Exhibit 4.05
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
DEER VALLEY CORPORATION
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
Deer Valley Corporation, a corporation organized and existing under the
laws of the State of Florida (the "CORPORATION"), hereby certifies that the
Board of Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD"),
pursuant to authority of the Board of Directors as required by applicable
corporate law, and in accordance with the provisions of its Certificate of
Incorporation and Bylaws, has and hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $0.01 per share
(the "PREFERRED STOCK"), and hereby states the designation and number of shares,
and fixes the rights, preferences, privileges, powers, and restrictions thereof,
as follows:
SERIES E CONVERTIBLE PREFERRED STOCK DESIGNATION AND AMOUNT
1,000,000 shares of the authorized and unissued Preferred Stock of the
Corporation are hereby designated "SERIES E CONVERTIBLE PREFERRED STOCK" with
the following rights, preferences, powers, privileges, restrictions,
qualifications, and limitations.
1. Voting.
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a. Number of Votes. On any matter presented to the stockholders of the
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Corporation for their action or consideration at any meeting of
stockholders of the Corporation (or by written consent of stockholders in
lieu of meeting), each holder of outstanding shares of Series E Convertible
Preferred Stock shall be entitled, subject to the limitation set forth in
Section 1(b) below, to cast the number of votes equal to the number of
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whole shares of common stock, par value $0.01 of the Corporation (the
"COMMON STOCK") into which the shares of Series E Convertible Preferred
Stock held by such holder are convertible as of the record date for
determining stockholders entitled to vote on such matter. Except as
provided by law or by the provisions of Sections 1(b) and (c) below,
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holders of Series E Convertible Preferred Stock shall vote together with
the holders of Common Stock, and with the holders of any other series of
Preferred Stock the terms of which so provide, together as a single class.
b. Limitation on Number of Votes. Notwithstanding anything contained
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herein to the contrary, the voting rights of each holder of outstanding
shares of Series E Convertible Preferred Stock shall be limited in
accordance with Section 5 hereof, so that each holder of Series E
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Convertible Preferred Stock shall be entitled to vote only the number of
votes equal to the number of whole shares of Common Stock into which the
shares of Series E Convertible Preferred Stock are convertible as of the
record date, up to a maximum of 4.99% of the outstanding shares of Common
Stock of the Corporation.
c. Limitations on Corporate Action. At any time when shares of Series
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E Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the
Corporation is required by law or by this Certificate of Designation, and
in addition to any other vote required by law or this Certificate of
Designation, without the written consent or affirmative vote of the holders
of a majority of the then-outstanding shares of Series E Convertible
Preferred Stock given in writing or by vote at a meeting, consenting or
voting (as the case may be) as a separate class from the Common Stock, the
Corporation shall not, either directly or by amendment, merger,
consolidation or otherwise:
(i) increase the authorized number of shares of Series E
Convertible Preferred Stock; or
(ii) alter or change the voting or other powers, preferences, or
other rights, privileges, or restrictions of the Series E Convertible
Preferred Stock contained herein (by merger, consolidation, or
otherwise).
2. Dividends. Each holder of one or more shares of Series E Convertible
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Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors, if at all, dividends on a parity with each holder of one or more
shares of the Common Stock.
3. Liquidation, Dissolution, or Winding-Up; Certain Mergers, Consolidations
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and Asset Sales.
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a. Payments to Holders of Series E Convertible Preferred Stock. In the
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event of any voluntary or involuntary liquidation, dissolution, or winding
up of the Corporation, the holders of shares of Series E Convertible
Preferred Stock then outstanding shall be entitled to be paid out of the
assets available for distribution to its stockholders after the Aggregate
Series A Liquidation Preference Payment and the Aggregate Series C
Liquidation Preference Payment (as such terms are defined in the
Certificate of Designation, Preferences, and Rights of Series A Convertible
Preferred Stock of the Corporation (the "SERIES A PREFERRED STOCK
CERTIFICATE OF DESIGNATION") and the Certificate of Designation,
Preferences, and Rights of Series C Convertible Preferred Stock of the
Corporation (the "SERIES C PREFERRED STOCK CERTIFICATE OF DESIGNATION"))
and before any payment shall be made to the holders of Common Stock or any
other class or series of stock ranking on liquidation junior to the Series
E Convertible Preferred Stock (such Common Stock and other stock being
collectively referred to as "JUNIOR STOCK") by reason of their ownership
thereof, an amount equal to Two Thousand and No/100 Dollars ($2,000)(the
amount payable pursuant to this sentence is hereinafter referred to as the
"SERIES E LIQUIDATION PREFERENCE AMOUNT"). If, upon any such liquidation,
dissolution, or winding up of the Corporation (and after the entire
Aggregate Series A Liquidation Preference Payment and the Aggregate Series
C Liquidation Preference Payment have been paid to the holders of shares of
Series A Preferred Stock and the Series C Preferred Stock) the remaining
assets available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series E Convertible Preferred Stock and
any class or series of stock ranking on liquidation on a parity with the
Series E Convertible Preferred Stock, the full preferential amount to which
they shall be entitled, the holders of shares of Series E Convertible
Preferred Stock and any class or series of stock ranking on liquidation on
a parity with the Series E Convertible Preferred Stock, which shall include
all other Preferred Stock of the Corporation other than the Series A
Preferred Stock and the Series C Preferred Stock (the "REMAINING
PREFERRED"), shall share ratably in any distribution of the remaining
assets available for distribution in proportion to the respective amounts
that would otherwise be payable in respect of the shares held by them upon
such distribution if all amounts payable on or with respect to such shares
were paid in full.
b. Payments to Holders of Junior Stock. Upon any liquidation,
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dissolution or winding up of the Corporation, immediately after (1) the
holders of Series A Preferred Stock have been paid in full the Aggregate
Series A Liquidation Preference Payment, as set forth in the Series A
Preferred Stock Certificate of Designation; (2) the holders of Series C
Preferred Stock have been paid in full the Aggregate Series C Liquidation
Preference Payment, as set forth in the Series C Preferred Stock
Certificate of Designation; and (3) the holders of remaining Preferred
Stock have been paid in full the applicable liquidation amounts, as set
forth in the applicable Preferred Stock Certificates of Designation and the
holders of Series E Convertible Preferred Stock have been paid in full the
Series E Liquidation Preference Amount pursuant to Section 3(a) above, the
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remaining net assets of the Corporation available for distribution shall be
distributed pro-rata among the holders of shares of Remaining Preferred,
Series E Convertible Preferred Stock, and Common Stock on an
as-converted-to-common stock basis.
4. Optional Conversion. The holders of Series E Convertible Preferred Stock
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shall have the conversion rights as follows:
a. Right to Convert. Each share of Series E Convertible Preferred
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Stock shall be convertible, at the option of the holder thereof and subject
to the conversion cap set forth in Section 5 below, at any time after
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original issuance, and without the payment of additional consideration by
the holder thereof, into One (1) share of Common Stock.
b. Fractional Shares. No fractional shares of Common Stock shall be
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issued upon conversion of the Series E Convertible Preferred Stock. In lieu
of any fractional shares to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by the
fair market value of a share of Common Stock as determined in good faith by
the Board of Directors, or round-up to the next whole number of shares, at
the Corporation's option. Whether or not fractional shares would be
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series E Convertible Preferred Stock the holder is at
the time converting into Common Stock and the aggregate number of shares of
Common Stock issuable upon such conversion.
c. Mechanics of Conversion.
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(i) For a holder of Series E Convertible Preferred Stock to
voluntarily convert shares of Series E Convertible Preferred Stock
into shares of Common Stock, that holder shall surrender the
certificate or certificates for such shares of Series E Convertible
Preferred Stock (or, if the registered holder alleges that such
certificate has been lost, stolen, or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Corporation to
indemnify the Corporation against any claim that may be made against
the Corporation on account of the alleged loss, theft, or destruction
of such certificate), at the office of the transfer agent for the
Series E Convertible Preferred Stock (or at the principal office of
the Corporation if the Corporation serves as its own transfer agent),
together with written notice that the holder elects to convert all or
any number of the shares of the Series E Convertible Preferred Stock
represented by such certificate or certificates and, if applicable,
any event on which such conversion is contingent. The notice shall
state the holder's name or the names of the nominees in which the
holder wishes the certificate or certificates for shares of Common
Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed by the registered holder or his, her,
or its attorney duly authorized in writing. The close of business on
the date of receipt by the transfer agent of such certificates (or
lost certificate affidavit and agreement) and notice (or by the
Corporation if the Corporation serves as its own transfer agent) shall
be the time of conversion (the "CONVERSION TIME"), and the shares of
Common Stock issuable upon conversion of the shares represented by
such certificate shall be deemed to be outstanding of record as of
that date. The Corporation shall, as soon as practicable after the
Conversion Time, issue and deliver at such office to the holder of
Series E Convertible Preferred Stock, or to his, her, or its
nominee(s), a certificate or certificates for the number of shares of
Common Stock to which the holder(s) shall be entitled, together with
cash in lieu of any fraction of a share, if applicable.
(ii) All shares of Series E Convertible Preferred Stock that
shall have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding, and all rights with respect to
such shares, including the rights, if any, to receive notices, to
vote, and to receive payment of any dividends accrued or declared but
unpaid thereon, shall immediately cease and terminate at the
Conversion Time, except only the right of the holders thereof to
receive shares of Common Stock in exchange therefor. Any shares of
Series E Convertible Preferred Stock so converted shall be retired and
cancelled and shall not be reissued as shares of such series, and the
Corporation (without the need for stockholder action) may from time to
time take such appropriate action as may be necessary to reduce the
authorized number of shares of Series E Convertible Preferred Stock
accordingly.
(iii) The Corporation shall pay any and all issue and other
similar taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock upon conversion of shares of Series
E Convertible Preferred Stock pursuant to this Section 4. The
Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which
the shares of Series E Convertible Preferred Stock so converted were
registered, and no such issuance or delivery shall be made unless and
until the person or entity requesting such issuance has 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.
d. Adjustment for Merger or Reorganization, etc. Subject to the
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provisions of Section 4(c) above, if there shall occur any reorganization,
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recapitalization, reclassification, consolidation or merger involving the
Corporation in which the Common Stock (but not the Series E Convertible
Preferred Stock) is converted into or exchanged for securities, cash, or
other property, then, following any such reorganization, recapitalization,
reclassification, consolidation, or merger, each share of Series E
Convertible Preferred Stock shall thereafter be convertible in lieu of the
Common Stock into which it was convertible prior to such event into the
kind and amount of securities, cash or other property that a holder of the
number of shares of Common Stock of the Corporation issuable upon
conversion of one share of Series E Convertible Preferred Stock immediately
prior to such reorganization, recapitalization, reclassification,
consolidation, or merger would have been entitled to receive pursuant to
such transaction; and, in such case, appropriate adjustment (as determined
in good faith by the Board of Directors) shall be made in the application
of the provisions in this Section 4 with respect to the rights and
interests thereafter of the holders of the Series E Convertible Preferred
Stock, to the end that the provisions set forth in this Section 4 shall
thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or other property thereafter deliverable upon the conversion
of the Series E Convertible Preferred Stock.
e. Notice of Record Date. In the event:
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(i) the Corporation shall take a record of the holders of its
Common Stock (or other stock or securities at the time issuable upon
conversion of the Series E Convertible Preferred Stock) for the
purpose of entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive
any other right; or
(ii) of any capital reorganization of the Corporation, any
reclassification of the Common Stock; or
(iii) of the voluntary or involuntary dissolution, liquidation,
or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to be
sent to the holders of the Series E Convertible Preferred Stock a notice
specifying, as the case may be, (i) the record date for such dividend,
distribution, or right, and the amount and character of such dividend,
distribution, or right; or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation, or winding-up is proposed to take place, and the
time, if any is to be fixed, as of which the holders of record of Common
Stock (or such other stock or securities at the time issuable upon the
conversion of the Series E Convertible Preferred Stock) shall be entitled
to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation, or winding-up, and the amount per share and
character of such exchange applicable to the Series E Convertible Preferred
Stock and the Common Stock. Such notice shall be sent at least ten (10)
days prior to the record date or effective date for the event specified in
such notice. Any notice required by the provisions hereof to be given to a
holder of shares of Series E Convertible Preferred Stock shall be deemed
sent to such holder if deposited in the United States mail, postage
prepaid, and addressed to such holder at his, her, or its address appearing
on the books of the Corporation.
5. Holder's Restriction on Conversion. The Corporation shall not effect any
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conversion of Series E Convertible Preferred Stock for a holder Series E
Convertible Preferred Stock (a "HOLDER"), and a Holder shall not have the right
to convert any Series E Convertible Preferred Stock, to the extent that after
giving effect to the conversion set forth on the applicable notice of
conversion, such Holder (together with such Holder's Affiliates (as defined
below), and any other person or entity acting as a group together with such
Holder or any of such Holder's Affiliates) would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of the Series E Convertible Preferred Stock with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (A) conversion of the
remaining, unconverted Series E Convertible Preferred Stock beneficially owned
by such Holder or any of its Affiliates and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 5,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section 5 applies, the determination of
whether Series E Convertible Preferred Stock is convertible (in relation to
other securities owned by such Holder together with any Affiliates) and of which
principal amount of Series E Convertible Preferred Stock is convertible shall be
in the sole discretion of such Holder, and the submission of a notice of
conversion shall be deemed to be such Holder's determination of whether Series E
Convertible Preferred Stock may be converted (in relation to other securities
owned by such Holder together with any Affiliates) and which principal amount of
Series E Convertible Preferred Stock is convertible, in each case subject to
such aggregate percentage limitations. To ensure compliance with this
restriction, each Holder will be deemed to represent to the Corporation each
time it delivers a notice of conversion that such notice of conversion has not
violated the restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. The "BENEFICIAL OWNERSHIP LIMITATION"
shall be 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock
issuable upon conversion of Series E Convertible Preferred Stock held by the
Holder. The Beneficial Ownership Limitation provisions of this Section 5 may be
waived by such Holder, at the election of such Holder, upon not less than 61
days' prior notice to the Company, to change the Beneficial Ownership Limitation
to 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon conversion of
Series E Convertible Preferred Stock held by the Holder and the provisions of
this Section 5 shall continue to apply. Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 5
to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of Series E Convertible Preferred Stock. "AFFILIATE" means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a person, as such terms are
used in and construed under Rule 144 under the Securities Act. With respect to a
Holder, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Holder will be deemed
to be an Affiliate of such Holder.
6. Waiver. Any of the rights, powers, or preferences of the holders of
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Series E Convertible Preferred Stock set forth herein may be waived by the
affirmative consent or vote of the holders of at least a majority of the shares
of Series E Convertible Preferred Stock then outstanding.
IN WITNESS WHEREOF, this Certificate of Designation has been executed by a
duly authorized officer of the Corporation on this ____ day of November, 2006.
DEER VALLEY CORPORATION
By:
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Charles G. Masters, Chief Executive Officer
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