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Exhibit 10.51
CERTIFICATE OF DESIGNATIONS
VASCO DATA SECURITY INTERNATIONAL, INC.
Certificate of Designations,
Preferences and Rights of Preferred Stock
by Resolution of the Board of Directors
Providing for an Issue of 150,000 Shares
of Preferred Stock Designated
"SERIES C CONVERTIBLE PREFERRED STOCK"
I, MARIO HOUTHOOFT, President and Chief Executive Officer of VASCO DATA SECURITY
INTERNATIONAL, INC. (hereinafter referred to as the "CORPORATION"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "GENERAL CORPORATION LAW"), in accordance with the
provisions of Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors of the
Corporation by the Certificate of Incorporation of said Corporation (hereinafter
referred to as the "CERTIFICATE OF INCORPORATION") the Board of Directors
adopted a resolution providing for the issuance of a series of Preferred Stock,
par value $.01 per share, of the Corporation to be designated "SERIES C
CONVERTIBLE PREFERRED STOCK", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of the
Corporation by the Certificate of Incorporation, a series of Preferred Stock,
par value $.01 per share, of the Corporation be, and hereby is, created, to be
designated "SERIES C CONVERTIBLE PREFERRED STOCK" (hereinafter referred to as
the "SERIES C PREFERRED STOCK"), consisting of One Hundred Fifty Thousand
(150,000) shares, and, to the extent that the powers, preferences and relative
and other special rights, and the qualifications, limitations and restrictions
thereof, of the Series C Preferred Stock are not stated and expressed in the
Certificate of Incorporation, such powers, preferences and relative and other
special rights, and the qualifications, limitations and restrictions thereof,
are hereby fixed and stated to be as follows (all terms used herein which are
defined in the Certificate of Incorporation shall be deemed to have the meanings
provided therein):
The following terms shall have the meanings as set forth below:
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or
a day on which banking institutions in New York, New York or
Brussels, Belgium or the Nasdaq Stock Market are authorized or
obligated by law, executive order or government decree to be
closed.
"DOLLARS" or "$" means the lawful currency of the United States
of America.
"OTHER SECURITIES" means any stock (other than Common Stock) and
other securities of the Corporation or any other person
(corporate or otherwise) which the record holders of the Series
C Preferred Stock at any time shall be entitled to receive, or
shall have received, upon the conversion of the Series C
Preferred Stock, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
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1 MANDATORY REDEMPTION OR CONVERSION
1.1 Unless previously converted in accordance with the provisions of
Section 2 hereof, on July [ ], 2004 (the "MANDATORY REDEMPTION DATE"),
the Corporation shall redeem each outstanding share of Series C
Preferred Stock for cash at a redemption price equal to the
Liquidation Preference (as hereinafter defined), but only to the
extent of funds of the Corporation legally available therefor pursuant
to the General Corporation Law ("LEGALLY AVAILABLE FUNDS"). In
addition, at the Corporation's option, or otherwise in the event that
Legally Available Funds are insufficient to permit the Corporation to
redeem some or all of the shares of Series C Preferred Stock for cash,
the Corporation shall convert such shares of Series C Preferred Stock
into shares of its Common Stock. The number of shares of Common Stock
to be issued in connection with such conversion will be determined on
the basis of a fraction, the numerator of which will be the
Liquidation Preference and the denominator of which will be the lesser
of (i) the average of the Market Prices (as defined in the next
sentence) of the Common Stock for the period of 30 consecutive
Business Days on which the Common Stock was traded ending on the
Business Day immediately preceding the Mandatory Redemption Date,
subject to a discount of five percent (5%) and (ii) the Liquidation
Preference, such fraction multiplied by the number of shares of Series
C Preferred Stock outstanding and unredeemed on the Mandatory
Redemption Date. The "MARKET PRICE" of the Common Stock for any day
means the last reported sales price, regular way, or, in case no sale
takes place on such day, the average reported closing bid and asked
prices, regular way, in either case as reported on the Nasdaq National
Market.
1.2 Immediately following such conversion, the rights of the holders of
any converted shares of Series C Preferred Stock shall cease and the
persons entitled to receive shares of Common Stock upon the conversion
of such shares of Series C Preferred Stock shall be treated for all
purposes as having been the owners of such shares of Common Stock,
subject to Section 1.3 hereof. No payments or adjustments will be made
upon the Mandatory Conversion Date on account of accrued and unpaid
distributions, if any, on the shares of Series C Preferred Stock
subject to such conversion.
1.3 Upon conversion of the Series C Preferred Stock pursuant to Section
1.1 hereof, the Corporation shall make such arrangements as it deems
appropriate for (i) the issuance of certificates representing shares
of Common Stock and (ii) payment of cash in lieu of any fractional
shares of Common Stock in exchange for and contingent upon surrender
of certificates representing shares of Series C Preferred Stock;
provided that the Corporation shall give the holders of shares of
Series C Preferred Stock notice of any such actions as the Corporation
deems appropriate and, upon such surrender of their certificates
representing Series C Preferred Stock, such holders shall be entitled
to receive dividends declared and paid, if any, on such shares of
Common Stock subsequent to the Mandatory Conversion Date.
2 CONVERSION AT THE OPTION OF HOLDER
2.1 GENERAL Subject to and in compliance with the provisions of this
Section 2, shares of Series C Preferred Stock may, at the option of
any holder, be converted at any time and
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from time to time (each, a "CONVERSION Date") into fully paid and
nonassessable shares of Common Stock. The number of shares of Common
Stock which a holder of shares of Series C Preferred Stock shall be
entitled to receive upon conversion pursuant to this Section 2 shall
be the product obtained by multiplying (i) the Applicable Conversion
Rate (determined as provided in Section 2.2) by (ii) the number of
shares of Series C Preferred Stock being converted on the Conversion
Date.
2.2 APPLICABLE CONVERSION RATE Subject to Section 5 hereof, the conversion
rate in effect at any time for the conversion of the Series C
Preferred Stock pursuant to this Section 2 (the "APPLICABLE CONVERSION
RATE") shall be the lowest of the following:
2.2.1 in the event that no shares of Common Stock have been issued or
sold during the period beginning on the date of issuance of the
Series C Preferred Stock and ending on the Conversion Date, the
quotient obtained by dividing (i) the Liquidation Preference of
the Series C Preferred Stock by (ii) $14.25;
2.2.2 in the event that any shares of Common Stock were issued or
sold during the period beginning on the date of issuance of the
Series C Preferred Stock and ending on the Conversion Date at a
price per share of Common Stock exceeding $11.86 (the "UPPER
LIMIT"), the quotient obtained by dividing (i) the Liquidation
Preference of the Series C Preferred Stock by (ii) $14.25;
2.2.3 in the event that any shares of Common Stock were issued or
sold during the period beginning on the date of issuance of the
Series C Preferred Stock and ending on the Conversion Date at a
price per share of Common Stock below or equal to the Upper
Limit but above $7.00 (the "LOWER LIMIT"), the quotient
obtained by dividing (i) the Liquidation Preference of the
Series C Preferred Stock by (ii) the difference between (a)
$14.25 and (b) a fraction (1) the numerator of which will be
the product of (A) the difference between $14.25 and the Upper
Limit and (B) the difference between the Upper Limit and the
price paid per share of Common Stock and (2) the denominator of
which will be the difference between the Upper Limit and the
Lower Limit; and
2.2.4 in the event that any shares of Common Stock were issued or
sold during the period beginning on the date of issuance of the
Series C Preferred Stock and ending on the Conversion Date at a
price per share of Common Stock below or equal to the Lower
Limit, the quotient obtained by dividing (i) the Liquidation
Preference of the Series C Preferred Stock by (ii) $11.86.
For purposes of this Section 2.2, the issuance or sale of Common Stock
shall include the issuance and sale of shares of Common Stock as well
as securities convertible into Common Stock ("CONVERTIBLE SECURITIES")
and any rights or options to subscribe for, purchase or otherwise
acquire Common Stock, and the price per share of Common Stock offered
and sold for purposes of any calculations under this Section 2.2 shall
be equal to the U.S. dollar equivalent of: (i) in the case of shares
of Common Stock, the per share amount received or receivable by the
Corporation as consideration for the issue and sale of such Common
Stock, (ii) in the case of Convertible Securities, (a) the total
amount received or receivable by the Corporation as consideration for
the issue and sale of such Convertible Securities, plus the minimum
aggregate amount of additional
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consideration, if any, payable to the Corporation upon conversion or
exchange thereof, divided by (b) the maximum number of shares of
Common Stock issuable upon the conversion or exchange of such
Convertible Securities and (iii) in the case of any rights or options
to subscribe for, purchase or otherwise acquire stock, the total
amount, if any, received or receivable by the Corporation as
consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the exercise of such rights or options,
divided by (b) the maximum number of shares of Common Stock issuable
upon the exercise of such rights or options.
2.3 EXERCISE OF CONVERSION PRIVILEGE To exercise its conversion privilege,
a holder of shares of Series C Preferred Stock shall surrender the
certificate(s) representing the shares being converted to the
Corporation at its principal office, and shall give written notice to
the Corporation at that office that such holder elects to convert such
shares. Such notice shall also state the name or names (with address
or addresses) in which the certificate(s) for shares of Common Stock
issuable upon such conversion shall be issued. The certificate(s) for
shares of Series C Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in
blank. A notice hereunder shall be deemed to be given on the date it
is dispatched, if by international airmail, domestic mail or overnight
courier, or received, if sent by facsimile, telex or otherwise. The
date when such written notice is received by the Corporation, together
with the certificate(s) representing the shares of Series C Preferred
Stock being converted, shall be the "CONVERSION DATE." Any voluntary
conversion of shares of Series C Preferred Stock by any holder shall
be for at least 100 shares of Common Stock. As promptly as practicable
after the Conversion Date, the Corporation shall issue and shall
deliver to the holder of the shares of Series C Preferred Stock being
converted, or on its written order, such certificate(s) as it may
request for the number of whole shares of Common Stock issuable upon
the conversion of such shares of Series C Preferred Stock in
accordance with the provisions of this Section 2, and cash, as
provided in Section 2.4, in respect of any fraction of a share of
Common Stock issuable upon such conversion.
2.4 CASH IN LIEU OF FRACTIONAL SHARES No fractional shares of Common Stock
or scrip representing fractional shares shall be issued upon the
conversion of shares of Series C Preferred Stock pursuant to this
Section 2. Instead of any fractional shares of Common Stock which
would otherwise be issuable upon conversion of Series C Preferred
Stock, the Corporation shall pay to the holder of the shares of Series
C Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the
Market Price per share of the Common Stock at the close of business on
the Conversion Date. The determination as to whether or not any
fractional shares are issuable shall be based upon the aggregate
number of shares of Series C Preferred Stock being converted at any
one time by any holder thereof, not upon each share of Series C
Preferred Stock being converted.
2.5 PARTIAL CONVERSION In the event some but not all of the shares of
Series C Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute
and deliver to or on the order of the holder, at the expense
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of the Corporation, a new certificate representing the number of
shares of Series C Preferred Stock which were not converted.
2.6 RESERVATION OF COMMON STOCK The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of the Series C Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series C Preferred Stock,
and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series C Preferred Stock, the
Corporation shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
3 VOTING RIGHTS
3.1 Each holder of outstanding shares of Series C Preferred Stock shall
not be entitled to vote at any meeting of stockholders of the
Corporation (or written actions of stockholders in lieu of meetings)
with respect to any and all matters presented to the stockholders of
the Corporation for their action or consideration, except as may be
provided by law.
3.2 Notwithstanding the foregoing, the Corporation shall not amend, alter
or repeal preferences, rights, powers or other terms of the Series C
Preferred Stock so as to affect adversely the Series C Preferred
Stock, and may not create, authorize or issue shares of any class of
stock ranking senior to or on parity with the Series C Preferred Stock
without the written consent or affirmative vote of the holders of at
least Sixty-Six and Two-Thirds percent (66 2/3%) of the then
outstanding shares of Series C Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be)
separately as a class.
4 PRIORITY OF SERIES C PREFERRED STOCK IN THE EVENT OF LIQUIDATION OR
DISSOLUTION
In the event of any liquidation, dissolution, or winding up of the affairs
of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series C Preferred Stock shall be entitled
to receive, out of the remaining net assets of the Corporation, the amount
of One Hundred Dollars ($100.00) in cash for each share of Series C
Preferred Stock, (the "LIQUIDATION PREFERENCE"), before any distribution of
any kind shall be made to the holders of the Common Stock or any other
stock ranking (as to any such distribution) junior to the Series C
Preferred Stock. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets distributable among the holders of any series of
Preferred Stock ranking (as to any such distribution) on a parity with the
Series C Preferred Stock shall be insufficient to permit the payment in
full to the holders of all such series of Preferred Stock of all
preferential amounts payable to all such holders, then the entire assets of
the Corporation thus distributable shall be distributed rateably among the
holders of shares of Series C Preferred Stock and all series of Preferred
Stock ranking (as to any such distribution) on a parity with the Series C
Preferred Stock in proportion to the respective amounts that would be
payable per share if such assets were sufficient to permit
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payment in full. Except as otherwise provided in this Section 4, holders of
Series C Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation. For the purposes of this Section 4, neither the voluntary
sale, lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property
or assets of the Corporation, nor the consolidation or merger of the
Corporation with one or more other corporations, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
5 ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.; R
ECLASSIFICATION, ETC.
In case at any time or from time to time after the date of issuance of the
Series C Preferred Stock, the holders of Common Stock (or Other Securities)
shall have received or (on or after the record date fixed for the
determination of stockholders eligible to receive) shall have become
entitled to receive without payment therefor
(a) other or additional stock or property (other than cash) by way of
dividend, or
(b) any cash paid or payable (including, without limitation, by way of
dividend other than a dividend payable out of earned surplus of the
Corporation), or
(c) other or additional (or less) stock or property (including cash) by
way of spin-off, split-up, recapitalization, combination of shares or
similar corporate rearrangement,
then, and in each such case the record holder of a share of Series C
Preferred Stock, upon the conversion thereof as provided in Section 1 or 2,
shall be entitled to receive the amount of stock and property (including
cash in the cases referred to in subdivisions (b) and (c) of this Section
5) which such record holder would hold on the date of such conversion if on
the date of issuance of the Series C Preferred Stock such person had been
the holder of record of the number of shares of Common Stock called for
pursuant to the terms hereof and had thereafter, during the period from the
date of issuance of the Series C Preferred Stock to and including the date
of such conversion, retained such shares and all such other additional (or
less) stock and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 5) receivable by such person as
aforesaid during such period, giving effect to all adjustments called for
during such period by Sections 2 and 5 hereof.
In case the Corporation after the date of issuance of the Series C
Preferred Stock shall (a) effect a reorganization, (b) consolidate or merge
with any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Corporation, then, in each such case,
the record holders of the Series C Preferred Stock, upon the conversion
hereof as provided in Section 1 or 2 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall be entitled to receive (and the
Corporation shall be entitled to deliver), in lieu of the Common Stock (or
Other Securities) issuable upon such conversion prior to such consummation
or such effective date, the stock and property (including cash) to which
such record owner would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such record holder
had so exercised such Series C Preferred Stock immediately prior thereto,
all subject to further adjustment thereafter as provided in Section 2
hereof.
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6 RANKING OF SERIES C PREFERRED STOCK
With regard to rights to receive mandatory redemption payments and
distributions upon liquidation, dissolution or winding up of the
Corporation, the Series C Preferred Stock shall rank prior to any other
equity securities of the Corporation.
7 REPLACEMENT OF SERIES C PREFERRED STOCK
Upon receipt of evidence reasonably satisfactory to the Corporation of the
loss, theft, destruction or mutilation of any certificate representing
Series C Preferred Stock and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Corporation or, in the case of any
such mutilation, upon surrender and cancellation of such certificate, the
Corporation at its expense will execute and deliver, in lieu thereof, a new
certificate.
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IN WITNESS WHEREOF, said VASCO DATA SECURITY INTERNATIONAL, INC. has caused this
Certificate to be signed by Mario Houthooft, its President and Chief Executive
Officer, this th day of July, 2000.
VASCO DATA SECURITY INTERNATIONAL, INC.
By:
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Name: Mario Houthooft
Title: President and Chief Executive Officer
