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TITAN MOTORCYCLE CO. OF AMERICA
AMENDED AND RESTATED CERTIFICATE
OF DESIGNATIONS OF SERIES A CONVERTIBLE
PREFERRED STOCK
(Pursuant to Section 78.1955 of the General Corporation
Law of the State of Nevada)
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Titan Motorcycle Co. of America, a Nevada corporation (the
"Corporation"), in accordance with the provisions of Section 78.1955 of the
General Corporation Law of the State of Nevada (the "NGCL"), DOES HEREBY
CERTIFY:
That pursuant to authority vested in the Board of Directors of
the Corporation by the Restated Articles of Incorporation of the Corporation,
the Board of Directors of the Corporation, by unanimous written consent dated
September 10, 1999, adopted a resolution providing for the creation of a series
of the Corporation's Preferred Stock, $.001 par value, which series is
designated as "Series A Convertible Preferred Stock"; and
That upon the recommendation of the Board of Directors of the
Corporation, an amendment to such resolution setting forth the terms of the
Series A Convertible Preferred Stock was duly approved by the holders of the
Series A Convertible Preferred Stock pursuant to a written consent dated June 1,
2000, which resolution as so amended and restated is as follows:
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Restated Articles of Incorporation of the Corporation, the
Board of Directors does hereby amend and restate the terms of the following
series of Preferred Stock, $.001 par value (hereinafter called the "Preferred
Stock"), of the Corporation, and to the extent that the voting powers and the
designations, preferences and relative, participating, optional or other special
rights thereof and the qualifications, limitations or restrictions of such
rights have not been set forth in the Restated Articles of Incorporation of the
Corporation, does hereby fix the same as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
SECTION 1. DEFINITIONS. As used herein, the
following terms shall have the following meanings:
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"Accrual Amount" means with respect to any share of Series A
Convertible Preferred Stock on any date the amount of all accrued but unpaid
dividends on such share from the Issuance Date to the date of determination.
"Affiliate" means, with respect to any person, any other
person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject person;
for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise.
"Aggregated Person" means, with respect to any person, any
person whose beneficial ownership of shares of Common Stock would be aggregated
with the beneficial ownership of shares of Common Stock by such person for
purposes of Section 13(d) of the Exchange Act, and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Average Market Price" for any date means the arithmetic
average of the Market Price for each of the Trading Days during the applicable
Measurement Period.
"Biannual Reset Date" means the date occurring every six
months after the Initial Reset Date on the same day of each sixth month as the
Initial Reset Date through the third anniversary of the Issuance Date (for
example, if the Initial Reset Date is September 9, 2000, Biannual Reset Dates
shall occur on each March 9 and September 9 thereafter through September 9,
2002).
"Blackout Period" means the period of up to 30 consecutive
days after the date the Corporation notifies holders of shares of Series A
Convertible Preferred Stock who are bound by any Registration Rights Agreement
that such holders are required, pursuant to Section 4(d) of the Registration
Rights Agreements, to suspend offers and sales of Registrable Securities
pursuant to the Registration Statement as a result of an event or circumstance
described in Section 3(f)(1) of the Registration Rights Agreements, during which
period, by reason of Section 3(f)(2) of the Registration Rights Agreements, the
Corporation is not required to amend the Registration Statement or to supplement
the related prospectus.
"Board of Directors" or "Board" means the Board of Directors
of the Corporation.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Cash and Cash Equivalent Balances" of any person on any date
shall be determined from such person's books maintained in accordance with
Generally Accepted Accounting Principles, and means, without duplication, the
sum of (1) the cash accrued by such
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person and its subsidiaries on a consolidated basis on such date and available
for use by such person and its subsidiaries on such date and (2) all assets
which would, on a consolidated balance sheet of such person and its subsidiaries
prepared as of such date in accordance with Generally Accepted Accounting
Principles, be classified as cash or cash equivalents.
"Common Stock" means the Common Stock, $.001 par value, of the
Corporation.
"Computation Date" means, if a Redemption Limitation Event
occurs, any of (1) the date which is 30 days after such Redemption Limitation
Event occurs, if any Redemption Limitation Event is continuing on such date, (2)
each date which is 30 days after a Computation Date, if any Redemption
Limitation Event is continuing on such date, and (3) the date on which all
Redemption Limitation Events cease to continue.
"Control Notice" means a notice given by the Corporation to
the holders of shares of the Series A Convertible Preferred Stock, in accordance
with Section 7(a)(5) or Section 11(b)(4), stating that an Inconvertibility Day
or an Optional Redemption Event, as the case may be, has occurred by reason of
events which are not solely within the control of the Corporation.
"Conversion Agent" means Signature Stock Transfer, Inc., or
its duly appointed successor, as conversion agent for the Series A Convertible
Preferred Stock pursuant to the Transfer Agent Agreement.
"Conversion Amount" initially shall be equal to $1,000.00,
subject to adjustment as herein provided.
"Conversion Date" means, with respect to each conversion of
shares of Series A Convertible Preferred Stock pursuant to Section 10, the date
on which the Conversion Notice relating to such conversion is actually received
by the Conversion Agent, whether by mail, courier, personal service, telephone
line facsimile transmission or other means.
"Conversion Notice" means a written notice, duly signed by or
on behalf of a holder of shares of Series A Convertible Preferred Stock, stating
the number of shares of Series A Convertible Preferred Stock to be converted in
the form specified in the Subscription Agreements.
"Conversion Price" means:
(1) for any Conversion Date during the period from the
Issuance Date through the 364th day thereafter, the Fixed Conversion
Price;
(2) for any Conversion Date during the Reset Period
commencing on the Initial Reset Date, the lesser of:
(a) 130% of the Fixed Conversion Price; and
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(b) 90% of the Average Market Price during the
Measurement Period for the Initial Reset Date; and
(3) for any Conversion Date during each Reset Period
commencing on each successive Biannual Reset Date, the lesser of:
(a) 130% of the Conversion Price in effect for
the previous Reset Period; and
(b) 90% of the Average Market Price during the
Measurement Period for such Biannual Reset Date;
provided, however, that the Conversion Price applicable to a particular
conversion shall be subject to reduction as provided in Section 10(b)(6); and
provided further, however, that if a Redemption Limitation Event occurs, then,
in addition to any other right or remedy of any holder of shares of Series A
Convertible Preferred Stock, thereafter the Conversion Price for the shares not
redeemed shall be reduced on each Computation Date by an amount equal to five
percent of the amount that the Conversion Price otherwise would have been
without any reduction pursuant to this proviso (pro rated in the case of any
Computation Date which is less than 30 days after a Redemption Limitation Event
occurs or less than 30 days after another Computation Date), such reduction not
to exceed a maximum aggregate reduction for all Computation Dates of 30% of the
amount that the Conversion Price otherwise would have been without any reduction
pursuant to this proviso, such reduction to remain in effect for 30 days after
the end of the Redemption Limitation Event.
"Conversion Rate" shall have the meaning provided in Section
10(a).
"Converted Market Price" means, for any share of Series A
Convertible Preferred Stock as of any date of determination, an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, at the time of such determination, be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock if a Conversion Notice were given by the holder of such share of Series A
Convertible Preferred Stock on the date of such determination (determined
without regard to any limitation on conversion based on beneficial ownership
contained in Section 10(a)) times (y) the Average Market Price of the Common
Stock during the Measurement Period for the date of such determination.
"Corporation Optional Redemption Notice" means a notice given
by the Corporation to the holders of shares of Series A Convertible Preferred
Stock pursuant to Section 9(a) which notice shall state (1) that the Corporation
is exercising its right to redeem all or a portion of the outstanding shares of
Series A Convertible Preferred Stock pursuant to Section 9(a), (2) the number of
shares of Series A Convertible Preferred Stock held by such holder which are to
be redeemed, (3) the Redemption Price per share of Series A Convertible
Preferred Stock to be redeemed or the formula for determining the same,
determined in accordance herewith, and (4) the applicable Redemption Date.
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"Current Price" means with respect to any date the arithmetic
average of the Market Price of the Common Stock on the ten consecutive Trading
Days commencing 15 Trading Days before such date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Redemption Date" means the date of redemption of shares
of Series A Convertible Preferred Stock pursuant to Section 9(b), determined in
accordance therewith.
"Final Redemption Notice" means a notice given by the
Corporation to each holder of Series A Convertible Preferred Stock pursuant to
Section 9(b), which notice shall state (1) that the Corporation is exercising
its right to redeem all outstanding shares of Series A Convertible Preferred
Stock pursuant to Section 9(b), (2) the number of shares of Series A Convertible
Preferred Stock held by such holder which are to be redeemed, (3) the Final
Redemption Price per share of Series A Convertible Preferred Stock held by such
holder which are to be redeemed, determined in accordance herewith, and (4) the
Final Redemption Date.
"Final Redemption Price" means, for any share of Series A
Convertible Preferred Stock on any date, an amount equal to the sum of (i)
$1,000 plus (ii) an amount equal to the Accrual Amount on the share of Series A
Convertible Preferred Stock to be redeemed to the Final Redemption Date, plus
(iii) an amount equal to the accrued and unpaid interest on cash dividends in
arrears on such share of Series A Convertible Preferred Stock to the Final
Redemption Date (determined as provided in Section 5).
"Fixed Conversion Price" means $2.6812 (subject to equitable
adjustments from time to time on terms reasonably determined by the Board of
Directors for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which "ex-"
trading commences on or after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Nevada).
"Generally Accepted Accounting Principles" for any person
means the generally accepted accounting principles and practices applied by such
person from time to time in the preparation of its audited financial statements.
"Inconvertibility Day" means any Trading Day on which the
Corporation would not have been required to convert in accordance with Section
10(a) any shares of Series A Convertible Preferred Stock as a consequence of the
limitations set forth in Section 7(a)(1) had all outstanding shares of Series A
Convertible Preferred Stock held by such holder on such Trading Day been
converted into Common Stock on such Trading Day (without regard to the
limitation, if any, on beneficial ownership by such holder contained in Section
10(a)).
"Inconvertibility Notice" shall have the meaning provided in
Section 7(a)(2).
"Indebtedness" as used in reference to any person means all
indebtedness of such person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally
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Accepted Accounting Principles and shall include all such indebtedness
guaranteed in any manner by such person and all indebtedness secured by mortgage
or other lien upon property owned by such person, although such person has not
assumed or become liable for the payment of such indebtedness, and, for all
purposes hereof, such indebtedness shall be treated as though it has been
assumed by such person, but excluding specifically accounts payable and accrued
expenses.
"Initial Reset Date" means the first anniversary of the
Issuance Date (having the same calendar month and day as the Issuance Date).
"Issuance Date" means September 17, 1999.
"Junior Dividend Stock" means, collectively, the Common Stock
and any other class or series of capital stock of the Corporation ranking junior
as to dividends to the Series A Convertible Preferred Stock.
"Junior Liquidation Stock" means the Common Stock or any other
class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Series A Convertible Preferred Stock.
"Junior Stock" shall have the meaning provided in Section
10(b)(8).
"Liquidation Preference" means, for each share of Series A
Convertible Preferred Stock, the sum of (i) an amount equal to the Accrual
Amount thereon to the date of final distribution to such holders and (ii)
$1,000.00.
"Majority Holders" means at any time the holders of shares of
Series A Convertible Preferred Stock which shares constitute a majority of the
outstanding shares of Series A Convertible Preferred Stock.
"Market Price" of the Common Stock on any date means the
closing bid price for one share of Common Stock on such date on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the
principal market for the Common Stock on such date, or (c) the Nasdaq SmallCap,
if the Nasdaq SmallCap constitutes the principal securities market for the
Common Stock on such date, in any such case as reported by Bloomberg, L.P.;
provided, however, that if during any Measurement Period or other period during
which the Market Price is being determined:
(i) The Corporation shall declare or pay a dividend or
make a distribution to all holders of the outstanding Common Stock in
shares of Common Stock or fix any record date for any such action, then
the Market Price for each day in such Measurement Period or such other
period which day is prior to the earlier of (1) the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution and (2) the date on which ex-dividend trading in the
Common Stock with respect to such dividend or distribution begins shall
be reduced by multiplying the Market Price
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(determined without regard to this proviso) for each such day in such
Measurement Period or such other period by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding at the
close of business on the earlier of (1) the record date fixed for such
determination and (2) the date on which ex-dividend trading in the
Common Stock with respect to such dividend or distribution begins and
the denominator of which shall be the sum of such number of shares and
the total number of shares constituting such dividend or other
distribution;
(ii) The Corporation shall issue rights or warrants to all
holders of its outstanding shares of Common Stock, or fix a record date
for such issuance, which rights or warrants entitle such holders (for a
period expiring within forty-five (45) days after the date fixed for
the determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price (determined without regard
to this proviso) for any day in such Measurement Period or such other
period which day is prior to the end of such 45-day period, then the
Market Price for each such day shall be reduced so that the same shall
equal the price determined by multiplying the Market Price (determined
without regard to this proviso) by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding at the close
of business on the record date fixed for the determination of
stockholders entitled to receive such rights or warrants plus the
number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Market Price, and the
denominator of which shall be the number of shares of Common Stock
outstanding on the close of business on such record date plus the total
number of additional shares of Common Stock so offered for subscription
or purchase. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less
than the Market Price (determined without regard to this proviso), and
in determining the aggregate offering price of such shares of Common
Stock, there shall be taken into account any consideration received for
such rights or warrants, the value of such consideration, if other than
cash, to be determined in good faith by a resolution of the Board of
Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock or a record
date for any such subdivision shall be fixed, then the Market Price of
the Common Stock for each day in such Measurement Period or such other
period which day is prior to the earlier of (1) the day upon which such
subdivision becomes effective and (2) the date on which ex-dividend
trading in the Common Stock with respect to such subdivision begins
shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Market Price for each day in such
Measurement Period or such other period which day is prior to the
earlier of (1) the date on which such combination becomes effective and
(2) the date on which trading in the Common Stock on a basis which
gives effect to such combination begins, shall be proportionately
increased;
(iv) The Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Corporation (other than
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any dividends or distributions to which clause (i) of this proviso
applies) or evidences of its indebtedness, cash or other assets
including securities (but excluding any rights or warrants referred to
in clause (ii) of this proviso, dividends and distributions paid
exclusively in cash and any capital stock, evidences of indebtedness,
cash or assets distributed upon a merger or consolidation) (the
foregoing hereinafter in this clause (iv) of this proviso called the
"Securities"), or fix a record date for any such distribution, then, in
each such case, the Market Price for each day in such Measurement
Period or such other period which day is prior to the earlier of (1)
the record date for such distribution and (2) the date on which
ex-dividend trading in the Common Stock with respect to such
distribution begins shall be reduced so that the same shall be equal to
the price determined by multiplying the Market Price (determined
without regard to this proviso) by a fraction, the numerator of which
shall be the Market Price (determined without regard to this proviso)
for such date less the fair market value (as determined in good faith
by resolution of the Board of Directors of the Corporation) on such
date of the portion of the Securities so distributed or to be
distributed applicable to one share of Common Stock and the denominator
of which shall be the Market Price (determined without regard to this
proviso) for such date; provided, however, that in the event the then
fair market value (as so determined) of the portion of the Securities
so distributed applicable to one share of Common Stock is equal to or
greater than the Market Price (determined without regard to this clause
(iv) of this proviso) for any such Trading Day, in lieu of the
foregoing adjustment, adequate provision shall be made so that the
holders of shares of Series A Convertible Preferred Stock shall have
the right to receive upon conversion of the shares of Series A
Convertible Preferred Stock the amount of Securities the holders of
shares of Series A Convertible Preferred Stock would have received had
the number of shares of Common Stock to be issued in payment of such
dividends on the shares of Series A Convertible Preferred Stock been
issued, or had the holders of shares of Series A Convertible Preferred
Stock converted the shares of Series A Convertible Preferred Stock, in
either such case immediately prior to the record date for such
distribution (provided, however, that if such Securities are not then
available, the Corporation shall substitute cash or securities or other
property of equivalent value on terms reasonably satisfactory to the
holders of shares of Series A Convertible Preferred Stock). If the
Board of Directors of the Corporation determines the fair market value
of any distribution for purposes of this clause (iv) by reference to
the actual or when issued trading market for any securities comprising
all or part of such distribution, it must in doing so consider the
prices in such market on the same day for which an adjustment in the
Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of
this proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
clause (i) or (ii) of this proviso applies (or both), shall be deemed
instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other
than such shares of Common Stock or rights or warrants to which clause
(i) or (ii) of this proviso applies (and any Market Price reduction
required by this clause (iv) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend
or distribution of such shares of Common
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Stock or such rights or warrants (and any further Market Price
reduction required by clauses (i) and (ii) of this proviso with respect
to such dividend or distribution shall then be made), except that any
shares of Common Stock included in such dividend or distribution shall
not be deemed "outstanding at the close of business on the date fixed
for such determination" within the meaning of clause (i) of this
proviso;
(v) The Corporation or any subsidiary of the Corporation
shall (x) by dividend or otherwise, distribute to all holders of its
Common Stock cash in (or fix any record date for any such
distribution), or (y) repurchase or reacquire shares of its Common
Stock (other than an Option Share Surrender) for, in either case, an
aggregate amount that, combined with (1) the aggregate amount of any
other such distributions to all holders of its Common Stock made
exclusively in cash after the Issuance Date and within the 12 months
preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to this clause (v) has been made, (2) the
aggregate amount of any cash plus the fair market value (as determined
in good faith by a resolution of the Board of Directors of the
Corporation) of consideration paid in respect of any repurchase or
other reacquisition by the Corporation or any subsidiary of the
Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the 12 months
preceding the date of payment of such distribution or making of such
repurchase or reacquisition, as the case may be, and in respect of
which no adjustment pursuant to this clause (v) has been made, and (3)
the aggregate of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the
Corporation) of consideration payable in respect of any Tender Offer by
the Corporation or any of its subsidiaries for all or any portion of
the Common Stock concluded within the 12 months preceding the date of
payment of such distribution or completion of such repurchase or
reacquisition, as the case may be, and in respect of which no
adjustment pursuant to clause (vi) of this proviso has been made (such
aggregate amount combined with the amounts in clauses (1), (2) and (3)
above being the "Combined Amount"), exceeds 10% of the product of the
Market Price (determined without regard to this proviso) for any day in
such Measurement Period or such other period which day is prior to the
earlier of (A) the record date with respect to such distribution and
(B) the date on which ex-dividend trading in the Common Stock with
respect to such distribution begins or the date of such repurchase or
reacquisition, as the case may be, times the number of shares of Common
Stock outstanding on such date, then, and in each such case, the Market
Price for each such day shall be reduced so that the same shall equal
the price determined by multiplying the Market Price (determined
without regard to this proviso) for such day by a fraction (i) the
numerator of which shall be equal to the Market Price (determined
without regard to this proviso) for such day less an amount equal to
the quotient of (x) the excess of such Combined Amount over such 10%
and (y) the number of shares of Common Stock outstanding on such day
and (ii) the denominator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day; provided,
however, that in the event the portion of the cash so distributed or
paid for the repurchase or reacquisition of shares (determined per
share based on the number of shares of Common Stock outstanding)
applicable to one share of Common Stock is equal to or greater than the
Market Price (determined without regard to this clause (v) of this
proviso) of the Common Stock for any such day, then in lieu of the
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foregoing adjustment with respect to such day, adequate provision shall
be made so that the holders of shares of Series A Convertible Preferred
Stock shall have the right to receive upon conversion of shares of
Series A Convertible Preferred Stock the amount of cash the holders of
shares of Series A Convertible Preferred Stock would have received had
the holders of shares of Series A Convertible Preferred Stock converted
shares of Series A Convertible Preferred Stock immediately prior to the
record date for such distribution or the payment date of such
repurchase, as applicable; or
(vi) A Tender Offer made by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock shall expire
and such Tender Offer (as amended upon the expiration thereof) shall
require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market
value (as determined in good faith by resolution of the Board of
Directors of the Corporation) that combined together with (1) the
aggregate of the cash plus the fair market value (as determined in good
faith by a resolution of the Board of Directors of the Corporation), as
of the expiration of such Tender Offer, of consideration paid or
payable in respect of any other Tender Offers by the Corporation or any
of its subsidiaries for all or any portion of the Common Stock expiring
within the 12 months preceding the expiration of such Tender Offer and
in respect of which no adjustment pursuant to this clause (vi) has been
made, (2) the aggregate amount of any cash plus the fair market value
(as determined in good faith by a resolution of the Board of Directors
of the Corporation) of consideration paid in respect of any repurchase
or other reacquisition by the Corporation or any subsidiary of the
Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the 12 months
preceding the expiration of such Tender Offer and in respect of which
no adjustment pursuant to clause (v) of this proviso has been made, and
(3) the aggregate amount of any distributions to all holders of Common
Stock made exclusively in cash within 12 months preceding the
expiration of such Tender Offer and in respect of which no adjustment
pursuant to clause (v) of this proviso has been made, exceeds 10% of
the product of the Market Price (determined without regard to this
proviso) for any day in such period times the number of shares of
Common Stock outstanding on such day, then, and in each such case, the
Market Price for such day shall be reduced so that the same shall equal
the price determined by multiplying the Market Price (determined
without regard to this proviso) for such day by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding on such day multiplied by the Market Price (determined
without regard to this proviso) for such day and the denominator of
which shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration paid or payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the Tender Offer) of all shares validly tendered and not
withdrawn as of the last time tenders could have been made pursuant to
such Tender Offer (the "Expiration Time") (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on such day times the Market
Price (determined without regard to this proviso) of the Common Stock
on the Trading Day next succeeding the Expiration Time.
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"Maximum Share Amount" means 3,429,400 shares of Common Stock,
or such greater number of shares as permitted by the rules of the Nasdaq
SmallCap or other securities market on which the Common Stock is then listed
(such amount to be subject to equitable adjustment from time to time on terms
reasonably determined by the Board of Directors for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring or with respect to which "ex-" trading commences
after the date of filing this Certificate of Designations with the Secretary of
State of the State of Nevada).
"Measurement Period" means, with respect to any date, the
period of ten consecutive Trading Days ending on the Trading Day prior to such
date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Net Cash and Cash Equivalent Balances" of any person on any
date means an amount not less than zero equal to the consolidated Cash and Cash
Equivalent Balances of such person and its subsidiaries on such date less the
amount of any outstanding Indebtedness of such person or any of its subsidiaries
which, directly or indirectly, is secured in whole or in part by, or restricts
the use of, the consolidated Cash and Cash Equivalent Balances of such person
and its subsidiaries.
"1933 Act" means the Securities Act of 1933, as amended.
"NYSE" means the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of shares of
Common Stock to the Corporation in payment of the exercise price or tax
obligations incurred in connection with the exercise of a stock option granted
by the Corporation to any of its employees, directors or consultants.
"Optional Redemption Event" means any one of the following
events:
(1) For any period of five consecutive Trading Days there
shall be no closing bid price of the Common Stock on the Nasdaq, the
Nasdaq SmallCap, the NYSE or the AMEX;
(2) The Common Stock ceases to be listed for trading on
any of the Nasdaq, the Nasdaq SmallCap, the NYSE or the AMEX and is not
simultaneously listed on one of the other such markets or exchanges;
(3) The inability for 30 or more days (whether or not
consecutive) of any holder of shares of Series A Convertible Preferred
Stock to sell such shares of Common Stock issued or issuable on
conversion of shares of Series A Convertible Preferred Stock
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<PAGE> 12
pursuant to the Registration Statement for any reason other than a
Blackout Period on each of such 30 days;
(4) The Corporation shall (A) default in the timely
performance of the obligation to issue shares of Common Stock upon
conversion of shares of Series A Convertible Preferred Stock as and
when required by Section 10 or (B) fail or default in the timely
performance of any material obligation (other than as specifically set
forth elsewhere in this definition) to a holder of shares of Series A
Convertible Preferred Stock under the terms of this Certificate of
Designations or under the Subscription Agreements, the Registration
Rights Agreements, the Warrants or any other agreement or document
entered into in connection with the issuance of shares of Series A
Convertible Preferred Stock, as such instruments may be amended from
time to time; provided, however, that (i) with respect to the first two
occurrences of an event described in clause (A) above, each of such
events shall be an Optional Redemption Event only if such default shall
have continued for a period of three Trading Days after notice thereof
is given to the Corporation by any holder of shares of Series A
Convertible Preferred Stock and (ii) an event described in clause (B)
above shall be an Optional Redemption Event only if such failure or
default shall have continued for a period of 30 days after notice
thereof is given to the Corporation by any holder of shares of Series A
Convertible Preferred Stock.
(5) (A) Any consolidation or merger of the Corporation
with or into another entity (other than a merger or consolidation of a
subsidiary of the Corporation with or into the Corporation or a
wholly-owned subsidiary of the Corporation) where the shareholders of
the Corporation immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of
the surviving corporation of such consolidation or merger immediately
following such transaction and (i) such transaction materially and
adversely affects the rights of any holder of shares of Series A
Convertible Preferred Stock or (ii) the common stock of the surviving
corporation is not listed for trading on the NYSE, the AMEX, the Nasdaq
or the Nasdaq SmallCap; or (B) any sale or other transfer of all or
substantially all of the assets of the Corporation unless (i) the
shareholders of the Corporation immediately prior to such transaction
own at least 51% of the outstanding voting securities of the transferee
of such assets, (ii) the common stock of such transferee is listed for
trading on the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap and
(iii) such transferee assumes all of the obligations of the Corporation
to the holders of the Series A Convertible Preferred Stock under this
Certificate of Designations, the Subscription Agreements and the other
instruments contemplated hereby and thereby; or
(6) The adoption of any amendment to the Corporation's
Articles of Incorporation, without the consent of the Majority Holders,
which materially and adversely affects the rights of any holder of
shares of Series A Convertible Preferred Stock.
"Optional Redemption Notice" means a notice from a holder of
shares of Series A Convertible Preferred Stock to the Corporation which states
(1) that the holder delivering such notice is thereby requiring the Corporation
to redeem shares of Series A Convertible Preferred
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<PAGE> 13
Stock pursuant to Section 11, (2) to such holder's knowledge, a summary of the
circumstances constituting the Optional Redemption Event giving rise to such
redemption, and (3) the number of shares of Series A Convertible Preferred Stock
held by such holder which are to be redeemed.
"Optional Redemption Price" means the greater of (i) the
Premium Price on the applicable redemption date and (ii) the Converted Market
Price on the applicable redemption date.
"Parity Dividend Stock" means any class or series of the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series A Convertible Preferred Stock.
"Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series A Convertible Preferred Stock.
"Premium Percentage" means 120%.
"Premium Price" means, for any share of Series A Convertible
Preferred Stock as of any date of determination, the sum of (a) the product
obtained by multiplying (x) the sum of (1) the Conversion Amount plus (2) an
amount equal to the Accrual Amount on such share of Series A Convertible
Preferred Stock to the date of determination, times (y) the Premium Percentage
plus (b) an amount equal to the accrued and unpaid interest on cash dividends in
arrears (as provided in Section 5) to the date of determination.
"Redemption Date" means the date x of a redemption of shares
of Series A Convertible Preferred Stock pursuant to Section 9(a), determined in
accordance therewith.
"Redemption Limitation Event" means the failure of the
Corporation to pay the applicable redemption price when due for some or all of
the shares of Series A Convertible Preferred Stock required to be redeemed
pursuant to Section 7 or Section 11 by reason of a restriction contained in the
Company's loan agreements or facilities with Wells Fargo Credit, Inc., or with
any other institutional lender, whether such agreements or facilities are now
existing or hereafter created; and such Redemption Limitation Event shall be
deemed to continue until such redemption price is paid in full in accordance
with the terms of this Certificate of Designations.
"Redemption Price" means the greater of (i) the Premium Price
on the applicable Redemption Date and (ii) the Converted Market Price on the
applicable Redemption Date; provided, however, that if the Corporation, as
certified by an officer of the Corporation in the Corporation Optional
Redemption Notice, has Net Cash and Cash Equivalent Balances which, together
with the amount of all definitive, binding commitments available to the
Corporation (which may include available borrowing capacity under instruments
which also reflect outstanding Indebtedness) on or prior to the applicable
Redemption Date to fund payment of the Redemption Price (as defined in this
proviso) of the shares of Series A Convertible Preferred Stock to be redeemed,
are sufficient, after taking into account the Corporation's net cash
requirements during the period from the date the Corporation Optional Redemption
Notice is given to the Redemption Date, to pay such Redemption Price of the
shares of Series A
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<PAGE> 14
Convertible Preferred Stock to be redeemed, the "Redemption Price" means the
Premium Price on the applicable Redemption Date.
"Registration Rights Agreements" means the several
Registration Rights Agreements entered into between the Corporation and the
original holders of the shares of Series A Convertible Preferred Stock, as
amended or modified from time to time in accordance with their respective terms.
"Registration Statement" means the Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 2(a) of
the Registration Rights Agreements.
"Reorganization Event" means a capital reorganization,
reclassification, or similar transaction involving the capital stock of the
Corporation (other than with a wholly-owned subsidiary of the Corporation), a
consolidation, merger or business combination of the Corporation with another
corporation or entity, or the sale or conveyance of all or substantially all of
the assets of the Corporation.
"Reset Period" means the applicable six month period
commencing on the Initial Reset Date and on each Biannual Reset Date thereafter
and ending on the day immediately prior to the next Biannual Reset Date.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Effective Date" means the date the Registration Statement
is first declared effective by the SEC.
"Senior Dividend Stock" means any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series A
Convertible Preferred Stock.
"Senior Liquidation Stock" means any class or series of
capital stock of the Corporation ranking senior as to liquidation rights to the
Series A Convertible Preferred Stock.
"Series A Convertible Preferred Stock" means the Series A
Convertible Preferred Stock, $.001 par value, of the Corporation.
"Share Limitation Redemption Date" means each date on which
the Corporation is required to redeem shares of Series A Convertible Preferred
Stock as provided in Section 7(a).
"Share Limitation Redemption Price" means the greater of (a)
the Premium Price on the applicable Share Limitation Redemption Date and (b) the
Converted Market Price on the applicable Share Limitation Redemption Date.
"Stockholder Approval" shall mean the approval by a majority
of the votes cast by the holders of shares of Common Stock (in person or by
proxy) at a meeting of the stockholders of the Corporation (duly convened at
which a quorum was present), or a written consent of holders of shares of Common
Stock entitled to such number of votes given without a
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<PAGE> 15
meeting, of the issuance by the Corporation of 20% or more of the Common Stock
of the Corporation outstanding on the Issuance Date for less than the greater of
the book or market value of such Common Stock on conversion of the Series A
Convertible Preferred Stock, as and to the extent required under Rule
4310(c)(25)(H) of the Nasdaq SmallCap as in effect from time to time or any
successor, replacement or similar provision thereof or of any other market on
which the Common Stock is listed for trading.
"Subscription Agreements" means the several Subscription
Agreements by and between the Corporation and the original holders of shares of
Series A Convertible Preferred Stock pursuant to which the shares of Series A
Convertible Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (x) the national
securities exchange, (y) the Nasdaq or (z) the Nasdaq SmallCap, which at the
time constitutes the principal securities market for the Common Stock, is open
for general trading.
"Transfer Agent Agreement" means the Transfer Agent Agreement,
dated as of September 15, 1999, by and among the Corporation, the Conversion
Agent and the original holders of the Series A Convertible Preferred Stock for
the benefit of the holders from time to time of shares of Series A Convertible
Preferred Stock.
"Warrants" means the Common Stock Purchase Warrants issued by
the Corporation in connection with the issuance of the shares of Series A
Convertible Preferred Stock.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such
series shall be designated as "Series A Convertible Preferred Stock", and the
number of shares constituting the Series A Convertible Preferred Stock shall be
4,000, and shall not be subject to increase. The Corporation shall not issue any
shares of Series A Convertible Preferred Stock other than pursuant to the
Subscription Agreements, unless such issuance shall have been approved by the
Majority Holders. Any shares of Series A Convertible Preferred Stock which are
redeemed by the Corporation and retired and any shares of Series A Convertible
Preferred Stock which are converted in accordance with Section 10 shall be
restored to the status of authorized, unissued and undesignated shares of the
Corporation's class of Preferred Stock and shall not be subject to issuance, and
may not thereafter be outstanding, as shares of Series A Convertible Preferred
Stock.
SECTION 3. [RESERVED.]
SECTION 4. RANK. Subject to Section 12(b), all Series A
Convertible Preferred Stock shall rank (i) senior to the Common Stock, now or
hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Corporation, whether voluntary
or involuntary, (ii) senior to any additional series of the class of Preferred
Stock which series the Board of Directors may from time to time authorize, both
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution, or winding
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<PAGE> 16
up of the Corporation, whether voluntary or involuntary, and (iii) senior to any
additional class of preferred stock (or series of preferred stock of such class)
which the Board of Directors or the stockholders may from time to time authorize
in accordance herewith.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders
of shares of Series A Convertible Preferred Stock shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available for such purpose, dividends at the rate of $60.00 per annum per share,
and no more, which shall be fully cumulative, shall accrue without interest
(except as otherwise provided herein as to dividends in arrears) from the date
of original issuance of each share of Series A Convertible Preferred Stock and
shall be payable quarterly on March 1, June 1, September 1 and December 1 of
each year commencing December 1, 1999 (except that if any such date is a
Saturday, Sunday, or legal holiday, then such dividend shall be payable on the
next succeeding day that is not a Saturday, Sunday, or legal holiday) to holders
of record as they appear on the stock books of the Corporation on such record
dates, which record dates must be not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
Dividends on the Series A Convertible Preferred Stock shall be paid in cash or,
in lieu of paying such dividends and subject to the limitations in Section 5(b)
hereof, the amount of such dividends shall be included in the Accrual Amount for
each share, at the option of the Corporation as hereinafter provided. The amount
of the dividends payable per share of Series A Convertible Preferred Stock for
each quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend period
and any period shorter than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months. Dividends required to be
paid in cash pursuant to Section 5(b) which are not paid on a payment date,
whether or not such dividends have been declared, will bear interest at the rate
of 14% per annum until paid (or such lesser rate as shall be the maximum rate
allowable by applicable law). No dividends or other distributions, other than
the dividends payable solely in shares of any Junior Dividend Stock, shall be
paid or set apart for payment on any shares of Junior Dividend Stock, and no
purchase, redemption, or other acquisition shall be made by the Corporation of
any shares of Junior Dividend Stock (except for Option Share Surrenders), unless
and until all accrued and unpaid cash dividends on the Series A Convertible
Preferred Stock and interest on dividends in arrears at the rate specified
herein shall have been paid or declared and set apart for payment.
If at any time any dividend on any Senior Dividend Stock shall
be in arrears, in whole or in part, no dividend shall be paid or declared and
set apart for payment on the Series A Convertible Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then current dividend period, shall
have been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series A Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series A Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series A
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<PAGE> 17
Convertible Preferred Stock and the Parity Dividend Stock, all dividends paid or
declared and set apart for payment upon shares of Series A Convertible Preferred
Stock (and interest on dividends in arrears at the rate specified herein) and
the Parity Dividend Stock shall be paid or declared and set apart for payment
pro rata, so that the amount of dividends paid or declared and set apart for
payment per share on the Series A Convertible Preferred Stock and the Parity
Dividend Stock shall in all cases bear to each other the same ratio that accrued
and unpaid dividends per share on the shares of Series A Convertible Preferred
Stock and the Parity Dividend Stock bear to each other.
Any references to "distribution" contained in this Section 5
shall not be deemed to include any stock dividend or distributions made in
connection with any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary.
(b) If (x) prior to any dividend payment date the
Corporation notifies the holders of Series A Convertible Preferred Stock that
the dividends with respect to such date will be paid in cash or (y) on any
dividend payment date the Corporation is not in compliance in all material
respects with its obligations to the holders of the Series A Convertible
Preferred Stock (including, without limitation, its obligations under the
Subscription Agreements, the Registration Rights Agreements, the Warrants and
this Certificate of Designations) and such noncompliance continues for a period
of ten days after notice thereof is given to the Corporation by any holder of
Series A Convertible Preferred Stock, such dividends must be timely paid in
cash. If clauses (x) or (y) of the foregoing sentence do not apply on any
dividend payment date, the Corporation may, but shall not be required to, pay
the applicable dividends in cash. The amount of any dividends not paid in cash
shall be included in the Accrual Amount for each share of Series A Convertible
Preferred Stock.
(c) Neither the Corporation nor any subsidiary of the
Corporation shall redeem, repurchase or otherwise acquire in any one transaction
or series of related transactions any shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock if the number of shares so repurchased,
redeemed or otherwise acquired in such transaction or series of related
transactions (excluding any Option Share Surrender) is more than 10% of the
number of shares of Common Stock, Junior Dividend Stock or Junior Liquidation
Stock, as the case may be, outstanding immediately prior to such transaction or
series of related transactions unless the Corporation or such subsidiary offers
to purchase for cash from each holder of shares of Series A Convertible
Preferred Stock at the time of such redemption, repurchase or acquisition the
same percentage of such holder's shares of Series A Convertible Preferred Stock
as the percentage of the number of outstanding shares of Common Stock, Junior
Dividend Stock or Junior Liquidation Stock, as the case may be, to be so
redeemed, repurchased or acquired at a purchase price per share of Series A
Convertible Preferred Stock equal to the greater of (i) the Premium Price in
effect on the date of purchase pursuant to this Section 5(c) and (ii) the
Converted Market Price on the date of purchase pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the
Corporation shall (1) make any Tender Offer for 10% or more of the outstanding
shares of Common Stock, unless the Corporation contemporaneously therewith makes
an offer, or (2) enter into an agreement regarding such a Tender Offer for
outstanding shares of Common Stock by any person other than
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<PAGE> 18
the Corporation or any subsidiary of the Corporation, unless such person agrees
with the Corporation to make an offer, in either such case to each holder of
outstanding shares of Series A Convertible Preferred Stock to purchase for cash
at the time of purchase in such Tender Offer the same percentage of shares of
Series A Convertible Preferred Stock held by such holder as the percentage of
outstanding shares of Common Stock actually purchased in such Tender Offer at a
price per share of Series A Convertible Preferred Stock equal to the greater of
(i) the Premium Price in effect on the date of purchase pursuant to this Section
5(d) and (ii) the Converted Market Price on the date of purchase pursuant to
this Section 5(d).
SECTION 6. LIQUIDATION PREFERENCE. In the event of a
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series A Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series A Convertible Preferred Stock equal to the Liquidation Preference, and no
more, before any payment shall be made or any assets distributed to the holders
of Junior Liquidation Stock; provided, however, that such rights shall accrue to
the holders of Series A Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series A Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series A Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution or winding up of the Corporation.
SECTION 7. MAXIMUM SHARE AMOUNT REDEMPTION.
(a) REDEMPTION BASED ON MAXIMUM SHARE AMOUNT. (1)
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the Nasdaq, the Nasdaq SmallCap, or other securities market on which the Common
Stock is then listed, so long as the Common Stock is listed on the Nasdaq, the
Nasdaq SmallCap, the NYSE or the AMEX the Corporation shall not be required to
issue upon conversion of shares of Series A Convertible Preferred Stock pursuant
to Section 10 more than the Maximum Share Amount. The Maximum Share Amount shall
be allocated among the shares of Series A Convertible Preferred Stock at the
time of initial issuance thereof pro rata based on the initial issuance of 4,000
shares of Series A Convertible Preferred Stock. Each certificate for shares of
Series A Convertible Preferred Stock initially issued shall bear a notation as
to the number of shares constituting the portion of the Maximum Share Amount
allocated to the shares of Series A Convertible Preferred Stock represented by
such certificate for purposes of conversion thereof. Upon surrender of any
certificate for shares of Series A Convertible Preferred Stock for transfer or
re-registration thereof (or, at the option of the holder, for conversion
pursuant to Section 10(a) of less than all of the shares of Series A
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Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series A Convertible Preferred Stock
evidenced by such new certificate. If any certificate for shares of Series A
Convertible Preferred Stock is surrendered for split-up into two or more
certificates representing an aggregate number of shares of Series A Convertible
Preferred Stock equal to the number of shares of Series A Convertible Preferred
Stock represented by the certificate so surrendered (as reduced by any
contemporaneous conversion of shares of Series A Convertible Preferred Stock
represented by the certificate so surrendered), each certificate issued on such
split-up shall bear a notation of the portion of the Maximum Share Amount
allocated thereto determined by pro rata allocation from among the remaining
portion of the Maximum Share Amount allocated to the certificate so surrendered.
If any shares of Series A Convertible Preferred Stock represented by a single
certificate are converted in full pursuant to Section 10, all of the portion of
the Maximum Share Amount allocated to such shares of Series A Convertible
Preferred Stock which remains unissued after such conversion shall be
re-allocated pro rata to the outstanding shares of Series A Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series A Convertible Preferred
Stock so converted, and if there shall be no other shares of Series A
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series A Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later
than five Business Days after the occurrence, give notice to each holder of
shares of Series A Convertible Preferred Stock (by telephone line facsimile
transmission at such number as such holder has specified in writing to the
Corporation for such purposes or, if such holder shall not have specified any
such number, by overnight courier or first class mail, postage prepaid, at such
holder's address as the same appears on the stock books of the Corporation) and
any holder of shares of Series A Convertible Preferred Stock may at any time
after the occurrence give notice to the Corporation, in either case, if on any
ten Trading Days within any period of 20 consecutive Trading Days the
Corporation would not have been required to convert shares of Series A
Convertible Preferred Stock of such holder in accordance with Section 10(a) as a
consequence of the limitations set forth in Section 7(a)(1) had the shares of
Series A Convertible Preferred Stock held by such holder been converted in full
into Common Stock on each such day, determined without regard to the limitation,
if any, on such holder contained in the proviso to the second sentence of
Section 10(a) (any such notice, whether given by the Corporation or a holder, an
"Inconvertibility Notice"). If the Corporation shall have given or been required
to give any Inconvertibility Notice, or if a holder shall have given any
Inconvertibility Notice, then within ten Trading Days after such
Inconvertibility Notice is given or was required to be given, the holder
receiving or giving, as the case may be, such Inconvertibility Notice shall have
the right by written notice to the Corporation (which written notice may be
contained in the Inconvertibility Notice given by such holder) to direct the
Corporation to redeem the portion of such holder's outstanding shares of Series
A Convertible Preferred Stock (which, if applicable, shall be all of such
holder's outstanding shares of Series A Convertible Preferred Stock) as shall
not, on the Business Day prior to the date of such redemption, be convertible
into shares of
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Common Stock by reason of the limitations set forth in Section 7(a)(1)
(determined without regard to the limitation, if any, on beneficial ownership of
Common Stock by such holder contained in the proviso to the second sentence of
Section 10(a)), within 15 Trading Days after such holder so directs the
Corporation, at a price per share equal to the Share Limitation Redemption
Price. If a holder of shares of Series A Convertible Preferred Stock directs the
Corporation to redeem outstanding shares of Series A Convertible Preferred Stock
and, prior to the date the Corporation is required to redeem such shares of
Series A Convertible Preferred Stock, the Corporation would have been able,
within the limitations set forth in Section 7(a)(1), to convert all of such
holder's shares of Series A Convertible Preferred Stock (determined without
regard to the limitation, if any, on beneficial ownership of shares of Common
Stock by such holder contained in the proviso to the second sentence of Section
10(a)) on any ten Trading Days within any period of 15 consecutive Trading Days
commencing after the period of 20 consecutive Trading Days which gave rise to
the applicable Inconvertibility Notice from the Corporation or such holder of
shares of Series A Convertible Preferred Stock, as the case may be, had all of
such holder's shares of Series A Convertible Preferred Stock been surrendered
for conversion into Common Stock on each of such ten Trading Days within such 15
Trading Day period, then the Corporation shall not be required to redeem any
shares of Series A Convertible Preferred Stock by reason of such
Inconvertibility Notice.
(3) Notwithstanding the giving of any Inconvertibility
Notice by the Corporation to the holders of Series A Convertible Preferred Stock
pursuant to Section 7(a)(2) or the giving or the absence of any notice by the
holders of the Series A Convertible Preferred Stock in response thereto or any
redemption of shares of Series A Convertible Preferred Stock pursuant to Section
7(a)(2), thereafter the provisions of Section 7(a)(2) shall continue to be
applicable on any occasion unless the Stockholder Approval shall have been
obtained from the stockholders of the Corporation or waived by the Nasdaq, the
Nasdaq SmallCap, or other securities market on which the Common Stock is then
listed.
(4) On each Share Limitation Redemption Date (or such
later date as a holder of shares of Series A Convertible Preferred Stock shall
surrender to the Corporation the certificate(s) for the shares of Series A
Convertible Preferred Stock being redeemed pursuant to this Section 7(a)), the
Corporation shall make payment in immediately available funds of the applicable
Share Limitation Redemption Price to such holder of shares of Series A
Convertible Preferred Stock to be redeemed to or upon the order of such holder
as specified by such holder in writing to the Corporation at least one Business
Day prior to such Share Limitation Redemption Date. Upon redemption of less than
all of the shares of Series A Convertible Preferred Stock evidenced by a
particular certificate, promptly, but in no event later than three Business Days
after surrender of such certificate to the Corporation, the Corporation shall
issue a replacement certificate for the shares of Series A Convertible Preferred
Stock evidenced by such certificate which have not been redeemed. Only whole
shares of Series A Convertible Preferred Stock may be redeemed.
(5) (A) Notwithstanding any other provision of this
Certificate of Designations, if an Inconvertibility Day occurs by reason of
events which are not solely within the control of the Corporation, the
Corporation shall have the right to give a Control Notice to the holders of
Series A Convertible Preferred Stock at any time after such Inconvertibility Day
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occurs and prior to the earlier of (1) the date on which all holders of shares
of Series A Convertible Preferred Stock who had the right (other than as limited
by this Section 7(a)(5)) to require redemption of any shares of Series A
Convertible Preferred Stock by reason of the occurrence of such Inconvertibility
Day no longer have such right and (2) the applicable Share Limitation Redemption
Date by reason of the earliest notice given by any holder of shares of Series A
Convertible Preferred Stock directing the Corporation to redeem such shares in
accordance with Section 7(a)(2) by reason of such Inconvertibility Day. For
purposes of this Section 7(a)(5), an Inconvertibility Day shall be deemed to
have occurred by reason of events which are not solely within the control of the
Corporation if a requirement of the Corporation to redeem, or a right of any
holder of shares of Series A Convertible Preferred Stock to require redemption
of, shares of Series A Convertible Preferred Stock by reason thereof would
result in the Corporation being required to classify the Series A Convertible
Preferred Stock as redeemable preferred stock on a balance sheet of the
Corporation prepared in accordance with Generally Accepted Accounting Principles
and Regulation S-X of the SEC. If the Corporation timely gives a Control Notice
to the holders of shares of Series A Convertible Preferred Stock, then in lieu
of payment of the Share Limitation Redemption Price pursuant to a redemption
notice given by any holder of shares of Series A Convertible Preferred Stock in
accordance with Section 7(a)(2) by reason of such Inconvertibility Day and
commencing on such Inconvertibility Day the Conversion Price for all outstanding
shares of Series A Convertible Preferred Stock will be 80% of the amount the
Conversion Price would otherwise be. Such adjustment of the Conversion Price
shall continue in effect until the earliest of (x) the date which is 90 days
after the Stockholder Approval shall have been obtained from the stockholders of
the Corporation or waived by the Nasdaq SmallCap or other securities market on
which the Common Stock is then listed, (y) the date any further adjustments are
made following a failure to obtain the Stockholder Approval as provided below,
and (z) the date when shares of Series A Convertible Preferred Stock are no
longer outstanding. On or after the date the Corporation gives such Control
Notice, upon notice from the Majority Holders, the Corporation promptly shall
call a special meeting of its stockholders, to be held not later than 90 days
after such notice is given, to seek the Stockholder Approval for the issuance of
all shares of Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock in accordance with Section 10 and shall use its best efforts to
obtain the Stockholder Approval. The Corporation shall prepare and file with the
SEC within 20 days after such notice is given preliminary proxy materials which
set forth a proposal to seek such Stockholder Approval. The Corporation shall
provide the Majority Holders an opportunity to consult with the Corporation
regarding the content of such proxy materials insofar as it relates to the
Stockholder Approval by providing copies of such preliminary proxy materials and
any revised preliminary proxy materials to the Majority Holders a reasonable
period of time prior to their filing with the SEC. The Corporation shall furnish
to each holder of shares of Series A Convertible Preferred Stock a copy of its
definitive proxy materials for such special meeting and any amendments or
supplements thereto promptly after the same are mailed to stockholders or filed
with the SEC. Upon the earlier of (i) the failure to obtain the Stockholder
Approval at the special meeting or (ii) the failure to hold the special meeting
within such 90-day period, the Corporation shall so notify the holders of shares
of Series A Convertible Preferred Stock and such of the following as shall be
specified by notice to the Corporation from the Majority Holders shall occur:
(1) commencing on the Business Day following the Corporation's receipt of such
notice, the Conversion Price of the outstanding shares of Series A Convertible
Preferred Stock will be 60% of the amount the Conversion Price would otherwise
be without
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<PAGE> 22
regard to other adjustments pursuant to this Section 7(a)(5) or Section 11(b)(4)
and (2) the Corporation shall promptly file applications and take all other
actions necessary to (i) list the Common Stock for trading and quotation on the
OTC Bulletin Board or such other securities market or exchange which will not
restrict the number of shares of Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock and (ii) upon filing such applications,
request the immediate removal of the Common Stock from listing on the securities
market on which it is then listed which restricts the issuance of shares of
Common Stock upon conversion of shares of Series A Convertible Preferred Stock
without the Stockholder Approval.
(B) If and for so long as an adjustment of the Conversion
Price is simultaneously required by this Section 7(a)(5) and by Section
11(b)(4), the applicable Conversion Price shall be the lower of the two amounts
required by each such section.
(C) The rights of holders of shares of Series A
Convertible Preferred Stock to require redemption of their shares and exercise
other rights pursuant to Sections 7(a)(1) through 7(a)(4) by reason of an
Inconvertibility Day as to which the Corporation does not have a right to give a
Control Notice, or fails to exercise such right on a timely basis, shall not be
limited by the operation of this Section 7(a)(5).
(b) NO OTHER REDEMPTION. The shares of Series A
Convertible Preferred Stock shall not be subject to redemption by the
Corporation at the option of the Holders except as provided in this Section 7
and in Section 11.
SECTION 8. NO SINKING FUND. The shares of Series A
Convertible Preferred Stock shall not be subject to the operation of a
purchase, retirement or sinking fund.
SECTION 9. OPTIONAL REDEMPTION.
(a) CORPORATION OPTIONAL REDEMPTION. If (1) the
Corporation shall be in compliance in all material respects with its obligations
to the holders of shares of Series A Convertible Preferred Stock (including,
without limitation, its obligations under the Subscription Agreements, the
Registration Rights Agreements, the Warrants and the provisions of this
Certificate of Designations), (2) on the date the Corporation Optional
Redemption Notice is given and at all times until the Redemption Date, the
Registration Statement is effective and available for use by each holder of
shares of Series A Convertible Preferred Stock for the resale of shares of
Common Stock acquired by such holder upon conversion of all shares of Series A
Convertible Preferred Stock held by such holder and (3) no Optional Redemption
Event shall have occurred with respect to which, on the date a Corporation
Optional Redemption Notice is to be given or on the Redemption Date, any holder
of shares of Series A Convertible Preferred Stock (A) shall be entitled to
exercise optional redemption rights under Section 11 by reason of such Optional
Redemption Event or (B) shall have exercised optional redemption rights under
Section 11 by reason of such Optional Redemption Event and the Corporation shall
not have paid the Optional Redemption Price to such holder, then the Corporation
shall have the right, exercisable by giving a Corporation Optional Redemption
Notice not less than 30 days or more than 50 days prior to the Redemption Date
to all holders of record of the shares of Series A Convertible Preferred Stock,
at any time to redeem all or from time to time to redeem any part of
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<PAGE> 23
the outstanding shares of Series A Convertible Preferred Stock in accordance
with this Section 9(a). If the Corporation shall redeem less than all
outstanding shares of Series A Convertible Preferred Stock, such redemption
shall be made as nearly as practical pro rata from all holders of shares of
Series A Convertible Preferred Stock. Any Corporation Optional Redemption Notice
under this Section 9(a) shall be given to the holders of record of the shares of
Series A Convertible Preferred Stock at their addresses appearing on the records
of the Corporation; provided, however, that any failure or defect in the giving
of such notice to any such holder shall not affect the validity of notice to or
the redemption of shares of Series A Convertible Preferred Stock of any other
holder. On the Redemption Date (or such later date as a holder of shares of
Series A Convertible Preferred Stock surrenders to the Corporation the
certificate(s) for shares of Series A Convertible Preferred Stock to be redeemed
pursuant to this Section 9(a)), the Corporation shall make payment of the
applicable Redemption Price to each holder of shares of Series A Convertible
Preferred Stock to be redeemed in immediately available funds to such account as
specified by such holder in writing to the Corporation at least one Business Day
prior to the Redemption Date. A holder of shares of Series A Convertible
Preferred Stock to be redeemed pursuant to this Section 9(a) shall be entitled
to convert such shares of Series A Convertible Preferred Stock in accordance
with Section 10 (x) through the day prior to the Redemption Date and (y) if the
Corporation shall fail to pay the Redemption Price of any share of Series A
Convertible Preferred Stock when due, at any time after the due date thereof
until such date as the Corporation pays the Redemption Price of such share of
Series A Convertible Preferred Stock. No share of Series A Convertible Preferred
Stock as to which the holder exercises the right of conversion pursuant to
Section 10 or the optional redemption right pursuant to Section 11 may be
redeemed by the Corporation pursuant to this Section 9(a) on or after the date
of exercise of such conversion right or optional redemption right, as the case
may be, regardless of whether the Corporation Optional Redemption Notice shall
have been given prior to, or on or after, the date of exercise of such
conversion right or optional redemption right, as the case may be.
(b) FINAL REDEMPTION. The Corporation shall have the
right to redeem all, but not less than all, outstanding shares of Series A
Convertible Preferred Stock at any time on or after the third anniversary of the
Issuance Date so long as (1) the Corporation shall be in compliance in all
material respects with its obligations to the holders of the Series A
Convertible Preferred Stock (including, without limitation, its obligations
under the Subscription Agreements, the Registration Rights Agreements, the
Warrants and this Certificate of Designations) and (2) no Optional Redemption
Event shall have occurred with respect to which on the date a Final Redemption
Notice is to be given or on the Final Redemption Date, any holder of shares of
Series A Convertible Preferred Stock (a) shall be entitled to exercise optional
redemption rights under Section 11 by reason of such Optional Redemption Event
or (b) shall have exercised optional redemption rights under Section 11 by
reason of such Optional Redemption Event and the Corporation shall not have paid
the Optional Redemption Price to such holder. In order to exercise its rights
under this Section 9(b), the Corporation shall give a Final Redemption Notice
not less than 30 days or more than 50 days prior to the Final Redemption Date to
all holders of record of the shares of Series A Convertible Preferred Stock. Any
Final Redemption Notice shall be given to the holders of record of the shares of
Series A Convertible Preferred Stock by telephone line facsimile transmission to
such number as shown on the records of the Corporation for such purpose;
provided, however, that any failure or defect
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<PAGE> 24
in the giving of such notice to any such holder shall not affect the validity of
notice to or the redemption of shares of Series A Convertible Preferred Stock of
any other holder. On the Final Redemption Date (or such later date as a holder
of shares of Series A Convertible Preferred Stock surrenders to the Corporation
the certificate(s) for shares of Series A Convertible Preferred Stock to be
redeemed pursuant to this Section 9(b)), the Corporation shall make payment of
the applicable Final Redemption Price to each holder of shares of Series A
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to the Final Redemption Date. A holder of shares of
Series A Convertible Preferred Stock to be redeemed pursuant to this Section
9(b) shall be entitled to convert such shares of Series A Convertible Preferred
Stock in accordance with Section 10 (x) through the day prior to the Final
Redemption Date and (y) if the Corporation shall fail to pay the Final
Redemption Price of any share of Series A Convertible Preferred Stock when due,
at any time after the due date thereof until such date as the Corporation pays
the Final Redemption Price of such share of Series A Convertible Preferred Stock
to such holder. No share of Series A Convertible Preferred Stock as to which a
holder exercises the right of conversion pursuant to Section 10 or the optional
redemption right pursuant to Section 11 may be redeemed by the Corporation
pursuant to this Section 9(b) on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Final Redemption Notice shall have been given prior to, or on or
after, the date of exercise of such conversion right or optional redemption
right, as the case may be.
(C) NO OTHER OPTIONAL REDEMPTION. The shares of Series
A Convertible Preferred Stock shall not be subject to redemption at the option
of the Corporation except as provided in Sections 9(a) and 9(b).
SECTION 10. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER. The holders of the
Series A Convertible Preferred Stock may at any time on or after the Issuance
Date convert at any time all or from time to time any part of their shares of
Series A Convertible Preferred Stock into fully paid and nonassessable shares of
Common Stock and such other securities and property as herein provided. Each
share of Series A Convertible Preferred Stock may be converted at the office of
the Conversion Agent or at such other additional office or offices, if any, as
the Board of Directors may designate, into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) the
Conversion Amount, (ii) an amount equal to the Accrual Amount on the share of
Series A Convertible Preferred Stock being converted to the applicable
Conversion Date, and (iii) accrued but unpaid interest on the dividends required
to be paid in cash on the share of Series A Convertible Preferred Stock being
converted in arrears to the applicable Conversion Date at the rate provided in
Section 5 by (y) the Conversion Price for such Conversion Date (the "Conversion
Rate"); provided, however, that in no event shall any holder of shares of Series
A Convertible Preferred Stock be entitled to convert any shares of Series A
Convertible Preferred Stock in excess of that number of shares of Series A
Convertible Preferred Stock upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by such holder and all Aggregated
Persons of such holder (other than shares of Common Stock deemed beneficially
owned through the ownership of (x) unconverted shares
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<PAGE> 25
of Series A Convertible Preferred Stock and (y) the unconverted or unexercised
portion of any instrument, including without limitation the Warrants, which
contains limitations similar to those set forth in this sentence) and (2) the
number of shares of Common Stock issuable upon the conversion of the number of
shares of Series A Convertible Preferred Stock with respect to which the
determination in this proviso is being made, would result in beneficial
ownership by such holder and all Aggregated Persons of such holder of more than
4.9% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of the proviso to the
immediately preceding sentence.
(b) OTHER PROVISIONS. (1) Notwithstanding anything in
this Section 10(b) to the contrary, no change in the Conversion Amount pursuant
to this Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Amount shall actually be changed to reflect all adjustments called
for by this Section 10(b) and not previously made. Notwithstanding anything in
this Section 10(b), no change in the Conversion Amount shall be made that would
result in the price at which a share of Series A Convertible Preferred Stock is
converted being less than the par value of the Common Stock into which shares of
Series A Convertible Preferred Stock are at the time convertible.
(2) The holders of shares of Series A Convertible
Preferred Stock at the close of business on the record date for any dividend
payment to holders of Series A Convertible Preferred Stock shall be entitled to
receive the dividend payable on such shares on the corresponding dividend
payment date notwithstanding the conversion thereof after such dividend payment
record date or the Corporation's default in payment of the dividend due on such
dividend payment date; provided, however, that the holder of shares of Series A
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of Series
A Convertible Preferred Stock on a record date for a dividend payment who (or
whose transferee) tenders any of such shares for conversion into shares of
Common Stock on or after such dividend payment date will receive the dividend
payable by the Corporation on such shares of Series A Convertible Preferred
Stock on such date, and the converting holder need not make any payment of the
amount of such dividend in connection with such conversion of shares of Series A
Convertible Preferred Stock. Except as provided above, no adjustment shall be
made in respect of cash dividends on Common Stock or Series A Convertible
Preferred Stock that may be accrued and unpaid at the date of surrender of
shares of Series A Convertible Preferred Stock.
(3) (A) The right of the holders of Series A
Convertible Preferred Stock to convert their shares shall be exercised by giving
(which may be done by telephone line facsimile transmission) a Conversion Notice
to the Conversion Agent, with a copy to the Corporation. If a holder of Series A
Convertible Preferred Stock elects to convert any shares of Series A
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<PAGE> 26
Convertible Preferred Stock in accordance with Section 10(a), such holder shall
not be required to surrender the certificate(s) representing such shares of
Series A Convertible Preferred Stock to the Corporation unless all of the shares
of Series A Convertible Preferred Stock represented thereby are so converted.
Each holder of shares of Series A Convertible Preferred Stock and the
Corporation shall maintain records showing the number of shares so converted and
the dates of such conversions or shall use such other method, satisfactory to
such holder and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any shares of Series A Convertible Preferred Stock evidenced by a particular
certificate therefor are converted as aforesaid, the holder of Series A
Convertible Preferred Stock may not transfer the certificate(s) representing
such shares of Series A Convertible Preferred Stock unless such holder first
physically surrenders such certificate(s) to the Corporation, whereupon the
Corporation will forthwith issue and deliver upon the order of such holder of
shares of Series A Convertible Preferred Stock new certificate(s) of like tenor,
registered as such holder of shares of Series A Convertible Preferred Stock
(upon payment by such holder of shares of Series A Convertible Preferred Stock
of any applicable transfer taxes) may request, representing in the aggregate the
remaining number of shares of Series A Convertible Preferred Stock represented
by such certificate(s). Each holder of shares of Series A Convertible Preferred
Stock, by acceptance of a certificate for such shares, acknowledges and agrees
that (1) by reason of the provisions of this paragraph, following conversion of
any shares of Series A Convertible Preferred Stock represented by such
certificate, the number of shares of Series A Convertible Preferred Stock
represented by such certificate may be less than the number of shares stated on
such certificate, and (2) the Corporation may place a legend on the certificates
for shares of Series A Convertible Preferred Stock which refers to or describes
the provisions of this paragraph.
(B) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series A Convertible Preferred Stock
except that the Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery
upon conversion of shares of Common Stock or other securities or property in a
name other than that of the holder of the shares of the Series A Convertible
Preferred Stock being converted, and the Corporation shall not be required to
issue or deliver any such shares or other securities or property unless and
until the person or persons requesting the issuance thereof shall have paid to
the Corporation the amount of any such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. The number of
shares of Common Stock to be issued upon each conversion of shares of Series A
Convertible Preferred Stock shall be the number set forth in the applicable
Conversion Notice which number shall be conclusive absent manifest error. The
Corporation shall notify a holder who has given a Conversion Notice of any claim
of manifest error within one Trading Day after such holder gives such Conversion
Notice and no such claim of error shall limit or delay performance of the
Corporation's obligation to issue upon such conversion the number of shares of
Common Stock which are not in dispute. A Conversion Notice shall be deemed for
all purposes to be in proper form unless the Corporation notifies a holder of
shares of Series A Convertible Preferred Stock being converted within one
Trading Day after a Conversion Notice has been given (which notice shall specify
all defects in the Conversion Notice) and any
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<PAGE> 27
Conversion Notice containing any such defect shall nonetheless be effective on
the date given if the converting holder promptly corrects all such defects.
(4) The Corporation (and any successor corporation) shall
take all action necessary so that a number of shares of the authorized but
unissued Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series A Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series A Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series A Convertible Preferred Stock on the new
basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the outstanding
shares of Series A Convertible Preferred Stock, the Corporation promptly shall
seek, and use its best efforts to obtain and complete, such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(5) In case any Reorganization Event shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets (including cash) with respect to or in exchange for shares
of the Common Stock, then, prior to and as a condition of such Reorganization
Event, lawful and adequate provision shall be made whereby the holders of Series
A Convertible Preferred Stock shall thereafter have the right to receive upon
conversion of the Series A Convertible Preferred Stock and in lieu of the shares
of Common Stock immediately theretofore issuable upon conversion of the Series A
Convertible Preferred Stock, such shares of stock, securities or assets
(including cash) as may be issued or payable with respect to or in exchange for
a number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore issuable upon conversion of the Series A
Convertible Preferred Stock had such Reorganization Event not taken place. In
any such case, appropriate provision shall be made with respect to the rights
and interests of the holders of Series A Convertible Preferred Stock to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and the number of shares of Common Stock
issuable upon conversion of the Series A Convertible Preferred Stock) shall
thereafter be applicable, as nearly as may be, in relation to any stock,
securities or assets thereafter deliverable upon the conversion of the Series A
Convertible Preferred Stock. The Corporation shall not effect any such
Reorganization Event (i) unless prior to or simultaneously with the consummation
thereof the survivor or successor corporation (if other than the Corporation)
resulting from such Reorganization Event or the corporation or other entity
purchasing such assets shall assume by written instrument executed and sent to
each holder of Series A Convertible Preferred Stock, the obligation to deliver
to such holder of Series A Convertible Preferred Stock such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder of Series A Convertible Preferred Stock may be entitled to receive, and
containing the express assumption by such successor corporation or other entity
of
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<PAGE> 28
the due and punctual performance and observance of every provision herein to be
performed and observed by the Corporation and of all liabilities and obligations
of the Corporation hereunder, and (ii) in which the Corporation, as opposed to
another party to the Reorganization Event, shall be required under any
circumstances to make a cash payment at any time to the holders of the Series A
Convertible Preferred Stock; provided, however, that this clause (5) shall not
limit the Corporation's obligation to make cash payments pursuant to Section 7
or Section 11 if the Corporation fails to give a Control Notice in accordance
with the terms thereof.
(6) If a holder shall have given a Conversion Notice for
shares of Series A Convertible Preferred Stock, the Corporation shall issue and
deliver to such person certificates for the Common Stock issuable upon such
conversion within three Trading Days after such Conversion Notice is given and
the person converting shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a holder
shall have given a Conversion Notice as provided herein, the Corporation's
obligation to issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of any action or inaction by the
converting holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any person or any action
to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to such holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
holder or any other person of any obligation to the Corporation or any violation
or alleged violation of law by such holder or any other person, and irrespective
of any other circumstance which might otherwise limit such obligation of the
Corporation to the holder in connection with such conversion. If the Corporation
fails to issue and deliver the certificates for the Common Stock to the holder
converting shares of Series A Convertible Preferred Stock pursuant to the first
sentence of this paragraph within three Trading Days after such Conversion
Notice is given, in addition to any other liabilities the Corporation may have
hereunder and under applicable law (1) the Corporation shall pay or reimburse
such holder on demand for all out-of-pocket expenses including, without
limitation, reasonable fees and expenses of legal counsel incurred by such
holder as a result of such failure, (2) for each Trading Day thereafter on which
the Corporation so fails to deliver such certificates, the Conversion Price
applicable to such conversion shall be reduced by an amount equal to one percent
of the amount that the Conversion Price would otherwise be, and (3) such holder
may by written notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly confirmed in
writing) given at any time prior to delivery to such holder of the certificates
for the shares of Common Stock issuable upon such conversion of shares of Series
A Convertible Preferred Stock, rescind such conversion, whereupon such holder
shall have the right to convert such shares of Series A Convertible Preferred
Stock thereafter in accordance herewith.
(7) No fractional shares of Common Stock shall be issued
upon conversion of Series A Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock to purchase fractional shares of Common
Stock which would otherwise be issuable in respect of the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the product of (i) the
arithmetic average of the
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<PAGE> 29
Market Price of one share of Common Stock on the three consecutive Trading Days
ending on the Trading Day immediately preceding the Conversion Date times (ii)
such fraction of a share.
(8) The Conversion Amount shall be adjusted from time to
time under certain circumstances, subject to the provisions of Section 10(b)(1),
as follows:
(i) In case the Corporation shall issue rights or
warrants on a pro rata basis to all holders of the Common Stock entitling such
holders to subscribe for or purchase Common Stock on the record date referred to
below at a price per share less than the Current Price for such record date,
then in each such case the Conversion Amount in effect on such record date shall
be adjusted in accordance with the following formula:
C(1) = C x O + N
-----
O + N x P
-----
M
where
C(1) = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock issuable
pursuant to the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which
amount shall include amounts received by the Corporation in
respect of the issuance and the exercise of such rights or
warrants).
M = the Current Price per share of Common Stock on the record
date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Junior Stock (as hereinafter
defined) evidences of its indebtedness or assets (including securities, but
excluding any warrants or subscription rights referred to in subparagraph (i)
above and any dividend or distribution paid in cash out of the retained earnings
of the Corporation), then in each such case the Conversion Amount then in effect
shall be adjusted in accordance with the formula
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<PAGE> 30
C(1) = C x M
---
M - F
where
C(1) = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Price per share of Common Stock on the record
date mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities to
be distributed divided by the number of shares of Common Stock
outstanding on the record date. The Board of Directors shall
determine such fair market value, which determination shall be
conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series A Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made
pursuant to Section 10(b)(5), the holder of any Series A Convertible Preferred
Stock thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section
10, no adjustment in the Conversion Amount shall be made in respect of any
conversion for share distributions or dividends theretofore declared and paid or
payable on the Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each holder and each transfer agent, if
any, for the Series A Convertible Preferred Stock and the transfer agent for the
Common Stock, a statement signed by the Chairman of the Board, the President, or
any Vice President of the Corporation and by its Treasurer or its Secretary or
an Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation. Whenever
the Conversion Amount is adjusted, the Corporation will give notice by mail to
the holders of record of Series A Convertible Preferred Stock, which notice
shall be made within 15 days after the effective date of such adjustment and
shall state the adjustment and the Conversion Amount. Notwithstanding
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the foregoing notice provisions, failure by the Corporation to give such notice
or a defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.
(11) In case on or after the Issuance Date:
(A) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock (other than in cash out of retained
earnings); or
(B) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or purchase
any share of any class or any other rights or warrants; or
(C) the Board of Directors shall authorize any
reclassification of the Common Stock (other than a subdivision or combination of
the outstanding Common Stock, or a change in par value, or from par value to no
par value, or from no par value to par value), or any consolidation or merger or
other business combination transaction to which the Corporation is a party and
for which approval of any stockholders of the Corporation is required, or the
sale or transfer of all or substantially all of the assets of the Corporation;
or
(D) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation;
the Corporation shall give the holders of record of the Series A Convertible
Preferred Stock, as promptly as possible but in any event at least ten Trading
Days prior to the applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up is expected
to become effective or occur, and the date as of which it is expected that
holders of Common Stock of record who shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, other business combination transaction, sale, transfer,
dissolution, liquidation or winding-up shall be determined. Such notice shall
not include any information which would be material non-public information for
purposes of the 1934 Act. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. In the case of any such action of which the
Corporation gives such notice to the holders of record of the Series A
Convertible Preferred Stock or is required to give such notice to such holders,
such holders shall be entitled to give a Conversion Notice which is contingent
on the completion of such action.
SECTION 11. REDEMPTION AT OPTION OF HOLDERS.
(a) REDEMPTION RIGHT. Subject to Section 11(b)(4), if an
Optional Redemption Event occurs, then, in addition to any other right or remedy
of any holder of shares of Series A Convertible Preferred Stock, each holder of
shares of Series A Convertible Preferred Stock shall have the right, at such
holder's option, to require the Corporation to redeem all of
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such holder's shares of Series A Convertible Preferred Stock, or any portion
thereof, on the date that is 15 Business Days after the date such holder gives
the Corporation an Optional Redemption Notice with respect to such Optional
Redemption Event at any time while any of such holder's shares of Series A
Convertible Preferred Stock are outstanding, at a price equal to the Optional
Redemption Price.
(b) NOTICES; METHOD OF EXERCISING OPTIONAL REDEMPTION
RIGHTS, ETC. (1) On or before the fifth Business Day after the occurrence of an
Optional Redemption Event, the Corporation shall give to each holder of
outstanding shares of Series A Convertible Preferred Stock a notice of the
occurrence of such Optional Redemption Event and of the redemption right set
forth herein arising as a result thereof. Such notice from the Corporation shall
set forth:
(i) the date by which the optional redemption right
must be exercised, and
(ii) a description of the procedure (set forth below)
which each such holder must follow to exercise such holder's optional redemption
right.
No failure of the Corporation to give such notice or defect therein shall limit
the right of any holder of shares of Series A Convertible Preferred Stock to
exercise the optional redemption right or affect the validity of the proceedings
for the redemption of such holder's shares of Series A Convertible Preferred
Stock.
(2) To exercise its optional redemption right, each
holder of outstanding shares of Series A Convertible Preferred Stock shall
deliver to the Corporation on or before the 30th day after the notice required
by Section 11(b)(1) is given to such holder (or if no such notice has been given
by the Corporation to such holder, within 40 days after such holder first learns
of such Optional Redemption Event) an Optional Redemption Notice to the
Corporation. At the Corporation's option, an Optional Redemption Notice may be
revoked by such holder giving such Optional Redemption Notice by giving notice
of such revocation to the Corporation at any time prior to the time the
Corporation pays the Optional Redemption Price to such holder.
(3) If a holder of shares of Series A Convertible
Preferred Stock shall have given an Optional Redemption Notice, on the date
which is 15 Business Days after the date such Optional Redemption Notice is
given (or such later date as such holder surrenders such holder's certificates
for the shares of Series A Convertible Preferred Stock to be redeemed) the
Corporation shall make payment in immediately available funds of the applicable
Optional Redemption Price to such account as specified by such holder in writing
to the Corporation at least one Business Day prior to the applicable redemption
date.
(4) Notwithstanding any other provision of this
Certificate of Designations, if an Optional Redemption Event occurs by reason of
events which are not solely within the control of the Corporation, the
Corporation shall have the right to give a Control Notice to the holders of
shares of Series A Convertible Preferred Stock at any time after such Optional
Redemption Event occurs and prior to the earlier of (1) the date on which all
holders of shares of Series A Convertible Preferred Stock who had the right
(other than as limited by this Section 11(b)(4)) to require redemption of any
shares of Series A Convertible Preferred Stock by reason of the
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occurrence of such Optional Redemption Event no longer have such right and (2)
the applicable Optional Redemption Date by reason of the earliest Optional
Redemption Notice given by any holder of shares of Series A Convertible
Preferred Stock by reason of such Optional Redemption Event. If the Corporation
timely gives such Control Notice to the holders of shares of Series A
Convertible Preferred Stock, then in lieu of payment of the Optional Redemption
Price by reason of any such Optional Redemption Event and commencing on the
first date on which such Optional Redemption Event occurs the following
adjustments shall take effect (subject to the provisions of Section 7(a)(5)(B)):
(A) In the case of an Optional Redemption Event described
in clauses (1), (2), (3), (4) or (6) of the definition of the term
Optional Redemption Event, for so long as such Optional Redemption
Event continues and for a period of ten Trading Days thereafter the
Conversion Price will be 70% of the amount which the Conversion Price
would otherwise be; and
(B) In the case of an Optional Redemption Event described
in clause (5) of the definition of the term Optional Redemption Event,
for so long as any shares of Preferred Stock are outstanding the
Conversion Price will be 70% of the amount which the Conversion Price
would otherwise be.
For purposes of this Section 11(b)(4), an Optional Redemption Event shall be
deemed to have occurred by reason of events which are not solely within the
control of the Corporation if a requirement of the Corporation to redeem, or a
right of any holder of shares of Series A Convertible Preferred Stock to require
redemption of, shares of Series A Convertible Preferred Stock by reason thereof
would result in the Corporation being required to classify the Series A
Convertible Preferred Stock as redeemable preferred stock on a balance sheet of
the Corporation prepared in accordance with Generally Accepted Accounting
Principles and Regulation S-X of the SEC, and, in the case of an Optional
Redemption Event described in clause (5) of the definition of the term Optional
Redemption Event, the Board does not have the right to approve or disapprove the
transactions resulting in such event. If as a result of any of the adjustments
to the Conversion Price required by this Section 11(b)(4) the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the outstanding shares of Series A Convertible
Preferred Stock, such insufficiency shall be deemed to be covered by the
applicable Control Notice and the Corporation shall have no obligation to redeem
any shares of Series A Convertible Preferred Stock by reason thereof. The
Corporation thereupon will use its best efforts to increase the authorized
number of shares of Common Stock in accordance with Section 10(b)(4).
(C) OTHER. (1) In connection with a redemption pursuant
to this Section 11 of less than all of the shares of Series A Convertible
Preferred Stock evidenced by a particular certificate, promptly, but in no event
later than three Business Days after surrender of such certificate to the
Corporation, the Corporation shall issue and deliver to such holder a
replacement certificate for the shares of Series A Convertible Preferred Stock
evidenced by such certificate which have not been redeemed.
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(2) An Optional Redemption Notice given by a holder of shares
of Series A Convertible Preferred Stock shall be deemed for all purposes to be
in proper form unless the Corporation notifies such holder in writing within
three Business Days after such Optional Redemption Notice has been given (which
notice shall specify all defects in such Optional Redemption Notice), and any
Optional Redemption Notice containing any such defect shall nonetheless be
effective on the date given if such holder promptly undertakes to correct all
such defects. No such claim of error shall limit or delay performance of the
Corporation's obligation to redeem all shares of Series A Convertible Preferred
Stock not in dispute whether or not such holder makes such undertaking.
SECTION 12. VOTING RIGHTS; CERTAIN RESTRICTIONS.
(a) VOTING RIGHTS. Except as otherwise required by law
or expressly provided herein, shares of Series A Convertible Preferred Stock
shall not be entitled to vote on any matter.
(b) ARTICLES OF INCORPORATION; CERTAIN STOCK. The
affirmative vote or consent of the Majority Holders, voting separately as a
class, will be required for (1) any amendment, alteration, or repeal, whether by
merger or consolidation or otherwise, of the Corporation's Articles of
Incorporation if the amendment, alteration, or repeal materially and adversely
affects the powers, preferences, or special rights of the Series A Convertible
Preferred Stock, or (2) the creation and issuance of any Senior Dividend Stock
or Senior Liquidation Stock; provided, however, that any increase in the
authorized Preferred Stock of the Corporation or the creation and issuance of
any stock which is both Junior Dividend Stock and Junior Liquidation Stock shall
not be deemed to affect materially and adversely such powers, preferences, or
special rights and any such increase or creation and issuance may be made
without any such vote by the holders of Series A Convertible Preferred Stock
except as otherwise required by law.
(c) REPURCHASES OF SERIES A CONVERTIBLE PREFERRED STOCK.
The Corporation shall not repurchase or otherwise acquire any shares of Series A
Convertible Preferred Stock (other than pursuant to Sections 7(a), 9(a), 9(b) or
11) unless the Corporation offers to repurchase or otherwise acquire
simultaneously a pro rata portion of each holder's shares of Series A
Convertible Preferred Stock for cash at the same price per share.
(d) OTHER. So long as any shares of Series A
Convertible Preferred Stock are outstanding:
(1) PAYMENT OF OBLIGATIONS. The Corporation will pay and
discharge, and will cause each subsidiary of the Corporation to pay and
discharge, when due all their respective obligations and liabilities which are
material to the Corporation and its subsidiaries taken as a whole, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings.
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<PAGE> 35
(2) MAINTENANCE OF PROPERTY; INSURANCE. (A) The
Corporation will keep, and will cause each subsidiary of the Corporation to
keep, all material property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
(B) The Corporation will maintain, and will cause each
subsidiary of the Corporation to maintain, with financially sound and
responsible insurance companies, insurance against loss or damage by fire or
other casualty and such other insurance, including but not limited to, product
liability insurance, in such amounts and covering such risks as is reasonably
adequate for the conduct of their businesses and the value of their properties.
(3) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Corporation will continue, and will cause each subsidiary of the Corporation to
continue, to engage in business of the same general type as conducted by the
Corporation and its operating subsidiaries at the time this Certificate of
Designations is filed with the Secretary of State of the State of Nevada, and
will preserve, renew and keep in full force and effect, and will cause each
subsidiary of the Corporation to preserve, renew and keep in full force and
effect, their respective corporate existence and their respective material
rights, privileges and franchises necessary or desirable in the normal conduct
of business.
(4) COMPLIANCE WITH LAWS. The Corporation will comply,
and will cause each subsidiary of the Corporation to comply, in all material
respects with all applicable laws, ordinances, rules, regulations, decisions,
orders and requirements of governmental authorities and courts (including,
without limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Corporation and its subsidiaries taken as a
whole.
(5) INVESTMENT COMPANY ACT. The Corporation will not be
or become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act of 1940, as amended, or any successor provision.
SECTION 13. OUTSTANDING SHARES. For purposes of this
Certificate of Designations, all authorized and issued shares of Series A
Convertible Preferred Stock shall be deemed outstanding except (i) from the
applicable Conversion Date, each share of Series A Convertible Preferred Stock
converted into Common Stock, unless the Corporation shall default in its
obligation to issue and deliver shares of Common Stock upon such conversion as
and when required by Section 10; (ii) from the date of registration of transfer,
all shares of Series A Convertible Preferred Stock held of record by the
Corporation or any subsidiary or Affiliate of the Corporation (other than an
Affiliate of the Corporation who is a natural person or any original holder of
shares of Series A Convertible Preferred Stock) and (iii) from the applicable
Redemption Date, Share Limitation Redemption Date, Final Redemption Date or date
of redemption pursuant to Section 11, all shares of Series A Convertible
Preferred Stock which are redeemed or repurchased, so long as in each case the
Redemption Price, the Share Limitation Redemption Price, the Final Redemption
Price, the Optional Redemption Price or other
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<PAGE> 36
repurchase price, as the case may be, of such shares of Series A Convertible
Preferred Stock shall have been paid by the Corporation as and when due
hereunder.
SECTION 14. MISCELLANEOUS.
(a) NOTICES. Any notices required or permitted to be
given under the terms of this Certificate of Designations shall be in writing
and shall be delivered personally (which shall include telephone line facsimile
transmission) or by courier and shall be deemed given upon receipt, if delivered
personally or by courier (a) in the case of the Corporation, addressed to the
Corporation at 2222 West Peoria Avenue, Phoenix, Arizona 85029, Attention: Chief
Executive Officer (telephone line facsimile transmission number (602) 331-0941),
or (b) in the case of any holder of shares of Series A Convertible Preferred
Stock, at such holder's address or telephone line facsimile transmission number
shown on the stock books maintained by the Corporation with respect to the
Series A Convertible Preferred Stock or such other address as the Corporation
shall have provided by notice to the holders of shares of Series A Convertible
Preferred Stock in accordance with this Section or any holder of shares of
Series A Convertible Preferred Stock shall have provided to the Corporation in
accordance with this Section.
(b) REPLACEMENT OF CERTIFICATES. Upon receipt by the
Corporation of evidence reasonably satisfactory to the Corporation of the
ownership of and the loss, theft, destruction or mutilation of any certificate
for shares of Series A Convertible Preferred Stock and (1) in the case of loss,
theft or destruction, of indemnity from the record holder of the certificate for
such shares of Series A Convertible Preferred Stock reasonably satisfactory in
form to the Corporation (and without the requirement to post any bond or other
security if such holder has and agrees to maintain reasonably sufficient assets
to support the indemnity) or (2) in the case of mutilation, upon surrender and
cancellation of the certificate for such shares of Series A Convertible
Preferred Stock, the Corporation will execute and deliver to such holder a new
certificate for such shares of Series A Convertible Preferred Stock without
charge to such holder.
(c) OVERDUE AMOUNTS. Except as otherwise specifically
provided in Section 5 with respect to dividends in arrears on the Series A
Convertible Preferred Stock, whenever any amount which is due to any holder of
shares of Series A Convertible Preferred Stock is not paid to such holder when
due, such amount shall bear interest at the rate of 14% per annum (or such other
rate as shall be the maximum rate allowable by applicable law) until paid in
full.
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IN WITNESS WHEREOF, Titan Motorcycle Co. of America has
caused this Amended and Restated Certificate of Designations to be signed by
______________________________________________, its ___________________________,
and ________________________________________________, its _____________________,
as of the _______ day of __________________, 2000.
TITAN MOTORCYCLE CO. OF
AMERICA
By:
--------------------------------------
Title: President
By:
--------------------------------------
Title: Secretary
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