation (which may include the records of any transfer agent for the Series
A Preferred Stock or Common Stock as the case may be) or (iii) to such other
addresses the Corporation or any such holder as the case may be shall have
designated by notice similarly given.
(B) The term "Common Stock" as used in this Resolution means the
Corporation's Common Stock, par value $.001 per share, as the same exists at the
date of filing with the Secretary of State of Nevada of this Certificate of
Designation relating to Series A Preferred Stock or any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value or
from no par value to par value. In the event that at any time as a result of an
adjustment made pursuant to Section 8 of this Certificate of Designation, the
holder of any share of the Series A Preferred Stock upon thereafter surrendering
such shares for conversion, shall become entitled to receive any shares or other
securities of the Corporation other than shares of Common Stock, the Conversion
Rate in respect of such other shares or securities so receivable upon conversion
of shares of Series A Preferred Stock shall thereafter be adjusted and shall be
subject to further adjustment from time to time, in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to Common Stock
contained in Section 7 hereof, and the provisions of Sections 1 through 6, 8 and
9 of this Certificate of Designation with respect to the Common Stock shall
apply on like or similar terms to any such other shares or securities.
(C) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series A Preferred Stock or shares of Common Stock or other securities issued
on account of Series A Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series A Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series A Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
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Section 9. Miscellaneous - continued
such issuance, delivery or payment is paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(D) In the event that a holder of shares of Series A Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series A Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to register such
shares and make such payment in the name of the holder of such Series A
Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates representing such shares or such payment, to the
address of such holder shown on the records of the Corporation.
(E) Unless otherwise provided in the Certificate of Incorporation, as the
same may be amended, of the Corporation, all payments in the form of dividends,
distributions on voluntary or involuntary dissolution, liquidation or winding-up
or otherwise made upon the shares of Series A Preferred Stock and any other
stock ranking on a parity with the Series A Preferred Stock with respect to such
dividend or distribution shall be pro rata so that amounts paid per share on the
Series A Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that the required dividends, distributions or payments, as
the case may be, then payable per share on the shares of the Series A Preferred
Stock and such other stock bear to each other.
(F) The Corporation may appoint, and from time to time discharge and
change, a transfer agent for the Series A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first-class mail, postage pre-paid to each holder of record of Series
A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate of
Designation and do affirm the foregoing as true under the penalties of perjury
this 24th day of February, 2004.
Name: /s/ RICHARD SONGER
---------------------------
RICHARD SONGER
Title: President
ATTEST:
Name: /s/ JUDY SONGER
---------------------------
JUDY SONGER
Title: Secretary
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