CERTIFICATE OF DESIGNATION
8% SERIES A CONVERTIBLE PREFERRED STOCK ($0.01 PAR VALUE)
OF
THE TRANSLATION GROUP, LTD.
The Translation Group, Ltd., a Delaware corporation (hereinafter called
the "Corporation"), hereby certifies that the Board of Directors of the
Corporation, by unanimous consent on April 12, 2000, pursuant to the provisions
of the General Corporation Law of the State of Delaware and pursuant to the
authority expressly vested in the Board of Directors of the Corporation by its
Certificate of Incorporation, adopted the following Resolutions creating a class
of preferred stock designated as 8% Series A Convertible Preferred Stock:
RESOLVED, that, pursuant to the Certificate of Incorporation and the
Bylaws of the Corporation (which authorizes 1,000,000 shares of Preferred Stock,
$0.01 par value, none of which are presently issued and outstanding), the Board
of Directors hereby fixes the voting powers, designation and preferences and
other special rights, and qualifications, limitations and restrictions of a
class of Preferred Stock designated as 8% Series A Convertible Preferred Stock
("Preferred Stock").
RESOLVED, that the Preferred Stock shall be subject to the following
provisions and have the following rights and preferences:
1. The Corporation shall issue shares of Preferred Stock to Ben
Franklin/Progress Capital Fund, L.P., Mentor Special Situation Fund. L.P., Mr.
Charles Murray and Mr. Edmund N. Pressman (collectively the "Investor"),
pursuant and subject to the terms and conditions of each Convertible Preferred
Stock Purchase Agreement ("Agreement") by and among the Corporation and
Investor.
2.1 NUMBER. 250,000 shares of the Preferred Stock of the Corporation shall be
issued.
2.2 TERMS OF PREFERRED STOCK.
2.2.1 CONVERSION. Subject to the provisions set forth below, the
holders of the Preferred Stock shall have the right, at any time, from time to
time, to convert any or all of such holder's shares of Preferred Stock into such
whole number of fully paid and nonassessable shares of Common Stock as is equal
to the quotient obtained by dividing (x) the Stated Value ($4.00) multiplied by
the number of shares of Preferred Stock being converted, by (y) the Conversion
Price (as hereinafter in this Section 2.2.1 defined), as last adjusted and then
in effect, by surrender of the certificates representing the shares of Preferred
Stock to be converted in the manner provided in Section 2.2.2 below. The
1
<PAGE>
"Conversion Price" per share at which shares of Common Stock shall be issuable
upon conversion of shares of Preferred Stock shall be the Stated Value;
PROVIDED, HOWEVER, that such Conversion Price shall be subject to adjustment as
set forth in Section 2.2.3 hereof. The holder of any shares of Preferred Stock
converted into shares of Common Stock pursuant to this Section 2.2.1 shall
remain entitled to payment of all accrued but unpaid dividends, if any, payable
with respect to such shares of Preferred Stock up to and including the
Conversion Date.
2.2.2 EXERCISE. The holder of any shares of Preferred Stock may
exercise the conversion right pursuant to Section 2.2.1 by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the Preferred
Stock to be converted along with an amount sufficient to pay any transfer or
similar tax, duly endorsed or assigned in blank or to the Corporation (if
required by it), accompanied by written notice stating that such holder elects
to convert such shares and unless the Common Stock issuable on conversion are to
be issued in the same name as the name in which the Preferred Stocks are
registered, each Preferred Stock surrendered for conversion shall be accompanied
by instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder or the holder's duly authorized attorney stating the name
or names (with address) in which the certificate or certificates for the shares
of Common Stock are to be issued. Conversion shall be deemed to have been
effected with respect to conversion under Section 2.2.1, on the date when the
aforesaid delivery is made and such date is referred to herein as the
"Conversion Date." Simultaneous with the conversion being effected, the shares
of Preferred Stock so converted shall no longer be deemed outstanding, shall no
longer be in existence and shall not be subject to reissuance by the
Corporation. As promptly as practicable thereafter, the Corporation shall issue
and deliver to or upon the written order of such holder, at the place designated
by such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled and a check or cash in respect of
any fractional interest in a share of Common Stock, if any, as provided in
Section 2.2.2(b) hereof, payable with respect to the shares of Preferred Stock
so converted. The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a stockholder of
record on the Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event such holder shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open, but the Conversion Price shall be that in effect on the Conversion
Date.
(a) Upon conversion of only a portion of the number of shares
represented by a certificate of Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to or upon the written order of the holder
of the certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Preferred Stock
representing the unconverted portion of the certificate so surrendered, which
new certificate shall entitle the holder thereof to dividends on, and all
2
<PAGE>
other rights incident to the ownership of, the shares of Preferred Stock
represented thereby to the same extent as if the certificate theretofore
covering such unconverted shares had not been surrendered for conversion.
(b) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any shares of
Preferred Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the current Conversion Price of a
share of Common Stock multiplied by such fractional interest. Fractional
interests shall not be entitled to dividends, and the holders of a fractional
interest shall not be entitled to any rights as stockholders of the Corporation
in respect of such fractional interest. If more than one share of Preferred
Stock shall be surrendered for conversion at any one time by the same holder,
the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Preferred Stock so
surrendered.
2.2.3 ANTIDILUTION. The Conversion Price shall be subject to
adjustment from time to time, up to and including the Conversion Date, as
follows:
(a) If the Corporation shall at any time or from time to time
after the Issue Date (as defined in the Agreement), issue any shares of Common
Stock, Preferred Stock or other securities (including, without limitation,
options, warrants, rights to subscribe or purchase, or other rights) convertible
into or exchangeable or exercisable for shares of Common Stock, in each case
other than Excluded Stock (as defined in Section 2.2.3(e) hereof), without
consideration or for a consideration per share less than the Conversion Price in
effect immediately prior to such issuance of such Common Stock, Preferred Stock
or other securities, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be lowered to a price equal to the quotient
obtained by dividing (x) an amount equal to the product of (I) the Conversion
Price in effect immediately prior to such issuance, multiplied by (II) the sum
of (A) the total number of shares of Common Stock outstanding immediately prior
to such issuance on a fully diluted basis, (B) the total number of shares of
Common Stock issuable upon conversion of Preferred Stock and upon conversion or
exercise of any securities referred to in Section 2.2.3(e) hereof immediately
prior to such issuance, and (C) the number of shares of Common Stock which could
have been purchased at the current Conversion Price for the consideration
received by the Corporation upon such issuance; by (y) the sum of (I) the total
number of shares of Common Stock outstanding immediately after such issuance on
a fully diluted basis and (II) the total number of shares of Common Stock
issuable upon conversion of Preferred Stock and upon conversion or exercise of
any securities referred to in Section 2.2.3(e) hereof immediately after such
issuance.
3
<PAGE>
For purposes of any adjustment of the Conversion Price pursuant to this
Section 2.2.3(a), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed, paid
or incurred by the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair market value thereof as determined in good faith by the
Board of Directors of the Corporation, irrespective of any accounting treatment.
(3) In the case of the issuance of (x) options to purchase or rights to
subscribe for Common Stock, (y) securities by their terms convertible into or
exchangeable for Common Stock or (z) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(I) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsection 2.2.3(a)(1) and 2.2.3(a)(2)
above, if any, received by the Corporation upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(II) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration received by the Corporation for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subsections 2.2.3(a)(1) and 2.2.3(a)(2)
above;
(III) on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchange for such convertible or exchangeable securities,
other than a change resulting from the antidilution provisions thereof, the
Conversion Price shall forthwith be readjusted to such
4
<PAGE>
Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior to such
change been made upon the basis of such change; and
(IV) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price applicable to the conversion of any shares of Preferred Stock
after the expiration or termination of any such options, rights or convertible
or exchangeable securities, the issuance of which caused an adjustment to the
Conversion Price, shall be readjusted to such Conversion Price as would have
obtained had the adjustment made upon the issuance of such options, rights or
securities or options or rights related to such securities, been made upon the
basis of the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities and subsequent conversion or exchange thereof.
(b) If, at any time after the Issue Date, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of Preferred Stock shall be increased
in proportion to such increase in outstanding shares.
(c) If, at any time after the Issue Date, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Conversion Price shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares.
(d) In the event, at any time after the Issue Date, of any
capital reorganization, or any reclassification of the capital stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock) or of the sale or other disposition
(including by contribution) of all or substantially all the properties and
assets of the Corporation as an entirety to any other person, each share of
Preferred Stock shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be convertible into the kind
and number of shares of stock or other securities or property of the
5
<PAGE>
Corporation or of the corporation resulting from such consolidation or surviving
such merger or to which such properties and assets shall have been sold or
otherwise disposed of to which the holder of the number of shares of Common
Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation, merger, sale or other disposition) upon
conversion of such share of Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 2.2.3(d) shall similarly apply to
successive reorganizations, reclassification, consolidations, mergers, sales or
other dispositions.
(e) "Excluded Stock" shall mean:
(1) Common Stock issued or issuable pursuant to stock option
plans or stock purchase plans for directors, officers, employees or consultants
of the Corporation approved by the Board of Directors of the Corporation not to
exceed 400,000 shares of Common Stock;
(2) issuance of rights or warrants to directors, officers,
employees or consultants of the Corporation approved by the Board of Directors
of the Corporation not to exceed 400,000 shares of Common Stock;
(3) Common Stock issued upon the conversion of options,
rights, warrants and/or convertible securities outstanding on the Issue Date;
and
(4) securities issued pursuant to the acquisition of another
corporation by the Corporation by merger, stock acquisition, reorganization,
purchase of substantially all of the assets or otherwise whereby the Corporation
owns not less than a majority in voting power of such other corporation after
such transaction.
2.2.4 RANK. With respect to dividend rights and rights on
liquidation, dissolution, winding up, the sale or other disposition, directly or
indirectly, by the Corporation in one or a series of related transactions of all
or substantially all of its assets on a consolidated basis or the merger or
consolidation of the Corporation or any of its principal subsidiaries with or
into any other firm, corporation or other legal entity the Preferred Stock ranks
senior to the Junior Stock (as defined in Section2.2.5 hereof).
2.2.5 DIVIDENDS. Holders of Preferred Stock shall be entitled
to receive, with regard to each share of Preferred Stock held, and in preference
to the holders of all classes and series of equity securities of the Corporation
whether now existing or hereafter created ("Junior Stock"), cumulative dividends
in an amount per share equal to the 8% per annum, multiplied by the Stated
Value. Such dividend shall be paid on the 15th day of April, July, October and
January. Dividends on the Preferred Stock for any period other than a full
dividend period shall be computed on the basis of a 360-day year consisting of
twelve 30 day
6
<PAGE>
months. Any unpaid dividends hereunder shall accrue and accumulate and shall
increase the Liquidation Preference (as hereinafter defined). Except for
dividends on Junior Stock payable solely in additional shares of Junior Stock,
unless all accrued dividends on all outstanding shares of the Preferred Stock
shall be paid or declared and set aside for payment, no dividends shall be
declared, paid or set apart for payment or any other distribution (whether in
cash or obligations of the Corporation or other properties) upon any Junior
Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired
for any consideration (or any money to be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation. Interest shall accrue and be payable on any accrued but unpaid
dividends on the Preferred Stock at the rate of ten percent (10%) per annum.
Dividends shall be payable in cash.
2.2.6 REDEMPTION RIGHTS. In the case that the Common Stock of
the Corporation has traded for at least 20 consecutive trading days at a price
in excess of $12.00 per share, on or after March 31, 2002, the Corporation may
elect to redeem the Preferred Stock at any time within 90 days from the last
trading day of such 20 day period by written notice to the holders of Preferred
Stock of its intention to redeem wherein a date for redemption is fixed which
shall be no less than 45 days and no more than 60 days from the date of said
notice. The redemption price shall equal the Purchase Price (as defined in the
Agreement), plus an amount equal to all accrued and unpaid dividends thereon
(including any accrued and unpaid interest) to the date fixed for redemption.
Provided that, the right of the Corporation to redeem a holder's Preferred Stock
shall terminate, regardless of whether a notice of redemption has been mailed,
upon delivery to the Corporation of a Notice of Election to Convert by such
holder of the Preferred Stock.
2.2.7 REPURCHASE PROVISIONS. The holders of the Preferred
Stock shall have the right, at their option, to require the Corporation to
purchase the Preferred Stock then held by them at any time within 90 days after
the fifth anniversary of the Issue Date by written notice to the Corporation of
its intention to require the Corporation to repurchase the Preferred Stock
wherein a date for repurchase is fixed which shall be no less than 45 days and
no more than 60 days from the date of said notice. The repurchase price shall
equal the Purchase Price plus accrued and unpaid dividends thereon (including
any accrued and unpaid interest) to the date of repurchase.
2.2.8 RIGHTS ON LIQUIDATION. In the event of (i) any
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, (ii) consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of at least 50% of the
outstanding capital stock of the Corporation for securities or other
consideration issued or paid or cause to be issued or paid by any such entity or
affiliate thereof, or (iii) the sale, license or transfer by the Corporation of
all or substantially all of its assets, the holders of shares of Preferred Stock
then outstanding shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its
7
<PAGE>
stockholders, whether from capital, surplus or earnings, before any payment
shall be made to the holders of any Junior Stock, an amount per share equal to
the Stated Value plus the amount of any accrued and unpaid dividends on the
Preferred Stock (including any accrued and unpaid interest)("Liquidation
Preference"). If, upon any such event the assets of the Corporation available
for distribution to the stockholders of the Corporation shall be insufficient to
pay the holders of shares of Preferred Stock the Liquidation Preference, the
holders of the shares of Preferred Stock shall share ratably in any distribution
of the remaining assets and funds of the Corporation.
2.2.9 MISCELLANEOUS. The Preferred Stock shall be non-voting
stock; provided, however, that the holders of Preferred Stock shall be entitled
to have one non-voting observer present at all meetings of the Corporation's
Board of Directors.
RESOLVED, that the officers of the Corporation, and each of them
singly, are hereby authorized to prepare, execute and deliver other documents,
certificates or agreements as may be required or appropriate to effectuate the
aforesaid resolutions.
RESOLVED, this Unanimous Written Consent of the Board of Directors of
the Corporation may be delivered by facsimile and executed in one or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same Consent.
RESOLVED, the actions taken by the foregoing Resolutions shall be
deemed to have been taken at the offices of the Corporation on the day first
above written.
IN WITNESS WHEREOF, The Translation Group, Ltd., has caused this
Certificate to be signed by Charles D. Cascio, a Director of The Translation
Group, Ltd., this 17th day of April 2000.
THE TRANSLATION GROUP, LTD.
By:_____________________________________
Name:___________________________________
Title:__________________________________
8
