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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 14, 1999
SKYLYNX COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 0-24687 84-1360029
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(State or other (Commission file number) (Employer Identi-
incorporation) fication No.)
600 South Cherry Street, Suite 305, Denver, Colorado 80246
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 316-0400
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(Former name or former address, if changed since last report)
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ITEM 5: OTHER EVENTS
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On December 14, 1999, SkyLynx Communications, Inc., a Colorado
corporation ("SkyLynx Colorado") completed its redomestication as a
corporation formed and organized under the laws of the state of Delaware. The
redomestication was accomplished by consummating the statutory merger of
SkyLynx Colorado with and into SkyLynx Communications, Inc., a Delaware
corporation ("SkyLynx-Delaware") with SkyLynx-Delaware being the surviving
corporation.
In connection with the transaction, the Company filed with the
Secretaries of State of the states of Colorado and Delaware a Certificate of
Ownership Merging SkyLynx Colorado with and into SkyLynx-Delaware (the
"Certificate of Ownership"), as well as an Agreement and Plan of Merger (the
"Merger Agreement"), and an Amended and Restated Certificate of Incorporation
of SkyLynx Communications, Inc., the Delaware corporation (the "Amended
Certificate"). The Certificate of Ownership, Merger Agreement and the Amended
Certificate are attached to this report as exhibits.
Under the terms of the Merger Agreement, automatically on the effective
date of the merger, all issued and outstanding securities of SkyLynx Colorado
immediately prior to the effective time, including issued and outstanding of
shares of Common Stock, $.001 par value, shares of Series A Preferred Stock,
shares of Series B Preferred Stock, shares of Series C Preferred Stock, shares
of Series D Preferred Stock and shares of Series E Preferred Stock were
converted automatically into an equal number of shares of Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock and Series E Preferred Stock of SkyLynx-Delaware. Further,
all outstanding Options, Warrants and other Stock Purchase Rights of SkyLynx
Colorado were assumed by SkyLynx-Delaware and became the obligation of
SkyLynx-Delaware without modification or interruption.
By virtue of the operation of Rule 12 g-3 under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") all shares of Common
Stock of SkyLynx-Delaware issued to the holders of issued and outstanding
shares of Common Stock of SkyLynx Colorado immediately prior to the effective
time of the merger are deemed automatically to be registered under Section 12g
of the Exchange Act; and SkyLynx-Delaware shall continue being subject to the
reporting requirements of Section 13 of the Exchange Act in the same manner
that SkyLynx Colorado had been subject to such reporting requirements
immediately prior to the merger.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
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(a) Exhibits
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Item Title
1.1 Certificate of Ownership
1.2 Agreement and Plan of Merger
1.3 Amended and Restated Certificate of Incorporation of SkyLynx
Communications, Inc., a Delaware corporation
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SKYLYNX COMMUNICATIONS , INC.
Dated: December 20, 1999 By: /s/ Jeffery A. Mathias
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Jeffery A. Mathias, President
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Exhibit 1.1
CERTIFICATE OF OWNERSHIP
MERGING
SKYLYNX COMMUNICATIONS, INC.
(a Colorado Corporation)
INTO
SKYLYNX COMMUNICATIONS, INC.
(a Delaware Corporation)
PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE
SkyLynx Communications, Inc., a corporation incorporated on September 23,
1996 pursuant to the provisions of the Colorado Business Corporation Act
("SCI-Colorado"), does hereby certify that SCI-Colorado owns all the capital
stock of SkyLynx Communications, Inc., a corporation incorporated on the 10th
of February, 1999 pursuant to the provisions of the General Corporation Law of
the State of Delaware ("SCI-Delaware"), and that, effective upon the filing of
this Certificate of Ownership, and in accordance with the laws of the State of
Colorado, SCI-Colorado, by a resolution of its Board of Directors duly
adopted, approved, certified, executed and acknowledged by unanimous written
consent dated as of the __th day of December, 1999, determined to and does
merge itself with and into said SCI-Delaware, which resolutions are in the
following words to wit:
WHEREAS, SkyLynx Communications, Inc., a Delaware corporation ("SCI-
Delaware") is a wholly-owned subsidiary of SCI-Colorado, a Colorado
corporation;
WHEREAS, it has been proposed that the ownership and operation of SCI-
Delaware and SCI-Colorado be consolidated;
WHEREAS, to effect such consolidation, it has been proposed that SCI-
Colorado be merged with and into SCI-Delaware with SCI-Delaware continuing its
corporate existence as the surviving corporation (the "Surviving Corporation")
of the merger (the "Merger");
WHEREAS, there has been submitted to and considered by the Board of
Directors a draft Agreement and Plan of Merger in the form attached hereto as
Exhibit A (the "Merger Agreement") by and between SCI-Colorado and SCI-
Delaware, pursuant to which: (i) SCI-Colorado would merge with and into SCI-
Delaware with SCI-Delaware continuing its corporate existence as the surviving
corporation of the Merger, (ii) SCI-Colorado would cease to exist, (iii) each
outstanding share of SCI-Delaware would be automatically canceled, (iv) each
outstanding share of SCI-Colorado common stock would be automatically
converted into a share of SCI-Delaware common stock, (v) each outstanding
share of SCI-Colorado preferred stock would automatically be converted into a
share of SCI-Delaware preferred stock with the identical rights, privileges,
powers, qualifications, limitations, restrictions, duties, and obligations,
(vi) all assets of SCI-Colorado would be transferred to and vested in SCI-
Delaware as a matter of law, and (vii) all debts and liabilities of SCI-
Colorado would be assigned to and assumed by SCI-Delaware by operation of law;
WHEREAS, it is intended, for federal tax purposes, that the Merger
accomplished by the Merger Agreement will qualify as a tax-free reorganization
within the meaning of Section 332 of the Internal Revenue Code;
WHEREAS, a sufficient number of votes were cast by each voting group
entitled to vote separately to authorize SCI-Colorado to enter into the Merger
Agreement and to consummate the Merger substantially in accordance with the
terms and conditions set forth in the Merger Agreement; and
WHEREAS, the Board of Directors has determined that it is advisable and
in the best interests of SCI-Colorado and its shareholders to enter into the
Merger Agreement and to consummate the Merger in accordance with the terms and
conditions set forth in the Merger Agreement.
NOW, THEREFORE, BE IT RESOLVED, that the Merger be, and hereby is,
approved;
RESOLVED FURTHER, that the Merger Agreement, including the provisions for
carrying such Merger into effect and converting the shares of outstanding
capital stock of SCI-Colorado be, and it hereby is, approved in substantially
the form submitted to the Board of Directors;
RESOLVED FURTHER, that each officer of the SCI-Colorado, acting alone or
in concert, is hereby authorized and directed, in the name and on behalf of
SCI-Colorado, to execute and deliver the Merger Agreement in substantially the
form submitted to the Board of Directors, together with such changes,
additions or deletions thereto as such officer may deem necessary or proper,
such necessity or propriety to be conclusively evidenced by such officer's
execution and delivery thereof;
RESOLVED FURTHER, that each officer of the SCI-Colorado, acting alone or
in concert, is hereby authorized and directed, in the name and on behalf of
SCI-Colorado, to prepare, execute and deliver or file such other documents and
to take such further actions, including without limitation the preparation,
execution and filing of a certificate of ownership or articles of merger with
the Delaware and Colorado Secretaries of State, as such officer may deem
necessary or proper in order to consummate the Merger, such necessity or
propriety to be conclusively evidenced by such officer's execution, delivery
or filing of such documents or taking of such actions;
RESOLVED FURTHER, that each officer of SCI-Colorado, acting alone or in
concert, is hereby authorized and directed, in the name and on behalf of SCI-
Colorado, to prepare, execute and deliver such documents and to take such
actions as such officer may deem necessary or proper in order to obtain any
required contractual consents to the Merger from third parties, such necessity
or propriety to be conclusively evidenced by such officer's execution or
delivery of such documents or taking of such actions;
RESOLVED FURTHER, that each officer of SCI-Colorado, acting alone or in
concert, is hereby authorized and directed, in the name and on behalf of SCI-
Colorado, to prepare, execute and deliver or file such documents and to take
such actions as such officer may deem necessary or proper in connection with
the transfer of all SCI-Colorado's assets to SCI-Delaware and the assignment
to and assumption by SCI-Delaware of all SCI-Colorado's debts and liabilities
as a result of the Merger, such necessity or propriety to be conclusively
evidenced by such officer's execution, delivery or filing of such documents or
taking of such actions;
RESOLVED FURTHER, that, to the extent that the Merger will effect an
amendment to the Bylaws of SCI-Colorado, the amendment to the Bylaws of SCI-
Colorado in the manner set forth in the Merger Agreement is hereby approved;
RESOLVED FURTHER, that at any time prior to the Effective Date, the Board
of Directors may amend the Merger Agreement in any manner or the Merger
Agreement may be terminated and the Merger abandoned at the election of the
Board of Directors; and
RESOLVED FURTHER, that any action heretofore or hereafter taken by any
officer or director of SCI-Colorado consistent with the authority granted by
these resolutions is hereby ratified, confirmed and approved as the act and
deed of SCI-Colorado.
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IN WITNESS WHEREOF, said SCI-Colorado has caused this Certificate to be
signed by its authorized officer, the __ day of December, 1999.
SkyLynx Communications, Inc.,
a Colorado corporation
By:_______________________________
Jeffery A. Mathias,
Chief Executive Officer
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
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EXHIBIT 1.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is dated as of
December 13, 1999, and is entered into by and between SkyLynx Communications,
Inc., a Colorado corporation ("SCI-Colorado") and SkyLynx Communications,
Inc., a Delaware corporation ("SCI-Delaware"). SCI-Colorado and SCI-Delaware
are hereinafter sometimes collectively referred to as the "Constituent
Corporations".
RECITALS
A. SCI-Colorado desires to merge with and into SCI-Delaware and SCI-
Delaware desires to merge with SCI-Colorado, all upon the terms and subject to
the conditions of this Merger Agreement.
B. SCI-Colorado was incorporated on September 23, 1996 and is a
corporation duly organized and existing under the laws of the State of
Colorado. Its authorized capital stock consists of 50,000,000 shares of
Preferred Stock, par value $0.01 per share (the "SCI-Colorado Preferred
Stock"), and 150,000,000 shares of Common Stock, par value $0.001 per share
(the "SCI-Colorado Common Stock"), of which 379,941 shares of SCI-Colorado
Series A Convertible Preferred Stock, 600 shares of SCI-Colorado Series B
Convertible Preferred Stock, 696,419 shares of SCI-Colorado Series C
Convertible Preferred Stock, 8,899 shares of SCI-Colorado Series D Convertible
Preferred Stock, 2,787 shares of SCI-Colorado Series E Convertible Preferred
Stock and 12,651,687 shares of Common Stock were issued and outstanding on
December 10, 1999.
C. SCI-Delaware was incorporated on February 10, 1999 and is a
corporation duly organized and existing under the laws of the State of
Delaware. Its authorized capital stock consists of 50,000,000 shares of
Preferred Stock, par value $0.001 per share (the "SCI-Delaware Preferred
Stock), and 150,000,000 shares of Common Stock, par value $0.001 per share
(the "SCI-Delaware Common Stock"), of which no shares of SCI-Delaware
Preferred Stock and 10,000 shares of SCI-Delaware Common Stock were issued and
outstanding on December 10, 1999. All outstanding shares of SCI-Delaware
Common Stock shares are held by and in the name of SCI-Colorado.
D. The Board of Directors of SCI-Colorado has determined that, for the
purpose of effecting the reincorporation of SCI-Colorado in the State of
Delaware, it is advisable and in the bests interests of SCI-Colorado and its
shareholders that SCI-Colorado merge with and into SCI-Delaware upon the terms
and conditions herein provided.
E. The Board of Directors of SCI-Colorado has adopted resolutions
approving this Merger Agreement and the transactions contemplated hereby and
has recommended to the existing shareholders of SCI-Colorado (individually, a
"Shareholder", and collectively, the "Shareholders") to approve this Merger
Agreement and the transactions contemplated hereby. The Shareholders of SCI-
Colorado approved the Merger Agreement at the annual meeting of Shareholders
held on August 23, 1999.
F. The Board of Directors of SCI-Delaware has adopted resolutions
approving this Merger Agreement and the transactions contemplated hereby.
G. It is intended, for federal tax purposes, that the merger
accomplished by the Merger Agreement will qualify as a tax-free reorganization
within the meaning of Section 332 of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
MERGER
Section 1.1. THE MERGER. In accordance with the provisions of this
Merger Agreement, the Colorado Business Corporation Act (the "CBCA") and the
Delaware General Corporation Law (the "DGCL"), SCI-Colorado shall be merged
with and into SCI-Delaware (the "Merger"), the separate existence of SCI-
Colorado shall cease and SCI-Delaware shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. The name of
the Surviving Corporation shall be "SkyLynx Communications, Inc."
Section 1.2. FILING AND EFFECTIVENESS. The Merger shall become
effective (the "Effective Date") when the following actions have been
completed:
(a) This Merger Agreement and the Merger shall have been adopted
and approved by the directors of SCI-Colorado and SCI-Delaware in accordance
with the requirements of the CBCA and the DGCL, respectively;
(b) An executed Certificate of Ownership or an executed counterpart
of this Merger Agreement meeting the requirements of the DGCL shall have been
filed with the Secretary of State of the State of Delaware; and
(c) An executed Articles of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the CBCA shall have been
filed with the Secretary of State of the State of Colorado.
Section 1.3. EFFECT OF THE MERGER. Upon the Effective Date, the
separate existence of SCI-Colorado shall cease and SCI-Delaware, as the
Surviving Corporation: (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date; (ii) shall be subject to all actions previously taken by its and SCI-
Colorado's Boards of Directors; (iii) shall succeed, without other transfer,
to all of the assets, rights, powers and property of SCI-Colorado in the
manner more fully set forth in Section 259 of the DGCL; (iv) shall continue to
be subject to all of the debts, liabilities and obligations of SCI-Delaware as
constituted immediately prior to the Effective Date; and (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
SCI-Colorado in the same manner as if SCI-Delaware had itself incurred them,
all as more fully provided under the applicable provisions of the DGCL and the
CBCA.
ARTICLE II
CHARTER DOCUMENTS; DIRECTORS AND OFFICERS
Section 2.1. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate
of Incorporation of SCI-Delaware, as amended and restated in the form attached
hereto as Exhibit A (the "Certificate"), and the Bylaws of SCI-Delaware as in
effect immediately prior to the Effective Date shall continue in full force
and effect as the Certificate of Incorporation and Bylaws of the Surviving
Corporation until duly amended in accordance with the provisions thereof and
applicable law.
Section 2.2. DIRECTORS AND OFFICERS. The directors and officers of
SCI-Colorado immediately prior to the Effective Date shall be the directors
and officers of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified or until as otherwise provided by
law, or by the Certificate and Bylaws of the Surviving Corporation.
ARTICLE III
MANNER OF CONVERSION OF STOCK
Section 3.1. SCI-COLORADO CAPITAL STOCK. Upon the Effective Date, each
share of SCI-Colorado Common Stock issued and outstanding immediately prior
thereto shall, by virtue of the Merger and without any action by the
Constituent Corporations, the holder of such shares or any other person, be
converted automatically into one (1) fully paid and nonassessable, issued and
outstanding share of Common Stock, par value $0.001 per share, of the
Surviving Corporation. Upon the Effective Date, each share of SCI-Colorado
Series A Preferred Stock, SCI-Colorado Series B Preferred Stock, SCI-Colorado
Series C Preferred Stock, SCI-Colorado Series D Preferred Stock and SCI-
Colorado Series E Preferred Stock issued and outstanding immediately prior
thereto shall, by virtue of the Merger and without any action by the
Constituent Corporations, the holder of such shares or any other person, be
converted automatically into one (1) fully paid and nonassessable, issued and
outstanding share of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, par value $0.01 per share, of the Surviving Corporation, as the case
may be, with the identical rights, privileges, powers, qualifications,
limitations, restrictions, duties, and obligations that existed prior to the
Merger, as more fully described in the Certificate.
Section 3.2. SCI-COLORADO OPTIONS AND STOCK PURCHASE RIGHTS.
(a) Upon the Effective Date, the Surviving Corporation shall assume
and continue the stock options and all other employee benefit plans of SCI-
Colorado and all of such options and plans shall become the lawful obligations
of the Surviving Corporation and shall be implemented and administered in the
same manner and without interruption until the same are amended or otherwise
lawfully altered or terminated. Each outstanding and unexercised option or
other right to purchase SCI-Colorado Preferred Stock or SCI-Colorado Common
Stock shall become an option or right to purchase the Surviving Corporation's
Preferred Stock or Common Stock, as the case may be, on the basis of one share
of the Surviving Corporation's Preferred Stock or Common Stock for each share
of SCI-Colorado Preferred Stock or SCI-Colorado Common Stock, as the case may
be, issuable pursuant to any such stock option or stock purchase right, on the
same terms and conditions and at an exercise price per share equal to the
exercise price applicable to any such SCI-Colorado stock option or stock
purchase right.
(b) A number of shares of the Surviving Corporation's Common Stock
shall be reserved for issuance upon the conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock of the Surviving Corporation, and the
exercise of options and stock purchase rights, equal to the number of shares
of SCI-Colorado Common Stock so reserved for issuance upon conversion of the
SCI-Colorado Series A Preferred Stock, SCI-Colorado Series B Preferred Stock,
SCI-Colorado Series C Preferred Stock, SCI-Colorado Series D Preferred Stock
and SCI-Colorado Series E Preferred Stock immediately prior to the Merger.
Section 3.3 SCI-DELAWARE COMMON STOCK. Upon the Effective Date, each
share of SCI-Delaware Common Stock issued and outstanding immediately prior
thereto shall, by virtue of the Merger and without any action by SCI-Delaware,
the holder of such shares or any other person, be canceled and returned to the
status of authorized but unissued shares.
Section 3.4. EXCHANGE OF CERTIFICATES. After the Effective Date, each
holder of an outstanding certificate representing shares of SCI-Colorado
Common Stock, SCI-Colorado Series A Preferred Stock, SCI-Colorado Series B
Preferred Stock, SCI-Colorado Series C Preferred Stock, SCI-Colorado Series D
Preferred Stock or SCI-Colorado Series E Preferred Stock may, at such
stockholder's option, surrender the same for cancellation to the Surviving
Corporation or its transfer agent, and each such holder shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of the Surviving Corporation's Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, into which
the surrendered shares were converted as herein provided. Unless and until so
surrendered, each outstanding certificate theretofore representing shares of
SCI-Colorado Common Stock, SCI-Colorado Series A Preferred Stock, SCI-Colorado
Series B Preferred Stock, SCI-Colorado Series C Preferred Stock, SCI-Colorado
Series D Preferred Stock or SCI-Colorado Series E Preferred Stock shall be
deemed for all purposes to represent the number of shares of the Surviving
Corporation's Common Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as the case may be, into which such shares were converted in
the Merger.
The registered owner on the books and records of SCI-Colorado of any
shares of capital stock represented by such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or otherwise
accounted for to the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the shares of capital stock
of the Surviving Corporation represented by such outstanding certificate as
provided above.
Each certificate representing capital stock of the Surviving Corporation
so issued in the Merger shall bear the same legends, if any, with respect to
the restrictions on transferability as the certificates of SCI-Colorado so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the
Surviving Corporation.
If any certificate for shares of capital stock of the Surviving
Corporation is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a condition of
issuance thereof that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer, that such transfer
otherwise be proper and comply with applicable securities laws and that the
person requesting such transfer pay to the Surviving Corporation or its
transfer agent any transfer or other taxes payable by reason of issuance of
such new certificates in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
ARTICLE IV
GENERAL
Section 4.1. COVENANTS OF SCI-DELAWARE. SCI-Delaware covenants and
agrees that it will, on or before the Effective Date:
(a) qualify to do business as a foreign corporation in the State of
Colorado and in connection therewith appoint an agent for the service of
process as required under the provisions of Section 7-115-103 of the CBCA; and
(b) take such other actions as may be required by the CBCA.
Section 4.2. FURTHER ASSURANCES. From time to time, as and when
required by SCI-Delaware or by its successors and assigns, there shall be
executed and delivered on behalf of SCI-Colorado such deeds and other
instruments, and there shall be taken or caused to be taken by SCI-Colorado
and SCI-Delaware such further and other actions, as shall be appropriate or
necessary in order to vest or perfect in the Surviving Corporation title to
and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of SCI-Colorado, and otherwise to
carry out the purposes and intent of this Merger Agreement, and the officers
and directors of the Surviving Corporation are fully authorized in the name
and on behalf of SCI-Colorado or otherwise to take any and all such action and
to execute and deliver any and all such deeds and other instruments.
Section 4.3. ABANDONMENT. At any time before the Effective Date, this
Merger Agreement may be terminated and the Merger contemplated hereby may be
abandoned by the Board of Directors of either SCI-Colorado or of SCI-Delaware,
or of both, notwithstanding approval of this Merger Agreement by the
shareholders of SCI-Colorado, by the sole stockholder of SCI-Delaware, or by
both.
Section 4.4. AMENDMENT. The Board of Directors of the Constituent
Corporations may amend this Merger Agreement at any time prior to the filing
of this Merger Agreement (or certificate in lieu thereof) with the Secretaries
of State of the States of Delaware and Colorado, provided that an amendment
made subsequent to the adoption of this Merger Agreement by the shareholders
of either Constituent Corporation shall not: (a) alter or change the amount or
kind of shares, securities, cash, property and/or rights to be received in
exchange for or on conversion of all or any of the shares of any class or
series thereof of such Constituent Corporation; (b) alter or change any term
of the Certificate of the Surviving Corporation from the form attached hereto
as Exhibit A; and (c) alter or change any of the terms or conditions of this
Merger Agreement if such alteration or change would adversely affect the
holders of any class or series of capital stock of any Constituent
Corporation.
Section 4.5. GOVERNING LAW. Except as required by Colorado law, this
Merger Agreement shall be governed by the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law.
Section 4.6. COUNTERPARTS. This Merger Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Merger Agreement having first been approved by
the resolutions of the Board of Directors of SkyLynx Communications, Inc., a
Delaware corporation, and SkyLynx Communications, Inc., a Colorado
corporation, is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.
SKYLYNX COMMUNICATIONS, INC.,
a Delaware corporation
By ___________________________
Name ___________________________
Title __________________________
ATTEST:
By ___________________________
Name ___________________________
Title ___________________________
SKYLYNX COMMUNICATIONS, INC.,
a Colorado corporation
By ____________________________
Name ___________________________
Title ___________________________
ATTEST:
By ___________________________
Name ___________________________
Title _________________________
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EXHIBIT A
CERTIFICATE OF INCORPORATION
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SKYLYNX COMMUNICATIONS, INC.
ARTICLE I
NAME
The name of the Company (the "Company") is SkyLynx Communications, Inc.
ARTICLE II
TERM OF EXISTENCE
The Company shall exist in perpetuity, from and after the date of filing
this Certificate of Incorporation with the Secretary of State of the State of
Delaware, unless sooner dissolved or disincorporated according to law.
ARTICLE III
OBJECT, PURPOSES AND POWERS
Section 1. General Objects and Purposes. To engage in any lawful
activity as may from time to time be authorized by the Company's Board of
Directors (the "Board of Directors" or "Board"), which is not prohibited by
law or by this Certificate of Incorporation. To undertake such other
activities as the Board of Directors may deem reasonable or necessary in the
furtherance of the general or specific purposes and powers of the Company.
Section 2. General Powers. Further, the Company shall have and may
exercise all the rights, powers and privileges now or hereafter conferred upon
corporations organized under the laws of the State of Delaware and in addition
may do everything necessary, suitable, proper for, or incident to, the
accomplishment of any of these corporate purposes.
ARTICLE IV
CAPITAL STOCK
Section 1. The total number of shares of capital stock which the
Company shall have authority to issue is one hundred fifty million
(150,000,000) shares of common stock (the "Common Stock") having a par value
of $.001 each, and fifty million (50,000,000) shares of preferred stock
("Preferred Stock") having a par value of $.01 each. All or any part of the
capital stock may be issued by the Company from time to time and for such
consideration and on such terms as may be determined and fixed by the Board of
Directors, without action of the stockholders, as provided by law, unless the
Board of Directors deems it advisable to obtain the advice of the
stockholders. Said stock may be issued for money, property, services or other
lawful considerations, and when issued shall be issued as fully paid and non-
assessable. The private property of stockholders shall not be liable for
Company debts.
Section 2. The preferences and relative participating optional or
other special rights and qualifications, limitations or restrictions of the
common stock of the Company are as follows:
A. Dividends. Dividends may be paid upon the common stock, as and
when declared by the Board of Directors, out of funds of the Company legally
available therefor.
B. Payment on Liquidation. Upon any liquidation, dissolution and
termination of the Company, and after payment or setting aside of any amount
sufficient to provide for payment in full of all debts and liabilities of, and
other claims against the Company, the assets shall be distributed pro rata to
the holders of the common stock.
C. Voting Rights. At any meeting of the stockholders of the
Company each holder of Common Stock shall be entitled to one vote for each
share outstanding in the name of such holder on the books of the Company on
the date fixed for determination of voting rights.
D. Majority Vote. The stockholders, by vote or concurrence of a
majority of the outstanding shares of the Company entitled to vote on the
subject matter, may take any action which would otherwise require a two-thirds
(2/3) vote under the General Corporation Law of the State of Delaware ("GCL").
E. Cumulative Voting. Cumulative voting shall not be allowed in
the election of directors or for any other purpose.
F. Preemptive Rights. Unless otherwise determined by the Board,
no stockholder of the Company shall have preemptive rights to subscribe for
any additional shares of stock, or for other securities of any class, or for
rights, warrants or options to purchase stock for the scrip, or for securities
of any kind convertible into stock or carrying stock purchase warrants or
privileges.
G. Restrictions on Sale or Disposition. All lawful restrictions
on the sale or other disposition of shares may be placed upon all or a portion
or portions of the certificates evidencing the Company's shares.
Section 3. The Preferred Stock of the Company shall be issued in one
or more series as may be determined from time to time by the Board. In
establishing a series the Board of Directors shall give to it a distinctive
designation so as to distinguish it from the shares of all other series and
classes, shall fix the number of shares in such series, and the preferences,
rights and restrictions thereof. All shares of any one series shall be alike
in every particular. All series shall be alike except that there may be
variation as to the following: (1) the rate of distribution, (2) the price at
and the terms and conditions on which shares shall be redeemed, (3) the amount
payable upon shares for distributions of any kind, (4) sinking fund provisions
for the redemption of shares, (5) the terms and conditions on which shares may
be converted if the shares of any series are issued with the privilege of
conversion, and (6) voting rights except as limited by law.
The Company hereby authorizes the following series of Preferred
Stock with the rights, preferences and restrictions as described below.
A. Rights, Preferences and Restrictions of Series A Preferred
Stock.
1. Designations and Amounts. Five Million (5,000,000) shares
of the Company's authorized Preferred Stock are designated as Series A
Convertible Preferred Stock ("Series A Preferred Stock").
2. Definitions. For the purposes of this Article IV,
Section 3.A, the following definitions shall apply:
(a) "Original Issue Date" Series A Preferred Stock shall
mean the date on which the first share of such series of Preferred Stock was
originally issued by SkyLynx Communications, Inc., a Colorado corporation
("SCI-Colorado").
(b) "Subsidiary" shall mean any corporation at least 50%
of whose outstanding voting stock shall at the time be owned directly or
indirectly by the Company or by one or more Subsidiaries.
3. Dividends.
(a) The holders of outstanding Series A Preferred Stock
shall be entitled to receive dividends at the annual rate of 10% based on the
stated value per share computed on the basis of a 360-day year and 12 30-day
months. Dividends shall be calculated from the date of issue by SCI-Colorado
and payable, in each case quarterly on the fifteenth day of April, July,
October and January of each year (the "Dividend Payment Date"). Dividends
shall be paid to record holders of shares of Series A Preferred Stock as of
the date one business day prior to the Dividend Payment Date (the "Dividend
Record Date"). The right of the holder of shares of Series A Preferred Stock
as of the Dividend Record Date to the relevant dividend shall not be affected
by the subsequent transfer or cancellation of such shares; such dividend being
payable to the holder as of the Dividend Record Date notwithstanding such
transfer or cancellation.
(b) Dividends on the shares of Series A Preferred Stock
shall be cumulative; therefore, if a full or partial dividend on the shares of
this series with respect to any dividend period is not declared by the Board
of the Company, the Company shall be obligated to pay full dividend on the
shares of this series with respect to such dividend period. Dividends shall
accrue but not compound on a daily basis if full dividends on all outstanding
shares of Series A Preferred Stock of this series at the rate set forth in
Article IV, Section 3A3(a) above shall not have been declared and paid for the
immediately preceding dividend period or for any prior dividend period, such
outstanding cumulative dividends shall not bear interest.
(c) In addition to the Common Stock dividend, the holders
of outstanding Series A Preferred Stock shall be entitled to participate, pro
rata, in dividends paid on outstanding shares of Common Stock, if, when and as
the Board shall in their sole discretion deem advisable, and only from the net
profits or surplus of the Company as such shall be fixed and determined by the
Board. The determination of the Board at any time of the amount of net
profits or surplus available for dividend shall be binding and conclusive on
the holders of all the stock of the Company at the time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, the holders of
each share of Series A Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
shareholders, before any payment or declaration and setting apart for payment
of any amount shall be made in respect to any outstanding Preferred Stock
ranking junior to the Series A Preferred Stock or the Common Stock, an amount
equal to Four Dollars ($4.00) per share. If upon any liquidation,
dissolution, or winding up of the Company, whether voluntary or involuntary,
the assets to be distributed to the holders of the Series A Preferred Stock
shall be insufficient to permit the payment to such shareholders of the full
preferential amount aforesaid, then all of the assets of the Company available
to be distributed shall be distributed ratably to the holders of the Series A
Preferred Stock.
(b) After the payment or distribution to the holders of
the Series A Preferred Stock of the full preferential amounts aforesaid, the
holders of any Preferred Stock rank junior to the Series A Preferred Stock and
the Common Stock then outstanding shall be entitled to receive all of the
remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of
the Company, a sale or other transfer of all or substantially all of its
assets, nor a sale of fifty percent (50%) or more of the Company's capital
stock then issued and outstanding nor the purchase or redemption by the
Company of stock of any class, nor the payment of a dividend or distribution
from net profits or surplus of the Company shall be treated as or deemed to be
a liquidation thereunder.
5. Redemption. The Company shall have neither the right
nor the obligation to redeem any of the outstanding Series A Preferred Stock,
and holders of the Series A Preferred Stock shall not have the right to demand
the redemption of any of the outstanding Series A Preferred Stock.
6. Voting Rights. Upon issuance, and subject to increase and
additional rights as provided below, holders of shares of this series of
Series A Preferred Stock shall be entitled to vote with the holders of shares
of Common Stock as a single class on all matters presented for a vote to the
shareholders of the Company. The number of votes per share of this series of
Series A Preferred Stock which can be cast shall be adjusted at such time or
times as the conversion price is adjusted so that the number of votes per
share of this series of Series A Preferred Stock which may be cast shall
always be equal to the full number of shares of Common Stock into which each
share of this series of Series A Preferred Stock may be converted when voting
with the holders of Common Stock as a single class.
7. Conversion. The Series A Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Optional Conversion. Holders of outstanding shares
of Series A Preferred Stock shall have an option to convert each share of
Series A Preferred Stock into one share of the Company's Common Stock (the
"Initial Conversion Value"). At any time commencing the earlier of (i) one
year from the date of issue by SCI-Colorado or (ii) upon the effective date of
a Registration Statement registering for sale under the Securities Act of
1933, as amended ("the Securities Act"), the shares of the Company's Common
Stock issuable upon such conversion ("Conversion Stock").
(b) Automatic Conversion. The foregoing notwithstanding,
each outstanding share of Series A Preferred Stock shall be automatically
converted into one share of Common Stock upon the earlier of (i) the third
anniversary of the date of issue by SCI-Colorado or (ii) in the event (a) a
Registration Statement has been filed with the Securities and Exchange
Commission and declared effective registering for sale under the Securities
Act the Conversion Stock, (b) there has been developed and exists a public
trading market for the Company's Common Stock on the over-the-counter market
(the "OTC Bulletin Board") and (c) the public trading price of the Company's
Common Stock has equaled or exceeded $6.00 per share (150% of the conversion
value) for at least ten consecutive trading days.
(c) Mechanics of Conversion. The conversion of all
outstanding shares of Series A Preferred Stock to Common Stock shall occur
automatically as provided in Article IV, Section 3A7(b) above ("Triggering
Events"). The Company shall, within ten (10) days of either Triggering Event,
provide written notice, first class postage pre-paid, to each holder of record
of the Series A Preferred Stock to be converted, at his post office address
last shown on the records of the Company, of the conversion (the "Conversion
Notice"). The Conversion Notice shall state:
(i) That all of the holder's outstanding shares of
Series A Preferred Stock were converted;
(ii) The number of shares of Series A Preferred Stock
held by the holder that were converted;
(iii) The effective date of the Conversion (the
"Conversion Date") and the number of shares of Common Stock which the holder
will receive; and
(iv) That the holder is to surrender to the Company,
in the manner and at the place designated, his certificate or certificates
representing the shares of Series A Preferred Stock converted.
Thereafter, each holder of Series A Preferred Stock to be
converted shall surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated in the
Conversion Notice, and thereupon the requisite number of shares of Common
Stock shall be issued in the name of the person whose name appears on the
surrendered certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. Notwithstanding that
the certificates evidencing any of the shares of Series A Preferred Stock
shall not have been surrendered, all rights with respect to such shares shall
forthwith after the Conversion Date, terminate, except only the right of the
holders to receive the appropriate number of shares of Common Stock upon
surrender of their certificate or certificates therefor.
(d) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the Original Issue Date
for a series of the Series A Preferred Stock effect a subdivision of the
outstanding Common Stock, the Conversion Value then in effect immediately
before that subdivision shall be proportionately decreased, and conversely, if
the Company shall at any time or from time to time after the Original Issue
Date for a series of the Series A Preferred Stock combine the outstanding
shares of Common Stock, the Conversion Value then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Article IV, Section 3A7(d) shall become effective at the close of business on
the date the subdivision or combination becomes effective.
(e) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the Series
A Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for elsewhere in this Article IV,
Section 3A7, then and in each such event the holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock into which such shares of
Series A Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further
adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of
Assets. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification, or exchange of shares provided for elsewhere in this Article
IV, Section 3A7) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the Company's
assets to any other person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the holders of the
Series A Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock, the number of shares of stock or
other securities or property of the Company, or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Article IV, Section 3A7 with respect to the rights of the holders of the
Series A Preferred Stock after the reorganization, merger, consolidation, or
sale to the end that the provisions of this Article IV, Section 3A7 (including
adjustment of the Conversion Value then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) Definition. The term "Additional Shares of Common
Stock" as used herein shall mean all shares of Common Stock issued or deemed
issued (including a right or option to purchase Common Stock, or shares of
stock or an obligation convertible into Common Stock) by the Company after the
Original Issue Date for a series of Series A Preferred Stock, whether or not
subsequently reacquired or retired by the Company, other than (1) shares of
Common Stock, and (2) shares or other securities issued to employees,
officers, directors, consultants or other persons performing services for the
Company pursuant to any stock offering, option, plan, or arrangement approved
by the Board of Directors of the Company.
(h) Notices of Record Date. In the event of (i) any
taking by the Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution or (ii) any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of
the assets of the Company to any other corporation, entity, or person, or any
voluntary or involuntary dissolution, liquidation, or winding up of the
Company, the Company shall mail to each holder of Series A Preferred Stock at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding up is expected to
become effective, and (C) the time, if any is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation, or winding up.
(i) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Company shall pay cash equal to the product of such fraction multiplied by the
fair market value of one share of the Company's Common Stock on the date of
conversion, as determined in good faith by the Board.
(j) Notices. Any notice required by the provisions of
this Paragraph 7 to be given to the holder of shares of the Series A Preferred
Stock shall be deemed given when personally delivered to such holder or five
(5) business days after the same has been deposited in the United States mail,
certified or registered mail, return receipt requested, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
the Company.
(k) Payment of Taxes. The Company will pay all taxes and
other governmental charges that may be imposed in respect of the issue or
delivery of shares of Common Stock upon conversion of shares of Series A
Preferred Stock.
(l) No Dilution or Impairment. The Company shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed thereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against dilution or other impairment.
8. No Preemptive Rights. No holder of the Series A Preferred
Stock of the Company shall be entitled, as of right, to purchase or subscribe
for any part of the unissued stock of the Company or of any stock of the
Company to be issued by reason of any increase of the authorized capital stock
of the Company, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the Company or to
purchase or subscribe for any stock of the Company purchased by the Company or
by its nominee or nominees, or to have any other preemptive rights now or
hereafter defined by the laws of the State of Delaware.
9. No Reissuance of Series A Preferred Stock. No share or
shares of Series A Preferred Stock acquired by the Company by reason of
purchase, conversion, or otherwise shall be reissued, and all such shares
shall be canceled, retired, and eliminated from the shares which the Company
shall be authorized to issue.
B. Rights, Preferences and Restrictions of Series B Preferred
Stock.
1. Designations and Amounts. Six Hundred (600) shares of
the Company's authorized Preferred Stock are designated as Series B
Convertible Preferred Stock ("Series B Preferred Stock").
2. Definitions. For the purposes of this Article IV, Section
3.B, the following definitions shall apply:
(a) "Original Issue Date" for Series B Preferred Stock
shall mean the date on which the first share of such series of Preferred Stock
was originally issued by SkyLynx Communications, Inc., a Colorado corporation
("SCI-Colorado").
(b) "Stated Value" for a share of Series B Preferred
Stock shall be $1,000 per share.
(c) "Subsidiary" shall mean any corporation at least 50%
of whose outstanding voting stock shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
3. Dividends.
(a) The holders of outstanding Series B Preferred Stock
shall be entitled to receive dividends at the annual rate of 8% based on the
stated value per share computed on the basis of a 360-day year and twelve 30-
day months. Dividends shall be calculated from the date of issue by SCI-
Colorado and payable, in each case quarterly on the fifteenth day of April,
July, October and January of each year (the "Dividend Payment Date").
Dividends shall be paid to record holders of shares of Series B Preferred
Stock as of the date one business day prior to the Dividend Payment Date (the
"Dividend Record Date"). The right of the holder of shares of Series B
Preferred Stock as of the Dividend Record Date to the relevant dividend shall
not be affected by the subsequent transfer or cancellation of such shares;
such dividend being payable to the holder as of the Dividend Record Date
notwithstanding such transfer or cancellation.
(b) The Dividends payable on the Series B Preferred Stock
may be paid, at the option of the Company, either (i) in cash or (ii) by the
issuance of the Company of shares of its Common Stock, valued at the Market
Price, as hereinafter defined, on the Dividend Record Date. In the event the
Company elects to pay the dividend through the issuance of shares of its
Common Stock, the shares shall be issued to the holders of the Series B
Preferred Stock either registered or registered for resale under the
Securities Act.
(c) Dividends on the shares of Series B Preferred Stock
shall be cumulative; therefore, if a full or partial dividend on the shares of
this series with respect to any dividend period is not declared by the Board
of Directors of the Company, the Company shall be obligated to pay full
dividend on the shares of this series with respect to such dividend period.
Dividends shall accrue but not compound on a daily basis if full dividends on
all outstanding shares of Series B Preferred Stock of this series at the rate
set forth in Article IV, Section 3B3(a) above shall not have been declared and
paid for the immediately preceding dividend period or for any prior dividend
period, such outstanding cumulative dividends shall not bear interest.
(d) In addition to the Common Stock dividend, the holders
of outstanding Series B Preferred Stock shall be entitled to participate, pro
rata in dividends paid on outstanding shares of Common Stock, if, when and as
the Board shall in its sole discretion deem advisable, and only from the net
profits or surplus of the Company as such shall be fixed and determined by the
Board. The determination of the Board of Directors at any time of the amount
of net profits or surplus available for dividend shall be binding and
conclusive on the holders of all the stock of the Company at the time
outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, the holders of
each share of Series B Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
shareholders, before any payment or declaration and setting apart for payment
of any amount shall be made in respect to any outstanding Preferred Stock
ranking junior to the Series B Preferred Stock or the Common Stock, an amount
equal to the Stated Value plus all accrued and unpaid dividends. The Series B
Preferred Stock shall be ranked pari passu with outstanding shares of Series A
Preferred Stock. If upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the assets to be distributed to the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such shareholders of the full preferential amount aforesaid, then
all of the assets of the Company available to be distributed shall be
distributed ratably to the holders of the Series B Preferred Stock.
(b) After the payment or distribution to the holders of
the Series B Preferred Stock of the full preferential amounts aforesaid, the
holders of any Preferred Stock rank junior to the Series B Preferred Stock and
the Common Stock then outstanding shall be entitled to receive all of the
remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of
the Company, a sale or other transfer of all or substantially all of its
assets, nor a sale of fifty percent (50%) or more of the Company's capital
stock then issued and outstanding nor the purchase or redemption by the
Company of stock of any class, nor the payment of a dividend or distribution
from net profits or surplus of the Company shall be treated as or deemed to be
a liquidation hereunder.
5. Redemption.
(a) Subject to the conditions set forth herein, in the
event that the bid price of the Company's Common Stock as quoted on the
over-the-counter market (or such other market, which is then the principal
trading market for the Company's Common Stock) is equal to or less than $2.00
per share of Common Stock for ten (10) or more consecutive trading days, the
Company, by action of its Board, may redeem all but not less than all of the
Series B Preferred Stock, at any time, or from time to time, in accordance
with the provisions of this Paragraph 5 (the "Optional Redemption").
(b) In the event the Board elects to redeem the Series B
Preferred Stock, on and after the date specified in the notice provided for in
Article IV, Section 3B5(e) below, each holder of the Series B Preferred Stock
called for redemption, upon presentation and surrender at the place designated
in such notice of the certificate or certificates evidencing said Series B
Preferred Stock held by him, her or it, properly endorsed in blank for
transfer or accompanied by proper instruments of assignment in blank, shall be
entitled to receive therefor the redemption price thereof.
(c) If redeemed pursuant to this Article IV, Section 3B5,
the redemption price for each share of Series B Preferred Stock (the
"Redemption Price") shall be an amount in cash equal to the sum of (i) the
Stated Value per share of Series B Preferred Stock plus (ii) the amount of all
accrued and unpaid dividends thereon, whether or not earned or declared, to
and including the date fixed for redemption, multiplied by a percentage, as
set forth below, determined by the number of days between the Original Issue
Date of the Series B Preferred Stock and the redemption date fixed in the
notice:
<TABLE>
<CAPTION>
Redemption Date Percentage
---------- ---------------
<S> <C>
Days 15-60 117.5%
Days 61-120 120%
Days 121 and above 125%
</TABLE>
(d) Notwithstanding the provisions of Article IV, Section
3B5(a) and (b) above, any holder of Series B Preferred Stock called for
redemption by the Company shall have the right and option to decline to have
such holder's shares of Series B Preferred Stock redeemed by the Company in
accordance with the notice described in Article IV, Section 3B5(e) below.
Such declination shall be made by a holder of Series B Preferred Stock, if at
all, by delivering written notice of such declination to the Company not later
than fifteen (15) days prior to the Redemption Date as set forth in the
Redemption Notice (hereafter the "Declination Notice"). The Declination
Notice shall identify the holder and the number of shares of Series B
Preferred Stock owned by holder and subject to the Declination Notice. Any
holder of Series B Preferred Stock who provides the Company with a Declination
Notice shall be deemed to have agreed to waive any and all right or option
which such holder has to convert all or any portion of the Series B Preferred
Stock into shares of the Company's Common Stock pursuant to the provisions of
Article IV, Section 3B6 below for a period commencing upon the date of such
Declination Notice and terminating fifteen (15) days from the Redemption Date
as fixed in the Redemption Notice.
(e) In the case of any Optional Redemption pursuant to
this Article IV, Section 3B5, at least thirty (30) days and not more than
forty (40) days prior to the date fixed for any such redemption of the Series
B Preferred Stock (hereinafter referred to as the "Redemption Date"), written
notice (hereinafter referred to as the "Redemption Notice") shall be mailed,
first class postage prepaid, to each holder of record to the Series B
Preferred Stock to be redeemed at his post office address last shown on the
records of the Company, and if the holder has provided the Company with a
facsimile number for notices, also by facsimile transmission. The Redemption
Notice shall state:
(i) That all of the holder's outstanding shares of
Series B Preferred Stock are being called for redemption;
(ii) The number of shares of Series B Preferred Stock
held by the holder that the Company intends to redeem;
(iii) The Redemption Date and the Redemption
Price; and
(iv) That the holder is to surrender to the Company,
in the manner and at the place designated, his certificate or certificates
representing the shares of Series B Preferred Stock to be redeemed.
(f) Unless a holder delivers to the Company a Declination
Notice pursuant to Article IV, Section 3B5(d) above, at least fifteen (15)
days before any Redemption Date, each holder of Series B Preferred Stock to be
redeemed shall surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired,
(g) If the Redemption Notice shall have been duly given
and, if on the Redemption Date the Redemption Price is either paid or
irrevocably made available for payment through the deposit arrangement
specified in Article IV, Section 3B5(h) below, then notwithstanding that the
certificates evidencing any of the shares of Series B Preferred Stock so
called for redemption shall not have been surrendered, the dividends with
respect to such shares shall cease to accrue after the Redemption Date and all
rights with respect to such shares shall forthwith after the Redemption Date
terminate, except only the right of the holders to receive the Redemption
Price, without interest upon surrender of their certificate or certificates
therefor.
(h) At least ten (10) days prior to the Redemption Date,
the Company may deposit with any bank or trust company in Boulder or Denver,
Colorado, a sum (or an irrevocable letter of credit) equal to the aggregate
Redemption Price of all shares of Series B Preferred Stock called for
redemption and not yet redeemed, with irrevocable instructions and authority
to the bank or trust company to pay, on or after the Redemption Date or prior
thereto, the Redemption Price to the respective holders entitled thereto upon
the surrender of their share certificates. From and after the Redemption
Date, the shares so called for redemption shall be redeemed if deposit shall
have been made with such instructions or authority on or before the tenth
(10th) day prior to the Redemption Date. The deposit shall on the Redemption
Date constitute full payment of the shares to their holders, and from and
after the Redemption Date the shares shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders with
respect to such shares and shall have no rights with respect thereto except
the rights to receive from the bank or trust company payment of the Redemption
Price of the shares, without interest, upon surrender of their certificates
therefor. Any funds so deposited and unclaimed at the end of one (1) year
from the Redemption Date by any holder of shares called for redemption shall
be released or repaid to the Company, after which the holders of such shares
called for redemption shall be entitled to receive payment of the Redemption
Price or, if applicable, the Optional Early Redemption Price for such shares
only from the Company.
6. Voting Rights. Except as required by the GCL or other
applicable legal requirements, holders of the Series B Preferred Stock shall
have no right to vote on any matters presented to the shareholders of the
Company at any regular or special meeting of the Company's security holders.
7. Optional Conversion. The holders of shares of Series B
Preferred Stock shall have the following conversion rights:
(a) Right to Convert Conversion Price. Subject to the
terms, conditions and restrictions of Article IV, Section 3B5(d) and the
provisions of this Article IV, Section 3B7, the holder of any shares of Series
B Preferred Stock shall have the right to convert each such share of Series B
Preferred Stock (except that upon any liquidation of the Company, the right of
conversion shall terminate at the close of business on the business day fixed
for payment of the amount distributable on the Series B Preferred Stock; and
further except that upon redemption of the Series B Preferred Stock by the
Company, the right of conversion shall terminate at the close of business on
the business day immediately preceding the Redemption Date) into an amount of
shares of Common Stock equal to the Stated Value of such share or shares of
Series B Preferred Stock plus all accrued and unpaid dividends thereon divided
by (i) the average of the three (3) lowest closing bid prices for the Common
Stock, as reported by Bloomberg L.P., on the principal market for the
Company's Common Stock (the "Principal Market") during the period of twenty-
two (22) Trading Days ending with the last Trading Day prior to the date of
conversion (the "Conversion Date") (the "Market Price"), after (ii)
discounting the Market Price by 20% to determine the conversion price (the
"Conversion Price"). To illustrate, if the Market Price as of the Conversion
Date is $6.00 and 100 shares of Series B Preferred Stock are being converted,
the Stated Value for which would be $100,000, then the Conversion Price shall
be $4.80 per share of Common Stock ($6.00 x .80), whereupon the Stated Value
of $100,000 of Series B Preferred Stock would entitle the holder thereof to
convert the 100 shares of Series B Preferred Stock into 20,833 shares of
Common Stock ($100,000 divided by $4.80 equals 20,833). However, in no event
shall the Conversion Price be greater than $4.00 per share, adjusted for any
subsequent stock splits, stock dividends or reverse stock splits (the "Maximum
Conversion Price"). In addition, if the Conversion Price on any Conversion
Date is less than $6.00, then the Company shall have the option, prior to
receipt of a Conversion Notice from the holder and upon prior written notice
to the holder, to pay the holder in shares of Common Stock as set forth above,
or else in cash in an amount equal to (i) the closing bid price on the
Principal Market on the day prior to the Conversion Date multiplied by (ii)
the number of shares of Common Stock which would otherwise be issuable to the
holder upon such conversion, or any combination of cash and Common Stock. If
notice of the Company's election to pay the holder in cash is not received by
the holder prior to the receipt by the Company of a Conversion Notice, the
Company shall pay the holder in shares of Common Stock.
(b) Section 13(d) Compliance. The Holder shall not have
the right, and the Company shall not have the obligation, to convert all or
any portion of the Series B Preferred Stock if and to the extent that the
issuance to the Holder of Common Shares upon such conversion would result in
the Holder being deemed the "beneficial owner" of more than 5% of the then
outstanding shares of Common Stock within the meaning of Section 13(d) of the
Exchange Act and the rules promulgated thereunder. If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a holder from being deemed the beneficial owner of more than 5% of the
then outstanding shares of Common Stock, then the Company shall redeem so many
of such holder's shares of Series B Preferred Stock pursuant to Article IV,
Section 3B(a) hereof as are necessary to cause such holder to be deemed the
beneficial owner of not more than 5% of the then outstanding shares of Common
Stock.
(c) Time of Conversion. The right of conversion may be
exercised by the holder at any time after the earlier of (i) 90 days from the
date of issuance of the Series B Preferred Stock by SCI-Colorado or (ii) the
effective date of the Registration Statement registering for sale under the
Securities Act the shares of the Company's Common Stock issuable upon such
conversion (the "Conversion").
(d) Notice of Conversion. The right of conversion shall
be exercised by the holder thereof by giving written notice (the "Conversion
Notice") to the Company, by facsimile or by registered mail or overnight
delivery service, with a copy by facsimile to the Company's then transfer
agent for its Common Stock, as designated by the Company from time to time,
that the holder elects to convert a specified number of shares of Series B
Preferred Stock representing a specified Stated Value thereof into Common
Stock and, if such conversion will result in the conversion of all of such
holder's shares of Series B Preferred Stock, by surrender of a certificate or
certificates for the shares so to be converted to the Company at its principal
office (or such other office or agency of the Company as the Company may
designate by notice in writing to the holders of the Series B Preferred Stock)
at any time during its usual business hours on the date set forth in the
Conversion Notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued. The Conversion Notice shall include therein the Stated Value
of shares of Series B Preferred Stock to be converted, and a calculation (i)
of the Market Price, (ii) the Conversion Price, and (iii) the number of shares
of Common Stock to be issued in connection with such conversion.
(e) Issuance of Certificates: Time Conversion Effected.
(i) Promptly, but in no event more than three (3)
business days, after the receipt of the Conversion Notice referred to in
Article IV, Section 3B5(d) and surrender of the certificate or certificates
for the share or shares of Series B Preferred Stock to be converted (if
required), the Company shall exercise best efforts to issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number
of whole shares of Common Stock into which such shares of Series B Preferred
Stock are converted. To the extent permitted by law, such conversion shall be
deemed to have been effected on the date on which such Conversion Notice shall
have been received by the Company and at the time specified stated in such
Conversion Notice, which must be during the calendar day of such notice, and
at such time the rights of the holder of such share or shares of Series B
Preferred Stock shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby. Issuance of shares of Common Stock
issuable upon conversion which are requested to be registered in a name other
than that of the registered holder shall be subject to compliance with all
applicable federal and state securities laws.
(ii) The Company understands that a delay in the
issuance of the shares of Common Stock beyond three (3) business days could
result in economic loss to the holder. As compensation to the holder for such
loss, unless a delay is due to causes beyond the reasonable control of the
Company, the Company agrees to pay late payments to the holder for late
issuance of shares of Common Stock upon conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond three (3) business days from the date of receipt of the
Conversion Notice):
<TABLE>
<CAPTION>
Late Payment For Each
$5,000 of Stated Value
No. Business Days Late Amount Being Converted
---------------------- ----------------------
<S> <C>
1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
>10 $ 1,000 + $200 for each Business
Day Late beyond 10 days
</TABLE>
The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Nothing herein shall limit
holder's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver Common Stock to the holder.
Furthermore, in addition to any other remedies which may be available to the
holder, in the event that the Company fails for any reason to effect delivery
of such shares of Common Stock within five business days the date of receipt
of the Conversion Notice, the holder will be entitled to revoke the relevant
Conversion Notice by delivering a notice to such effect to the Company
whereupon the Company and the holder shall each be restored to their
respective positions immediately prior to delivery of such Conversion Notice.
(iii) If, at any time (a) the Company challenges,
disputes or denies the right of the holder to effect the conversion of the
Series B Preferred Stock into Common Stock or otherwise dishonors or rejects
any Conversion Notice delivered in accordance with this Article IV, Section
3B7 or (b) any third party who is not and has never been an Affiliate (as
defined in Rule 405 under the Securities Act of 1933, as amended) of the
holder commences any lawsuit or proceeding or otherwise asserts any claim
before any court or public or governmental authority which seeks to challenge,
deny, enjoin, limit, modify, delay or dispute the right of the holder hereof
to effect the conversion of the Series B Preferred Stock into Common Stock,
then, the holder shall have the right, by written notice to the Company, to
require the Company to promptly redeem the Series B Preferred Stock for cash
at a redemption price equal to the Redemption Price then in effect in
accordance with Article IV, Section 3B5(c) above.
(f) Fractional Shares. No fractional shares shall be
issued upon conversion of Series B Preferred Stock into Common Stock. All
fractional shares shall be rounded up to the nearest whole share.
(g) Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Company shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, or, in the case of any consolidation, merger or mandatory share
exchange of the Company into any other company, then, as a condition of such
reorganization, reclassification or exchange, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Series B Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore receivable upon the conversion of such share or
shares of Series B Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization, reclassification or exchange not taken place, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the conversion rights) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
(h) Adjustments for Splits, Combinations, etc. The
Conversion Price and the number of shares of Common Stock into which the
Series B Preferred Stock shall be convertible shall be adjusted for stock
splits, combinations, or other similar events. Additionally, an adjustment
will be made in the case of an exchange of Common Stock, consolidation or
merger of the Company with or into another corporation or sale of all or
substantially all of the assets of the Company in order to enable the holder
of Series B Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been issued
upon the conversion of the Series B Preferred Stock. No adjustment to the
Conversion Price will be made for dividends (other than stock dividends), if
any, paid on the Common Stock or for securities issued pursuant to exercise
for fair value of options, warrants, or restricted stock.
8. No Preemptive Rights. No holder of the Series B Preferred
Stock of the Company shall be entitled, as of right, to purchase or subscribe
for any part of the unissued stock of the Company or of any stock of the
Company to be issued by reason of any increase of the authorized capital stock
of the Company, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the Company or to
purchase or subscribe for any stock of the Company purchased by the Company or
by its nominee or nominees, or to have any other preemptive rights now or
hereafter defined by the laws of the State of Delaware.
9. No Reissuance of Series B Preferred Stock. No share or
shares of Series B Preferred Stock acquired by the Company by reason of
purchase, conversion, or otherwise shall be reissued, and all such shares
shall be canceled, retired, and eliminated from the shares which the Company
shall be authorized to issue.
C. Rights, Preferences and Restrictions of Series C Preferred
Stock.
1. Designations and Amount. Two Million (2,000,000) shares
of the Company's authorized Preferred Stock are designated as Series C
Convertible Preferred Stock ("Series C Preferred Stock").
2. Definitions. For the purposes of this Article IV, Section
3.C, the following definitions shall apply:
(a) "Original Issue Date" for Series C Preferred Stock
shall mean the date on which the first share of such series of Preferred Stock
was originally issued by SkyLynx Communications, Inc., a Colorado corporation
("SCI-Colorado").
(b) "Stated Value" for Series C Preferred Stock shall be
$4.00 per share.
(c) "Subsidiary" shall mean any corporation at least 50%
of whose outstanding voting stock shall at the time be owned directly or
indirectly by the Company or by one or more subsidiaries.
3. Dividend.
(a) The holders of outstanding Series C Preferred Stock
shall be entitled to receive dividends at the annual rate of 10% based on the
Stated Value per share computed on the basis of a 360-day year and twelve (12)
30-day months. Dividends shall be calculated from the date of issue by SCI-
Colorado and payable, in each case semi-annually on the fifteenth day of June
and December of each year (the "Dividend Payment Date"). Dividends shall be
paid to record holders of shares of Series C Preferred Stock as of the date
one business day prior to the Dividend Payment Date (the "Dividend Record
Date"). The right of the holder of shares of Series C Preferred Stock as of
the Dividend Record Date to the relevant dividend shall not be affected by the
subsequent transfer or cancellation of such shares; such dividend being
payable to the holder as of the Dividend Record Date notwithstanding such
transfer or cancellation.
(b) Dividends payable on the Series C Preferred Stock
shall be paid exclusively by the issuance by the Company of additional shares
of Series C Preferred Stock, valued at the Stated Value, as hereinabove
defined. The dividend shall be equal to 1/20th of one share of Series C
Preferred Stock and shall be paid within thirty (30) days following the end of
each six (6) month period.
(c) Dividends on the shares of Series C Preferred Stock
shall be cumulative; therefore, if a full or partial dividend on the shares of
this series with respect to any dividend period is not declared by the Board
of Directors of the Company, the Company shall be obligated to pay full
dividend on the shares of this series with respect to such dividend period.
Dividends shall accrue but not compound on a daily basis if full dividends on
all outstanding shares of Series C Preferred Stock of this series at the rate
set forth in Article IV, Section 3C3(a) above shall not have been declared and
paid for the immediately preceding dividend period or for any prior dividend
period, such outstanding cumulative dividends shall not bear interest.
(d) In addition to the Common Stock dividend, the holders
of outstanding Series C Preferred Stock shall be entitled to participate, pro
rata in dividends paid on outstanding shares of Common Stock if, when and as
the Board of Directors shall in their sole discretion deem advisable, and only
from the net profits or surplus of the Company as such shall be fixed and
determined by the Board of Directors. The determination of the Board of
Directors at any time of the amount of net profits or surplus available for
dividend shall be binding and conclusive on the holders of all the stock of
the Company at the time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, the holders of
each share of Series C Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
shareholders, pari passu with the holders of outstanding shares of Series A
and Series B Preferred Stock before any payment or declaration and setting
apart for payment of any amount shall be made in respect to any outstanding
Preferred Stock ranking junior to the Series C Preferred Stock or the Common
Stock, an amount equal to Four Dollars ($4.00) per share. If upon any
liquidation, dissolution, or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series C
Preferred Stock shall be insufficient to permit the payment to such
shareholders of the full preferential amount aforesaid, then all of the assets
of the Company available to be distributed shall be distributed ratably to the
holders of the Series C Preferred Stock.
(b) After the payment or distribution to the holders of
the Series C Preferred Stock of the full preferential amounts aforesaid, the
holders of any Preferred Stock rank junior to the Series C Preferred Stock and
the Common Stock then outstanding shall be entitled to receive all of the
remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of
the Company, a sale or other transfer of all or substantially all of its
assets, nor a sale of fifty percent (50%) or more of the Company's capital
stock then issued and outstanding nor the purchase or redemption by the
Company of stock of any class, nor the payment of a dividend or distribution
from net profits or surplus of the Company shall be treated as or deemed to be
a liquidation hereunder.
5. Redemption. The Company shall have neither the right nor
the obligation to redeem any of the outstanding Series C Preferred Stock, and
holders of the Series C Preferred Stock shall not have the right to demand the
redemption of any of the outstanding Series C Preferred Stock.
6. Voting Rights. Upon issuance, and subject to increase and
additional rights as provided below, holders of shares of this series of
Series C Preferred Stock shall be entitled to vote with the holders of shares
of Common Stock as a single class on all matters presented for a vote to the
shareholders of the Company. The number of votes per share of this series of
Series C Preferred Stock which can be cast shall be adjusted at such time or
times as the conversion price is adjusted so that the number of votes per
share of this series of Series C Preferred Stock which may be cast shall
always be equal to the full number of shares of Common Stock into which each
share of this series of Series C Preferred Stock may be converted when voting
with the holders of Common Stock as a single class.
7. Conversion. The Series C Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Optional Conversion. Holders of outstanding shares
of Series C Preferred Stock shall have an option to convert each share of
Series C Preferred Stock into one share of the Company's Common Stock (the
"Initial Conversion Value"), at any time commencing the earlier of (i) one
year from the date of issue by SCI-Colorado or (ii) upon the effective date of
a Registration Statement registering for sale under the Securities Act of
1933, as amended (the "Securities Act"), the shares of the Company's Common
Stock issuable upon such conversion ("Conversion Stock").
(b) Automatic Conversion. The foregoing notwithstanding,
each outstanding share of Series C Preferred Stock shall be automatically
converted into one share of Common Stock upon the third anniversary of the
date of issue by SCI-Colorado.
(c) Mechanics of Conversion. The conversion of all
outstanding shares of Series C Preferred Stock to Common Stock shall occur
automatically as provided in Article IV, Section 3C7(b) above ("Triggering
Events"). The Company shall, within ten (10) days of either Triggering Event,
provide written notice, first class postage pre-paid to each holder of record
of the Series C Preferred Stock to be converted, at his post office address
last shown on the records of the Company, of the conversion (the "Conversion
Notice"). The Conversion Notice shall state:
(i) That all of the holder's outstanding shares of
Series C Preferred Stock were converted;
(ii) The number of shares of Series C Preferred
Stock held by the holder that were converted;
(iii) The effective date of the Conversion (the
"Conversion Date") and the number of shares of Common Stock which the holder
will receive; and
(iv) That the holder is to surrender to the
Company, in the manner and at the place designated, his certificate or
certificates representing the shares of Series C Preferred Stock converted.
Thereafter, each holder of Series C Preferred Stock to be
converted shall surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated in the
Conversion Notice, and thereupon the requisite number of shares of Common
Stock shall be issued in the name of the person whose name appears on the
surrendered certificate or certificates as the owner thereof; and each
surrendered certificate shall be canceled and retired. Notwithstanding that
the certificates evidencing any of the shares of Series C Preferred Stock
shall not have been surrendered, all rights with respect to such shares shall
forthwith after the Conversion Date, terminate, except only the right of the
holders to receive the appropriate number of shares of Common Stock upon
surrender of their certificate or certificates therefor.
(d) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the Original Issue Date
for a series of the Series C Preferred Stock effect a subdivision of the
outstanding Common Stock, the Conversion Value then in effect immediately
before that subdivision shall be proportionately decreased, and conversely, if
the Company shall at any time or from time to time after the Original Issue
Date for a series of the Series C Preferred Stock combine the outstanding
shares of Common Stock, the Conversion Value then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Article IV, Section 3C7(d) shall become effective at the close of business on
the date the subdivision or combination becomes effective.
(e) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the Series
C Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for elsewhere in this Article IV,
Section 3C7), then and in each such event the holder of each share of Series C
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock into which such shares of
Series C Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further
adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations or Sales of
Asset. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification, or exchange of shares provided for elsewhere in this Article
IV, Section 3C7) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the Company's
assets to any other person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the holders of the
Series C Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series C Preferred Stock, the number of shares of stock or
other securities or property of the Company, or of the successor corporation
resulting form such merger or consolidation or sale, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Article IV, Section 3C7 with respect to the rights of the holders of the
Series C Preferred Stock after the reorganization, merger, consolidation, or
sale to the end that the provisions of this Article IV, Section 3C7 (including
adjustment of the Conversion Value then in effect and the number of shares
purchasable upon conversion of the Series C Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) Definition. The term "Additional Shares of Common
Stock" as used herein shall mean all shares of Common Stock issued or deemed
issued (including a right or option to purchase Common Stock, or shares of
stock or an obligation convertible into Common Stock) by the Company after the
Original Issue Date for a series of Series C Preferred Stock, whether or not
subsequently reacquired or retired by the Company, other than (x) shares of
Common Stock, and (y) shares or other securities issued to employees,
officers, directors, consultants or other persons performing services for the
Company pursuant to any stock offering, option, plan, or arrangement approved
by the Board of Directors of the Company.
(h) Notices of Record Date. In the event of (i) any
taking by the Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution or (ii) any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of
the assets of the Company to any other corporation, entity, or person, or any
voluntary or involuntary dissolution, liquidation, or winding up of the
Company, the Company shall mail to each holder of Series C Preferred Stock at
least 30 days prior to the record date specified therein, a notice specifying
(A) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution
(B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding up is expected to
become effective, and (C) the time, if any is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation, or winding up.
(i) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series C Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Company shall pay cash equal to the product of such fraction multiplied by the
fair market value of one share of the Company's Common Stock on the date of
conversion, as determined in good faith by the Board.
(j) Notices. Any notice required by the provisions of
this Article IV, Section 3C7 to be given to the holder of shares of the Series
C Preferred Stock shall be deemed given when personally delivered to such
holder or five (5) business days after the same has been deposited in the
United States mail, certified or registered mail, return receipt requested,
postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Company.
(k) Payment of Taxes. The Company will pay all taxes and
other governmental charges that may be imposed in respect of the issue or
delivery of shares of Common Stock upon conversion of shares of Series C
Preferred Stock.
(l) No Dilution or Impairment. The Company shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series C Preferred Stock against dilution or other impairment.
8. No Preemptive Rights. No holder of the Series C Preferred
Stock of the Company shall be entitled, as of right, to purchase or subscribe
for any part of the unissued stock of the Company or of any stock of the
Company to be issued by reason of any increase of the authorized capital stock
of the Company, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the Company or to
purchase or subscribe for any stock of the Company purchased by the Company or
by its nominee or nominees, or to have any other preemptive rights now or
hereafter defined by the laws of the State of Delaware.
9. No Reissuance of Series C Preferred Stock. No share or
shares of Series C Preferred Stock acquired by the Company by reason of
purchase, conversion, or otherwise shall be reissued and all such shares shall
be canceled, retired, and eliminated from the shares which the Company shall
be authorized to issue.
D. Rights, Preferences and Restrictions of Series D Preferred
Stock.
1. Designation and Rank. The designation of such series of
the Preferred Stock shall be the Series D Convertible Preferred Stock, par
value $.01 per share (the "Series D Preferred Stock"). The maximum number of
shares of Series D Preferred Stock shall be twelve thousand (12,000) shares.
The Series D Preferred Stock shall have a liquidation preference of $1,000 per
share. The Series D Preferred Stock shall rank (i) prior to the common stock,
par value $.001 per share (the "Common Stock"), and to all other classes and
series of equity securities of the Company which by its terms does not rank
senior to the Series D Preferred Stock ("Junior Stock") and (ii) on parity
with the Series A, Series B and Series C Preferred Stock issued by SkyLynx
Communications, Inc., a Colorado corporation ("SCI-Colorado"), and exchanged
for identical shares of the Company, and any other class and series of equity
securities which by its terms shall rank on parity with the Series D Preferred
Stock. The Series D Preferred Stock shall be subordinate to and rank junior
to all indebtedness of the Company now or hereafter outstanding.
2. Dividends.
(a) Payment of Dividends. The holders of record of the
shares of Series D Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as declared by the
Board of Directors, dividends at the rate of five percent (5%) of the Stated
Liquidation Preference (as defined below) per share per annum (the "Dividend
Payment"), and no more, payable, at the option of the holders of the shares of
Series D Preferred Stock, in (i) shares of Common Stock equal to the quotient
of (a) the Dividend Payment divided by (b) the Conversion Price (as defined in
Article IV, Section 3D5(d) below) on the trading day preceding the date the
dividend is to be paid, or (ii) cash. In the case of shares of Series D
Preferred Stock outstanding for less than a full year after the date
originally issued by SCI-Colorado, dividends shall be pro rated based on the
portion of each year during which such shares are outstanding. Such dividends
on the Series D Preferred Stock shall be cumulative and shall accrue and be
payable only at conversion of the Series D Preferred Stock into shares of
Common Stock or upon redemption of the Series D Preferred Stock. Such
dividends on the Series D Preferred Stock are prior and in preference to any
declaration or payment of any distribution (as defined below) on any
outstanding shares of Common Stock or any other equity securities of the
Company ranking junior to the Series D Preferred Stock as to the payment of
dividends. Such dividends shall accrue on each share of Series D Preferred
Stock from day to day from the date of initial issuance thereof by SCI-
Colorado whether or not earned or declared so that if such dividends with
respect to any previous dividend period at the rate provided for herein have
not been paid on, or declared and set apart for, all shares of Series D
Preferred Stock at the time outstanding, the deficiency shall be fully paid
on, declared and set apart for, such shares on a pro rata basis with all other
equity securities of the Company ranking on a parity with the Series D
Preferred Stock as to the payment of dividends before any distribution shall
be paid on, or declared and set apart for Common Stock or any other equity
securities of the Company ranking junior to the Series D Preferred Stock as to
the payment of dividends.
(b) So long as any shares of Series D Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment any
dividend or make any distribution on any Junior Stock (other than dividends or
distributions payable in additional shares of Junior Stock), unless at the
time of such dividend or distribution the Company shall have paid, or set
apart for payment, all accrued and unpaid dividends on the outstanding shares
of Series D Preferred Stock.
(c) In the event of a dissolution, liquidation or winding
up of the Company pursuant to Article IV, Section 3D4, all accrued and unpaid
dividends on the Series D Preferred Stock shall be payable on the day
immediately preceding the date of payment of the preferential amount to the
holders of Series D Preferred Stock. In the event of (i) a mandatory
redemption pursuant to Article IV, Section 3D9 or (ii) a redemption at the
election of the Company pursuant to Article IV, Section 3D8, all accrued and
unpaid dividends on the Series D Preferred Stock shall be payable on the day
immediately preceding the date of such redemption. In the event of a
voluntary conversion pursuant to Article IV, Section 3D5(a), all accrued and
unpaid dividends on the Series D Preferred Stock being converted shall be
payable on the day immediately preceding the Voluntary Conversion Date (as
defined in Article IV, Section 3D5(b)(i)) and in the event of a mandatory
conversion pursuant to Article IV, Section 3D5(c), all accrued and unpaid
dividends on the Series D Preferred Stock being converted shall be payable on
the day immediately preceding the Mandatory Conversion Date (as defined in
Article IV, Section 3D5(c)(ii)).
(d) For purposes hereof, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of the Company (other than redemptions set
forth in Article IV, Section 3D8 below or repurchases of Common Stock held by
employees or consultants of the Company upon termination of their employment
or services pursuant to agreements providing for such repurchase) for cash or
property.
3. Voting Rights.
(a) Class Voting Rights. The Series D Preferred Stock
shall have the following class voting rights (in addition to the voting rights
set forth in Article IV, Section 3D3(b) hereof). So long as any shares of the
Series D Preferred Stock remain outstanding, the Company shall not, without
the affirmative vote or consent of the holders of at least three-quarters
(3/4) of the shares of the Series D Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting, in which the
holders of the Series D Preferred Stock vote separately as class: (i)
authorize, create, issue or increase the authorized or issued amount of any
class or series of stock, including but not limited to the issuance of any
more shares of previously authorized Common Stock or Preferred Stock, ranking
prior to the Series D Preferred Stock, with respect to the distribution of
assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal
the provisions of the Series D Preferred Stock, whether by merger,
consolidation or otherwise, so as to adversely affect any right, preference,
privilege or voting power of the Series D Preferred Stock; provided, however,
that any creation and issuance of another series of Junior Stock shall not be
deemed to adversely affect such rights, preferences, privileges or voting
powers; (iii) repurchase, redeem or pay dividends on, shares of the Company's
Junior Stock; (iv) amend the Certificate of Incorporation or Bylaws of the
Company so as to affect materially and adversely any right, preference,
privilege or voting power of the Series D Preferred Stock; provided, however,
that any creation and issuance of another series of Junior Stock shall not be
deemed to materially and adversely affect such rights, preferences privileges
or voting powers; (v) effect any distribution with respect to Junior Stock; or
(vi) reclassify the Company's outstanding securities.
(b) General Voting Rights. Except with respect to
transactions upon which the Series D Preferred Stock shall be entitled to vote
separately as a class pursuant to Section 3(a) above and except as otherwise
required by Delaware law, the Series D Preferred Stock shall have no voting
rights. The Common Stock into which the Series D Preferred Stock is
convertible shall, upon issuance, have all of the same voting rights as other
issued and outstanding Common Stock of the Company.
4. Liquidation Preference.
(a) In the event of the liquidation, dissolution or
winding up of the affairs of the Company, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of
the Company, the holders of shares of the Series D Preferred Stock then
outstanding shall be entitled to receive, out of the assets of the Company
whether such assets are capital or surplus of any nature, an amount equal to
$1,000 per share (the "Liquidation Preference Amount") of the Series D
Preferred Stock plus any accrued and unpaid dividends before any payment shall
be made or any assets distributed to the holders of the Common Stock or any
other Junior Stock. If the assets of the Company are not sufficient to pay in
full the Liquidation Preference Amount plus any accrued and unpaid dividends
payable to the holders of outstanding shares of the Series D Preferred Stock
and any series of Preferred Stock or any other class of stock on a parity, as
to rights on liquidation, dissolution or winding up, with the Series D
Preferred Stock, then all of said assets will be distributed among the holders
of the Series D Preferred Stock and the other classes of stock on a parity
with the Series D Preferred Stock, if any, ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. The liquidation payment with respect to each
outstanding fractional share of Series D Preferred Stock shall be equal to a
ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series D Preferred Stock. All payments for which this
Article IV, Section 3D4(a) provides shall be in cash, property (valued at its
fair market value as determined by the Company's independent, outside
accountant) or a combination thereof; provided, however, that no cash shall be
paid to holders of Junior Stock unless each holder of the outstanding shares
of Series D Preferred Stock has been paid in cash the full Liquidation
Preference Amount plus any accrued and unpaid dividends to which such holder
is entitled as provided herein. After payment of the full Liquidation
Preference Amount plus any accrued and unpaid dividends to which each holder
is entitled, such holders of shares of Series D Preferred Stock will not be
entitled to any further participation as such in any distribution of the
assets of the Company.
(b) A consolidation or merger of the Company with or into
any other corporation or corporations, or a sale of all or substantially all
of the assets of the Company, or the effectuation by the Company of a
transaction or series of transactions in which more than 50% of the voting
shares of the Company is disposed of or conveyed, shall not be deemed to be a
liquidation, dissolution, or winding up within the meaning of this Article IV,
Section 3D4. In the event of the merger or consolidation of the Company with
or into another corporation, the Series D Preferred Stock shall maintain its
relative powers, designations and preferences provided for herein and no
merger shall result inconsistent therewith.
(c) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, stating
a payment date and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than 45 days prior to the
payment date stated therein, to the holders of record of the Series D
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
5. Conversion. The holder of Series D Preferred Stock shall
have the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. At any time on or after the
Closing Date (as such term is defined in the Series D Preferred Stock Purchase
Agreement dated as of April 16, 1999 between the SCI-Colorado and the initial
holder of the Series D Preferred Stock (the "Securities Purchase Agreement")),
the holder of any such shares of Series D Preferred Stock may, at such
holder's option, subject to the limitations set forth in Article IV, Section
3D7 herein, elect to convert (a "Voluntary Conversion") all or any portion of
the shares of Series D Preferred Stock held by such person into a number of
fully paid and nonassessable shares of Common Stock (the "Conversion Rate")
equal to the quotient of (i) the Liquidation Preference Amount or the shares
of Series D Preferred Stock being converted divided by (ii) the Conversion
Price (as defined in Article IV, Section 3D5(d) below) then in effect as of
the date of the delivery by such holder of its notice of election to convert.
(b) Mechanics of Voluntary Conversion. The Voluntary
Conversion of Series D Preferred Stock shall be conducted in the following
manner:
(i) Holder's Delivery Requirements. To convert
Series D Preferred Stock into full shares of Common Stock on any date (the
"Voluntary Conversion Date"), the holder thereof shall (A) transmit by
facsimile (or otherwise delivering), for receipt on or prior to 11:59 p.m.,
New York Time on such date, a copy of a fully executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice"), to the
Company, and (B) surrender to a common carrier for delivery to the Company as
soon as practicable following such date, the original certificates
representing the shares of Series D Preferred Stock being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificates") and the
originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the Company
of a facsimile copy of a Conversion Notice, the Company shall immediately
send, via facsimile, a confirmation of receipt of such Conversion Notice to
such holder. Upon receipt by the Company of the Preferred Stock Certificates
to be converted pursuant to a Conversion Notice, together with the originally
executed Conversion Notice, the Company or its designated transfer agent (the
"Transfer Agent") (as applicable) shall, on the next business day following
the date of receipt by the Company of both (or the second business day
following the date of receipt by the Company of both if received after 11:00
a.m. New York Time), (A) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Conversion Notice, a certificate,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled, or (B) credit such
aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder's or its designee's balance account with American
Securities Transfer & Trust, Inc. If the number of shares of Preferred Stock
represented by the Preferred Stock Certificate(s) submitted for conversion is
greater than the number of shares of Series D Preferred Stock being converted,
then the Company shall, as soon as practicable and in no event later than two
business days after receipt of the Preferred Stock Certificate(s) and at its
own expense, issue and deliver to the holder a new Preferred Stock Certificate
representing the number of shares of Series D Preferred Stock not converted.
(iii) Dispute Resolution. In the case of a
dispute as to the determination of the Average Share Prices (as defined in
Article IV, Section 3D5(d) below) or the Conversion Price or the arithmetic
calculation of the number of shares of Common Stock to be issued upon
conversion, the Company shall promptly issue to the holder the number of
shares of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile as soon
as possible, but in no event later than two (2) business days after receipt of
such holder's Conversion Notice. If such holder and the Company are unable to
agree upon the determination of the Average Share Prices or the Conversion
Price or the arithmetic calculation of the number of shares of Common Stock to
be issued upon such conversion within one (1) business day of such disputed
determination or arithmetic calculation being submitted to the holder, then
the Company shall within one (1) business day submit via facsimile (A) the
disputed determination of the Average Share Prices or the Conversion Price to
an independent, reputable investment bank or (B) the disputed arithmetic
calculation of the number of shares of Common Stock to be issued upon such
conversion to its independent, outside accountant. The Company shall cause
the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than seventy-two (72) hours from the time it receives the
disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be
binding upon all parties absent manifest error. The reasonable expenses of
such investment bank or accountant in making such determination shall be paid
by the Company, in the event the holder's calculation or determination was
correct, or by the holder, in the event the Company's calculation or
determination was correct, or equally by the Company and the holder in the
event that neither the Company's or the holder's calculation or determination
was correct. The period of time in which the Company is required to effect
conversions or redemptions under this Article IV, Section 3D shall be tolled
with respect to the subject conversion or redemption pending resolution of any
dispute by the Company made in good faith and in accordance with this Article
IV, Section 3D5(b)(iii).
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of the Series
D Preferred Stock shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If within
five (5) business days of the Company's receipt of the Preferred Stock
Certificates to be converted and the Conversion Notice (the "Share Delivery
Period") the Company shall fail to issue a certificate to a holder or credit
the holder's balance account with American Securities Transfer & Trust, Inc.
for the number of shares of Common Stock to which such holder is entitled upon
such holder's conversion of the Series D Preferred Stock or to issue a new
Preferred Stock Certificate representing the number of shares of Series D
Preferred Stock to which such holder is entitled pursuant to Article IV,
Section 3D5(b)(ii) (a "Conversion Failure"), in addition to all other
available remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification pursuant to Article
VIII thereof), the Company shall pay additional damages to such holder on each
date after such fifth (5th) business day that such conversion is not timely
effected in an amount equal 1% of the product of (A) the sum of the number of
shares of Common Stock not issued to the holder on a timely basis pursuant to
Article IV, Section 3D5(b)(ii) and to which such holder is entitled and, in
the event the Company has failed to deliver a Preferred Stock Certificate to
the holder on a timely basis pursuant to Article IV, Section 3D5(b)(ii), the
number of shares of Common Stock issuable upon conversion of the shares of
Series D Preferred Stock represented by such Preferred Stock Certificate, as
of the last possible date which the Company could have issued such Preferred
Stock Certificate to such holder without violating Article IV, Section
3D5(b)(ii) and (B) the Closing Bid Price (as defined in Article IV, Section
3D5(d) below) of the Common Stock on the last possible date which the Company
could have issued such Common Stock and such Preferred Stock Certificate, as
the case may be, to such holder without violating Article IV, Section
3D5(b)(ii) and the holder may after any time after such Share Delivery Period
send the Company a notice of revocation of conversion (the "Revocation
Notice") revoking such holder's Conversion Notice (and requesting a return of
the applicable Preferred Share Stock Certificates) by (A) transmitting by
facsimile (or otherwise delivering), for receipt on or prior to 11:59 p.m.,
New York Time on such date, a copy of an executed Revocation Notice and (B)
sending by a common carrier for delivery to the Company as soon as practicable
following such date, the originally executed Revocation Notice. If the holder
has delivered a Revocation Notice to the Company, then the Company's
obligation to pay additional damages to such holder (in accordance with the
preceding sentence) shall terminate. If the Company fails to pay the
additional damages set forth in this Article IV, Section 3D5(b)(v) within five
(5) business days of the date incurred, then such payment shall bear interest
at the rate of 2% per month (pro rated for partial months) until such payments
are made.
(c) Mandatory Conversion.
(i) Each share of Series D Preferred Stock
outstanding on the Mandatory Conversion Date (as defined below) shall,
automatically and without any action on the part of the holder thereof,
convert into a number of fully paid and nonassessable shares of Common Stock
equal to the quotient of (i) the Liquidation Preference Amount of the shares
of Series D Preferred Stock outstanding on the Mandatory Conversion Date
divided by (ii) the Conversion Price (as defined below) in effect on the
Mandatory Conversion Date.
(ii) As used herein, a "Mandatory Conversion Date"
shall be the date which is three years after the date of issuance of the
shares of Series D Preferred Stock by SCI-Colorado (the "Issuance Date"),
provided that the Mandatory Conversion Date shall be extended for any shares
of Series D Preferred Stock (x) for as long as the conversion of such shares
of Series D Preferred Stock would violate Article IV, Section 3D7 and (y)
pursuant to Article IV, Section 3D3(n) of the Registration Rights Agreement
dated as of April 16, 1999 by and among SCI-Colorado and the initial holders
named therein (the "Registration Rights Agreement"), which extension shall be
one day for each of the days in any Blackout Period (as defined in Article IV,
Section 3D3(n) of the Registration Rights Agreement). The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred to
in this Article IV, Section 3D as the "Conversion Date."
(iii) On the Mandatory Conversion Date, the
outstanding shares of Series D Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the Preferred Stock Certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Series D Preferred
Stock unless the Preferred Stock Certificates evidencing such shares of Series
D Preferred Stock are either delivered to the Company or the holder notifies
the Company that such Preferred Stock Certificates have been lost, stolen, or
destroyed, and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. Upon the
occurrence of the automatic conversion of the Series D Preferred Stock
pursuant to this Article IV, Section 3D5, the holders of the Series D
Preferred Stock shall surrender the Preferred Stock Certificates representing
the Series D Preferred Stock for which the Mandatory Conversion Date has
occurred to the Company and the Company shall deliver the shares of Common
Stock issuable upon such conversion (in the same manner set forth in Article
IV, Section 3D5(b)(ii)) to the holder within three business days of the
holder's delivery of the applicable Preferred Stock Certificates.
(d) Conversion Price.
(i) The term "Five Day Average Share Price" shall
mean the average of the five (5) Closing Bid Prices of the Company's shares of
Common Stock (as reported by Bloomberg Financial Markets ("Bloomberg")) in the
OTC Bulletin Board for such security (or on such other United States stock
exchange or public trading market ("Alternative Exchange") on which the shares
of the Company trade if, at the time of the conversion, they are not trading
in the OTC Bulletin Board), preceding the Voluntary Conversion Date or
Mandatory Conversion Date, as applicable.
(ii) The term "Conversion Price" shall mean, with
respect to any conversion of Series D Preferred Stock converted prior to
December 31, 1999, $3.00, except that if a Registration Violation has occurred
and/or the Conversion Date occurs after December 31, 1999, then the
"Conversion Price" shall be equal to the lesser of (x) $3.00 and (y) an amount
equal to 105% of the Five Day Average Share Price, as applicable; provided,
however, that if (i) the Company has filed a Registration Statement (as
defined below in Article IV, Section 3D5(d)(iv)) which has been declared
effective by the Securities and Exchange Commission (the "Commission"), (ii)
the Company has filed a registration statement on Form S-1 registering shares
of Common Stock (a "Form S-1") in an underwritten public offering which has
been declared effective by the Commission and (iii) the Closing Bid Price of
the Common Stock has been at least $8.00 per share for a period of ten (10)
consecutive trading days with such period commencing at any time after the
ninetieth (90th) day after which the Form S-1 has been declared effective by
the Commission, then the "Conversion Price" shall be $3.00.
(iii) The term "Closing Bid Price" shall mean,
for any security as of any trading day, the last closing bid price of such
security in the OTC Bulletin Board for such security as reported by Bloomberg,
or, if no closing bid price is reported for such security by Bloomberg, the
last closing trade price of such security as reported by Bloomberg, or, if no
last closing trade price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing
Bid Price cannot be calculated for such security on such date on any of the
foregoing basis, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the holders of
a majority of the outstanding shares of Series D Preferred Stock. If the
Company and the holders of Series D Preferred Stock are unable to agree upon
the fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Article IV, Section 3D5(b)(iii) above with the term "Closing Bid
Price" being substituted for the term "Average Share Prices." (All such
determinations to be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period).
(iv) The term "Registration Violation" shall mean the
failure of the Company to (A) prepare and file with the Commission on or prior
to the Filing Date a Registration Statement pursuant to the terms and
conditions of the Registration Rights Agreement, (B) use its best efforts to
cause the Registration Statement to be declared effective under the Commission
as promptly as possible after the filing thereof, but in any event prior to
the Effective Date and (C) otherwise violate the terms and conditions of the
Registration Rights Agreement. All capitalized terms in this Article IV,
Section 3D5(d)(iv) shall have the meanings assigned to them in the
Registration Rights Agreement.
(e) Adjustments of Conversion Price.
(i) Adjustments for Stock Splits and Combinations.
If the Company shall at any time or from time to time after the Issuance Date,
effect a stock split of the outstanding Common Stock, the applicable
Conversion Price in effect immediately prior to the stock split shall be
proportionately decreased. If the Company shall at any time or from time to
time after the Issuance Date, combine the outstanding shares of Common Stock,
the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased. Any adjustments under this Article IV,
Section 3D5(e)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii) Adjustments for Certain Dividends and
Distributions. If the Company shall at any time or from time to time after
the Issuance Date, make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the applicable
Conversion Price in effect immediately prior to such event shall be decreased
as of the time of such issuance or, in the event such record date shall have
been fixed, as of the close of business on such record date, by multiplying,
as applicable, the applicable Conversion Price then in effect by a fraction:
(A) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date; and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution.
(iii) Adjustment for Other Dividends and
Distributions. If the Company shall at any time or from time to time after
the Issuance Date, make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in other than shares of Common Stock, then, and in each event, an
appropriate revision to the applicable Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise)
so that the holders of Series D Preferred Stock shall receive upon conversions
thereof, in addition to the number of shares of Common Stock receivable
thereon, the number of securities of the Company which they would have
received had their Series D Preferred Stock been converted into Common Stock
on the date of such event and had thereafter, during the period from the date
of such event to and including the Conversion Date, retained such securities
(together with any distributions payable thereon during such period), giving
application to all adjustments called for during such period under this
Article IV, Section 3D5(e)(iii) with respect to the rights of the holders or
the Series D Preferred Stock.
(iv) Adjustments for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon conversion of the Series D
Preferred Stock at any time or from time to time after the Issuance Date shall
be changed to the same or different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock
dividends provided for in Article IV, Section 3D5(e)(i), (ii) and (iii), or a
reorganization, merger, consolidation, or sale of assets provided for in
Article IV, Section 3D5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made
(by adjustments of the Conversion Price or otherwise) so that the holder of
each share of Series D Preferred Stock shall have the right thereafter to
convert such share of Series D Preferred Stock into the kind and amount of
shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which such share of Series D Preferred Stock might have been
converted immediately prior to such reclassification, exchange, substitution
or other change, all subject to further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger,
Consolidation or Sales of Assets. If at any time or from time to time after
the Issuance Date there shall be a capital reorganization of the Company
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Article IV, Section 3D5(e)(i), (ii)
and (iii), or a reclassification, exchange or substitution of shares provided
for in Article IV, Section 3D5(e)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person (an ''Organic
Change"), then as a part of such Organic Change an appropriate revision to the
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the holder of each share of Series
D Preferred Stock shall have the right thereafter to convert such share of
Series D Preferred Stock into the kind and amount of shares of stock and other
securities or property of the Company or any successor corporation resulting
from Organic Change. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Article IV, Section 3D5(e)(v)
with respect to the rights of the holders of the Series D Preferred Stock
after the Organic Change to the end that the provisions of this Article IV,
Section 3D5(e)(v) (including any adjustment in the applicable Conversion Price
then in effect and the number of shares of stock or other securities
deliverable upon conversion of the Series D Preferred Stock) shall be applied
after that event in as nearly an equivalent manner as may be practicable.
(vi) Consideration for Stock. In case any shares of
Common Stock or any securities convertible into or exchangeable for, directly
or indirectly, Common Stock (''Convertible Securities"), other than the Series
D Preferred Stock, or any rights or warrants or options to purchase any such
Common Stock or Convertible Securities, shall be issued or sold:
(A) in connection with any merger or
consolidation in which the Company is the surviving corporation (other than
any consolidation or merger in which the previously outstanding shares of
Common Stock of the Company shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration
therefore shall be, deemed to be the fair value, as determined reasonably and
in good faith by the Board of Directors of the Company, of such portion of the
assets and business of the nonsurviving corporation as such Board may
determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be; or
(B) in the event of any consolidation or merger
of the Company in which the Company is not the surviving corporation or in
which the previously outstanding shares of Common Stock of the Company shall
be changed into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of shares of its Common Stock
for stock or securities or other property of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was
predicated, and for a consideration equal to the fair market value on the date
of such transaction of all such stock or securities or other property of the
other corporation. If any such calculation results in adjustment of the
applicable Conversion Price, or the number of shares of Common Stock issuable
upon conversion of the Series D Preferred Stock, the determination of the
applicable Conversion Price or the number of shares of Common Stock issuable
upon conversion of the Series D Preferred Stock immediately prior to such
merger, consolidation or sale, shall be made after giving effect to such
adjustment of the number of shares of Common Stock issuable upon conversion of
the Series D Preferred Stock.
(vii) Record Date. In case the Company shall
take record of the holders of its Common Stock or any other Preferred Stock
for the purpose of entitling them to subscribe for or purchase Common Stock or
Convertible Securities, then the date of the issue or sale of the shares of
Common Stock shall be deemed to be such record date.
(viii) Certain Issues Excepted. Anything herein
to the contrary notwithstanding, the Company shall not be required to make any
adjustment of the number of shares of Common Stock issuable upon conversion of
the Series D Preferred Stock upon the grant after the Issuance Date of, or the
exercise after the Issuance Date of, options or warrants or rights to purchase
stock under the Company's stock option plan.
(f) No Impairment. The Company shall not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith, assist in the carrying out of all the
provisions of this Article IV, Section 3D5 and in the taking of all such
action as may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series D Preferred Stock against impairment.
(g) Certificates as to Adjustments. Upon occurrence of
each adjustment or readjustment of the Conversion Price or number of shares of
Common Stock issuable upon conversion of the Series D Preferred Stock pursuant
to this Article IV, Section 3D5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and furnish to each holder of such Series D Preferred Stock a certificate
setting forth such adjustment and readjustment, showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon
written request of the holder of such affected Series D Preferred Stock, at
any time, furnish or cause to be furnished to such holder a like certificate
setting forth such adjustments and readjustments, the applicable Conversion
Price in effect at the time, and the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon the conversion of a share of such Series D Preferred Stock.
Notwithstanding the foregoing, the Company shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or decrease of
at least one percent of such adjusted amount.
(h) Issue Taxes. The Company shall pay any and all issue
and other taxes, excluding federal, state or local income taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series D Preferred Stock pursuant thereto; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any
such conversion.
(i) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or by facsimile or three business days following being mailed by
certified or registered mail, postage prepaid, return-receipt requested,
addressed to the holder of record at its address appearing on the books of the
Company. The Company will give written notice to each holder of Series D
Preferred Stock at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-
up and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Company will also give
written notice to each holder of Series D Preferred Stock at least twenty (20)
days prior to the date on which any Organic Change, dissolution, liquidation
or winding-up will take place and in no event shall such notice be provided to
such holder prior to such information being made known to the public.
(j) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of the Series D Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to the product of such fraction multiplied by
the average of the Closing Bid Prices of the Common Stock for the five
consecutive trading days immediately preceding on the Voluntary Conversion
Date or Mandatory Conversion Date, as applicable.
(k) Reservation of Common Stock. The Company shall, so
long as any shares of Series D Preferred Stock are outstanding, reserve and
keep available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series D Preferred Stock, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series D Preferred Stock then outstanding;
provided that the number of shares of Common Stock so reserved shall at no
time be less than 200% of the number of shares of Common Stock for which the
shares of Series D Preferred Stock are at any time convertible. The initial
number of shares of Common Stock reserved for conversions of the Series D
Preferred Stock and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Series D Preferred Stock based on
the number of shares of Series D Preferred Stock held by each holder at the
time of issuance of the Series D Preferred Stock or increase in the number of
reserved shares, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder's shares of Series D Preferred Stock,
each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any shares of Series D Preferred Stock shall be allocated to the
remaining holders of Series D Preferred Stock, pro rata based on the number of
shares of Series D Preferred Stock then held by such holder. The Company
shall, from time to time in accordance with the GCL, as amended, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Company's
obligations under this Article IV, Section 3D5(k).
(l) Retirement of Series D Preferred Stock. Conversion
of Series D Preferred Stock shall be deemed to have been effected on the
applicable Voluntary Conversion Date or Mandatory Conversion Date. Upon
conversion of only a portion of the number of shares of Series D Preferred
Stock represented by a certificate surrendered for conversion, the Company
shall issue and deliver to such holder at the expense of the Company, a new
certificate covering the number of shares of Series D Preferred Stock
representing the unconverted portion of the certificate so surrendered as
required by Article IV, Section 3D 5(b)(ii).
(m) Regulatory Compliance. If any shares of Common Stock
to be reserved for the purpose of conversion of Series D Preferred Stock
require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Company shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
6. No Preemptive Rights. Except as provided in Article IV,
Section 3D5 hereof and in the Securities Purchase Agreement, no holder of the
Series D Preferred Stock shall be entitled to rights to subscribe for,
purchase or receive any part of any new or additional shares of any class,
whether now or hereinafter authorized, or of bonds or debentures, or other
evidences of indebtedness convertible into or exchangeable for shares of any
class, but all such new or additional shares of any class, or any bond,
debentures or other evidences of indebtedness convertible into or exchangeable
for shares, may be issued and disposed of by the Board on such terms and for
such consideration (to the extent permitted by law), and to such person or
persons as the Board in their absolute discretion may deem advisable.
7. Conversion Restrictions. Notwithstanding anything to the
contrary set forth in Article IV, Section 3D5 of this Article IV, Section 3D,
in no event shall any holder be entitled to convert Series D Preferred Stock
in excess of that number of shares of Series D Preferred Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares
of Common Stock beneficially owned by the holder and its affiliates to exceed
4.99% of the outstanding shares of the Common Stock following such conversion.
For purposes of the foregoing proviso, the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of the shares of
Series D Preferred Stock with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) conversion of the remaining, nonconverted
shares of Series D Preferred Stock beneficially owned by the holder and its
affiliates, and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without limitation,
any warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the holder and its
affiliates. Except as set forth in the preceding sentence, for purposes of
this Article IV, Section 3D2(a), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended.
8. Redemption. If at any time after the one year anniversary
of the Issuance Date, the Company's Common Stock is trading for less than
$3.00 per share, the Company may redeem all or a portion of the Series D
Preferred Stock outstanding upon 30 days prior written notice (the "Company's
Redemption Notice") at a price per share of Series D Preferred Stock equal to
120% of the Liquidation Preference, plus any accrued but unpaid dividends (the
"Company's Redemption Price"); provided, that if a holder has delivered a
Conversion Notice to the Company or delivers a Conversion Notice within 30
days of receipt of the Company's Redemption Notice, the shares of Series D
Preferred Stock designated to be converted may not be redeemed by the Company.
The Company's Redemption Notice shall state the date of redemption (the
"Redemption Date"), the Company's Redemption Price and the number of shares to
be redeemed by the Company. The Company shall deliver the Company's
Redemption Price to the holder(s) within five (5) business days after the
Company has delivered the Company's Redemption Notice. If the Company fails
to pay the Redemption Price by the trading day following the Redemption Date,
the redemption will be declared null and void and the Company shall lose its
right to serve a Company's Redemption Notice in the future.
9. Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If,
upon the Company's receipt of a Conversion Notice or on the Mandatory
Conversion Date, the Company cannot issue shares of Common Stock registered
for resale under the Registration Statement for any reason, including, without
limitation, because the Company (x) does not have a sufficient number of
shares of Common Stock authorized and available, (y) is otherwise prohibited
by applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its Securities from issuing all of the Common
Stock which is to be issued to a holder of Series D Preferred Stock pursuant
to a Conversion Notice or (z) fails to have a sufficient number of shares of
Common Stock registered for resale under the Registration Statement, then the
Company shall issue as many shares of Common Stock as it is able to issue in
accordance with such holder's Conversion Notice and pursuant to Article IV,
Section 3D5(b)(ii) above and, with respect to the unconverted Series D
Preferred Stock, the holder, solely at such holder's option, can elect to:
(i) require the Company to redeem from such holder
those Series D Preferred Stock for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("Mandatory
Redemption") at a price per share equal to the Triggering Event Redemption
Price as of such Conversion Date (the "Mandatory Redemption Price");
(ii) if the Company's inability to fully convert
Series D Preferred Stock is pursuant to Article IV, Section 3D9(a)(z) above,
require the Company to issue restricted shares of Common Stock in accordance
with such holder's Conversion Notice and pursuant to Article IV, Section
3D5(b)(ii) above; and/or
(iii) void its Conversion Notice and retain or
have returned, as the case may be, the shares of Series D Preferred Stock that
were to be converted pursuant to such holder's Conversion Notice (provided
that a holder's voiding its Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of such
notice).
(b) Mechanics of Fulfilling Holder's Election. The
Company shall immediately send via facsimile to a holder of Series D Preferred
Stock, upon receipt of a facsimile copy of a Conversion Notice from such
holder which cannot be fully satisfied as described in Article IV, Section
3D9(a) above, a notice of the Company's inability to fully satisfy such
holder's Conversion Notice (the "Inability to Fully Convert Notice"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such holder's Conversion Notice, (ii) the
number of Series D Preferred Stock which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder shall notify the Company
of its election pursuant to Article IV, Section 3D9(a) above by delivering
written notice via facsimile to the Company ("Notice in Response to Inability
to Convert").
(c) Payment of Redemption Price. If such holder shall
elect to have its shares redeemed pursuant to Article IV, Section 3D9(a)(i)
above, the Company shall pay the Mandatory Redemption Price in cash to such
holder within thirty (30) days of the Company's receipt of the holder's Notice
in Response to Inability to Convert, provided that prior to the Company's
receipt of the holder's Notice in Response to Inability to Convert the Company
has not delivered a notice to such holder stating, to the satisfaction of the
holder, that the event or condition resulting in the Mandatory Redemption has
been cured and all Conversion Shares issuable to such holder can and will be
delivered to the holder in accordance with the terms of Article IV, Section
3D2(g). If the Company shall fail to pay the applicable Mandatory Redemption
Price to such holder on a timely basis as described in this Article IV,
Section 3D9(c) (other than pursuant to a dispute as to the determination of
the arithmetic calculation of the Redemption Price), in addition to any remedy
such holder of Series D Preferred Stock may have under this Article IV,
Section 3D and the Securities Purchase Agreement, such unpaid amount shall
bear interest at the rate of 2.0% per month (prorated for partial months)
until paid in full. Until the full Mandatory Redemption Price is paid in full
to such holder, such holder may (i) void the Mandatory Redemption with respect
to those Series D Preferred Stock for which the full Mandatory Redemption
Price has not been paid, (ii) receive back such Series D Preferred Stock, and
(iii) require that the Conversion Price of such returned Series D Preferred
Stock be adjusted to the lesser of (A) the Conversion Price as in effect on
the date on which the holder voided the Mandatory Redemption and (B) the
lowest Closing Bid Price during the period beginning on the Conversion Date
and ending on the date the holder voided the Mandatory Redemption.
Notwithstanding the foregoing, if the Company fails to pay the applicable
Mandatory Redemption Price within such thirty (30) days time period due to a
dispute as to the determination of the arithmetic calculation of the
Redemption Rate, such dispute shall be resolved pursuant to Article IV,
Section 3D5(b)(iii) above with the term "Redemption Price" being substituted
for the term "Conversion Price".
(d) Pro-Rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one holder of Series D
Preferred Stock on the same day and the Company can convert and redeem some,
but not all, of the Series D Preferred Stock pursuant to this Article IV,
Section 3D9, the Company shall convert and redeem from each holder of Series D
Preferred Stock electing to have Series D Preferred Stock converted and
redeemed at such time an amount equal to such holder's pro-rata amount (based
on the number shares of Series C Preferred Stock held by such holder relative
to the number shares of Series D Preferred Stock outstanding) of all shares of
Series D Preferred Stock being converted and redeemed at such time.
10. Vote to Change the Terms of or Issue Preferred Stock. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than three-fourths (3/4)
of the then outstanding shares of Series D Preferred Stock, shall be required
(a) for any change to this Article IV, Section 3D which would amend, alter,
change or repeal any of the powers, designations, preferences and rights of
the Series D Preferred Stock or (b) for the issuance of shares of Series D
Preferred Stock other than pursuant to the Securities Purchase Agreement.
11. Lost or Stolen Certificates. Upon receipt by the Company
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the shares of
Series D Preferred Stock, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the holder to the Company and, in the case
of mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
certificate(s) of like tenor and date; provided, however, the Company shall
not be obligated to re-issue Preferred Stock certificates if the holder
contemporaneously requests the Company to convert such shares of Series D
Preferred Stock into Common Stock.
12. Remedies, Characterizations, Other Obligations, Breaches
and Injunctive Relief. The remedies provided in this Article IV, Section 3D
shall be cumulative and in addition to all other remedies available under this
Article IV, Section 3D, at law or in equity (including, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit a holder's right to pursue actual
damages for any failure by the Company to comply with the terms of this
Article IV, Section 3D. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be
the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the holders of the
Series D Preferred Stock and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holders of the Series D Preferred Stock shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
13. Specific Shall Not Limit General; Construction. No
specific provision contained in this Article IV, Section 3D shall limit or
modify any more general provision contained herein. This Article IV, Section
3D shall be deemed to be jointly drafted by the Company and all initial
purchasers of the Series D Preferred Stock and shall not be construed against
any person as the drafter hereof.
14. Failure or Indulgence Not Waiver. No failure or delay on
the part of a holder of Series D Preferred Stock in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
E. Rights, Preferences and Restrictions of Series E Preferred
Stock.
1. Designation and Rank. The designation of such series of
the Preferred Stock shall be the Series E Convertible Preferred Stock, par
value $.01 per share (the "Series E Preferred Stock"). The maximum number of
shares of Series E Preferred Stock shall be three thousand (3,000) shares.
The Series E Preferred Stock shall have a liquidation preference of $1,000 per
share. The Series E Preferred Stock shall rank (i) prior to the common stock,
par value $.001 per share ("Common Stock"), and to all other classes and
series of equity securities of the Company which by their terms do not rank
senior to the Series E Preferred Stock ("Junior Stock") and (ii) on parity
with the Series A, Series B, Series C and Series D Preferred Stock issued by
SkyLynx Communications, Inc., a Colorado corporation ("SCI-Colorado") and
exchanged for identical shares of the Company, and any other class and series
of equity securities which by its terms shall rank on parity with the Series E
Preferred Stock. The Series E Preferred Stock shall be subordinate to and
rank junior to all indebtedness of the Company now or hereafter outstanding.
2. Dividends.
(a) Payment of Dividends. The holders of record of the
shares of Series E Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as declared by the
Board of Directors, dividends at the rate of five percent (5%) of the stated
Liquidation Preference (as defined below) per share per annum (the "Dividend
Payment"), and no more, payable, at the option of the holders of the shares of
Series E Preferred Stock, in (i) shares of Common Stock equal to the quotient
of (a) the Dividend Payment divided by (b) the Conversion Price (as defined in
Article IV, Section 3E5(d) below) on the trading day preceding the date the
dividend is to be paid, or (ii) cash. In the case of shares of Series E
Preferred Stock outstanding for less than a full year, dividends shall be pro
rated based on the portion of each year during which such shares are
outstanding. Such dividends on the Series E Preferred Stock shall be
cumulative and shall accrue and be payable only at conversion of the Series E
Preferred Stock into shares of Common Stock or upon redemption of the Series E
Preferred Stock. Such dividends on the Series E Preferred Stock are prior and
in preference to any declaration or payment of any distribution (as defined
below) on any outstanding shares of Common Stock or any other equity
securities of the Company ranking junior to the Series E Preferred Stock as to
the payment of dividends. Such dividends shall accrue on each share of Series
E Preferred Stock from day to day from the date of initial issuance thereof by
SCI-Colorado whether or not earned or declared. If such dividends with
respect to any previous dividend period at the rate provided for herein have
not been paid on, or declared and set apart for, all shares of Series E
Preferred Stock at the time outstanding, the deficiency shall be fully paid
on, or declared and set apart for, such shares on a pro rata basis with all
other equity securities of the Company ranking on a parity with the Series E
Preferred Stock as to the payment of dividends before any distribution shall
be paid on, or declared and set apart for Common Stock or any other equity
securities of the Company ranking junior to the Series E Preferred Stock as to
the payment of dividends.
(b) So long as any shares of Series E Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment any
dividend or make any distribution on any Junior Stock (other than dividends or
distributions payable in additional shares of Junior Stock), unless at the
time of such dividend or distribution the Company shall have paid, or set
apart for payment, all accrued and unpaid dividends on the outstanding shares
of Series E Preferred Stock.
(c) In the event of a dissolution, liquidation or winding
up of the Company pursuant to Article IV, Section 3E4, all accrued and unpaid
dividends on the Series E Preferred Stock shall be payable on the day
immediately preceding the date of payment of the preferential amount to the
holders of Series E Preferred Stock. In the event of (i) a mandatory
redemption pursuant to Article IV, Section 3E9 or (ii) a redemption at the
election of the Company pursuant to Article IV, Section 3E8, all accrued and
unpaid dividends on the Series E Preferred Stock shall be payable on the day
immediately preceding the date of such redemption. In the event of a
voluntary conversion pursuant to Article IV, Section 3E5(a), all accrued and
unpaid dividends on the Series E Preferred Stock being converted shall be
payable on the day immediately preceding the Voluntary Conversion Date (as
defined in Article IV, Section 3E5(b)(i)) and in the event of a mandatory
conversion pursuant to Article IV, Section 3E5(c), all accrued and unpaid
dividends on the Series E Preferred Stock being converted shall be payable on
the day immediately preceding the Mandatory Conversion Date (as defined in
Article IV, Section 3E5(c)(ii)).
(d) For purposes hereof, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of capital stock of the Company (other than
redemptions set forth in Section 8 below or repurchases of Common Stock held
by employees or consultants of the Company upon termination of their
employment or services pursuant to agreements providing for such repurchase)
for cash or property.
3. Voting Rights.
(a) Class Voting Rights. The Series E Preferred Stock
shall have the following class voting rights (in addition to the voting rights
set forth in Article IV, Section 3E3(b) hereof). So long as any shares of the
Series E Preferred Stock remain outstanding, the Company shall not, without
the affirmative vote or consent of the holders of at least three quarters
(3/4) of the shares of the Series E Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting, in which the
holders of the Series E Preferred Stock vote separately as class: (i)
authorize, create, issue or increase the authorized or issued amount of any
class or series of stock, including but not limited to the issuance of any
more shares of previously authorized Common Stock or any Preferred Stock
ranking prior to the Series E Preferred Stock, with respect to the
distribution of assets on liquidation, dissolution or winding up; (ii) amend,
alter or repeal the provisions of the Series E Preferred Stock, whether by
merger, consolidation or otherwise, so as to adversely affect any right,
preference, privilege or voting power of the Series E Preferred Stock;
provided, however, that any creation and issuance of another series of Junior
Stock shall not be deemed to adversely affect such rights, preferences,
privileges or voting powers; (iii) repurchase, redeem or pay dividends on,
shares of the Company's Junior Stock; (iv) amend the Certificate of
Incorporation or Bylaws of the Company so as to affect materially and
adversely any right, preference, privilege or voting power of the Series E
Preferred Stock; provided, however, that any creation and issuance of another
series of Junior Stock shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers; (v) effect any
distribution with respect to Junior Stock; or (vi) reclassify the Company's
outstanding securities.
(b) General Voting Rights. Except with respect to
transactions upon which the Series E Preferred Stock shall be entitled to vote
separately as a class pursuant to Article IV, Section 3E3(a) above and except
as otherwise required by Delaware law, the Series E Preferred Stock shall have
no voting rights. The Common Stock into which the Series E Preferred Stock is
convertible shall, upon issuance, have all of the same voting rights as other
issued and outstanding Common Stock.
4. Liquidation Preference.
(a) In the event of the liquidation, dissolution or
winding up of the affairs of the Company, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of
the Company, the holders of shares of the Series E Preferred Stock then
outstanding shall be entitled to receive, out of the assets of the Company
whether such assets are capital or surplus of any nature, an amount equal to
$1,000 per share (the "Liquidation Preference Amount") of the Series E
Preferred Stock plus any accrued and unpaid dividends before any payment shall
be made or any assets distributed to the holders of the Common Stock or any
other Junior Stock. If the assets of the Company are not sufficient to pay in
full the Liquidation Preference Amount plus any accrued and unpaid dividends
payable to the holders of outstanding shares of the Series E Preferred Stock
and any series of Preferred Stock or any other class of stock on a parity, as
to rights on liquidation, dissolution or winding up, with the Series E
Preferred Stock, then all of said assets will be distributed among the holders
of the Series E Preferred Stock and the other classes of stock on a parity
with the Series E Preferred Stock, if any, ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. The liquidation payment with respect to each
outstanding fractional share of Series E Preferred Stock shall be equal to a
ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series E Preferred Stock. All payments for which this
Article IV, Section 3E4(a) provides shall be in cash, property (valued at its
fair market value as determined by the Company's independent, outside
accountant) or a combination thereof; provided, however, that no cash shall be
paid to holders of Junior Stock unless each holder of the outstanding shares
of Series E Preferred Stock has been paid in cash the full Liquidation
Preference Amount plus any accrued and unpaid dividends to which such holder
is entitled as provided herein. After payment of the full Liquidation
Preference Amount plus any accrued and unpaid dividends to which each holder
is entitled, such holders of shares of Series E Preferred Stock will not be
entitled to any further participation as such in any distribution of the
assets of the Company.
(b) A consolidation or merger of the Company with or into
any other corporation or corporations, or a sale of all or substantially all
of the assets of the Company, or the effectuation by the Company of a
transaction or series of transactions in which more than 50% of the voting
shares of the Company is disposed of or conveyed, shall not be deemed to be a
liquidation, dissolution, or winding up within the meaning of this Article IV,
Section 3E4. In the event of the merger or consolidation of the Company with
or into another corporation, the Series E Preferred Stock shall maintain its
relative powers, designations and preferences provided for herein and no
merger shall result inconsistent therewith.
(c) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, stating
a payment date and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than 45 days prior to the
payment date stated therein, to the holders of record of the Series E
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
5. Conversion. The holder of Series E Preferred Stock shall
have the following conversion rights (the "Conversion Rights"):
(a) Right to Convert. At any time on or after the
Closing Date (as such term is defined in the Series E Preferred Stock Purchase
Agreement dated as of May 6, 1999 between SCI-Colorado and the initial holders
of the Series E Preferred Stock (the "Securities Purchase Agreement")), the
holder of any shares of Series E Preferred Stock may, at the holder's option,
subject to the limitations set forth in Article IV, Section 3E7 herein, elect
to convert (a "Voluntary Conversion") all or any portion of the shares of
Series E Preferred Stock held by such person into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i) the
Liquidation Preference Amount of the shares of Series E Preferred Stock being
converted divided by (ii) the Conversion Price (as defined in Article IV,
Section 3E5(d) below) then in effect as of the date of the delivery by such
holder of its notice of election to convert.
(b) Mechanics of Voluntary Conversion. The Voluntary
Conversion of Series E Preferred Stock shall be conducted in the following
manner:
(i) Holder's Delivery Requirements. To convert
Series E Preferred Stock into full shares of Common Stock on any date (the
"Voluntary Conversion Date"), the holder thereof shall (A) transmit by
facsimile (or otherwise delivering), for receipt on or prior to 11:59 p.m.,
New York Time on such date, a copy of a fully executed notice of conversion in
the form attached hereto as Exhibit I (the "Conversion Notice"), to the
Company, and (B) surrender to a common carrier for delivery to the Company as
soon as practicable following such date, the original certificates
representing the shares of Series E Preferred Stock being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificates") and the
originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the Company
of a facsimile copy of a Conversion Notice, the Company shall immediately
send, via facsimile, a confirmation of receipt of such Conversion Notice to
the holder. Upon receipt by the Company of the Preferred Stock Certificates
to be converted pursuant to a Conversion Notice, together with the originally
executed Conversion Notice, the Company or its designated transfer agent (the
"Transfer Agent") (as applicable) shall, on the next business day following
the date of receipt by the Company of both (or the second business day
following the date of receipt by the Company of both if received after 11:00
am. New York Time), (A) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Conversion Notice, a certificate,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled, or (B) credit such
aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder's or its designee's balance account with American
Securities Transfer & Trust, Inc. If the number of shares of Preferred Stock
represented by the Preferred Stock Certificate(s) submitted for conversion is
greater than the number of shares of Series E Preferred Stock being converted,
then the Company shall, as soon as practicable and in no event later than two
business days after receipt of the Preferred Stock Certificate(s) and at its
own expense, issue and deliver to the holder a new Preferred Stock Certificate
representing the number of shares of Series E Preferred Stock not converted.
(iii) Dispute Resolution. In the case of a
dispute as to the determination of the Average Share Prices (as defined in
Article IV, Section 3E5(d) below) or the Conversion Price or the arithmetic
calculation of the number of shares of Common Stock to be issued upon
conversion, the Company shall promptly issue to the holder the number of
shares of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile as soon
as possible, but in no event later than two (2) business days after receipt of
such holder's Conversion Notice. If the holder and the Company are unable to
agree upon the determination of the Average Share Prices or the Conversion
Price or the arithmetic calculation of the number of shares of Common Stock to
be issued upon such conversion within one (1) business day of such disputed
determination or arithmetic calculation being submitted to the holder, then
the Company shall within one (1) business day submit via facsimile (A) the
disputed determination of the Average Share Prices or the Conversion Price to
an independent, reputable investment bank or (B) the disputed arithmetic
calculation of the number of shares of Common Stock to be issued upon such
conversion to its independent, outside accountant. The Company shall cause
the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than seventy-two (72) hours from the time it receives the
disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be
binding upon all parties absent manifest error. The reasonable expenses of
such investment bank or accountant in making such determination shall be paid
by the Company, in the event the holder's calculation or determination was
correct, or by the holder, in the event the Company's calculation or
determination was correct, or equally by the Company and the holder in the
event that neither the Company's or the holder's calculation or determination
was correct. The period of time in which the Company is required to effect
conversions or redemptions under this Article IV, Section 3E shall be tolled
with respect to the subject conversion or redemption pending resolution of any
dispute by the Company made in good faith and in accordance with this Article
IV, Section 3E5(b)(iii).
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of the Series
E Preferred Stock shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If within
two (2) business days of the Company's receipt of the Preferred Stock
Certificates to be converted and the Conversion Notice (the "Share Delivery
Period"), the Company shall fail to issue a certificate to a holder or credit
the holder's balance account with American Securities Transfer & Trust, Inc.
for the number of shares of Common Stock to which the holder is entitled upon
such holder's conversion of the Series E Preferred Stock or to issue a new
Preferred Stock Certificate representing the number of shares of Series E
Preferred Stock to which such holder is entitled pursuant to Article IV,
Section 3E5(b)(ii) (a "Conversion Failure"), in addition to all other
available remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification pursuant to Article
VIII thereof), the Company shall pay additional damages to such holder on each
date after such fifth (5th) business day that such conversion is not timely
effected in an amount equal 1% of the product of (A) the sum of the number of
shares of Common Stock not issued to the holder on a timely basis pursuant to
Article IV, Section 3E5(b)(ii) and to which such holder is entitled and, in
the event the Company has failed to deliver a Preferred Stock Certificate to
the holder on a timely basis pursuant to Article IV, Section 3E5(b)(ii), the
number of shares of Common Stock issuable upon conversion of the shares of
Series E Preferred Stock represented by such Preferred Stock Certificate, as
of the last possible date which the Company could have issued such Preferred
Stock Certificate to such holder without violating Article IV, Section
3E5(b)(ii) and (B) the Closing Bid Price (as defined in Article IV, Section
3E5(d) below) of the Common Stock on the last possible date which the Company
could have issued such Common Stock and such Preferred Stock Certificate, as
the case may be, to such holder without violating Article IV, Section
3E5(b)(ii). The holder may after any time after such Share Delivery Period
send the Company a notice of revocation of conversion (the "Revocation
Notice") revoking the holder's Conversion Notice (and requesting a return of
the applicable Preferred Share Stock Certificates) by (A) transmitting by
facsimile (or otherwise delivering), for receipt on or prior to 11:59 p.m.,
New York Time on such date, a copy of an executed Revocation Notice and (B)
sending by a common carrier for delivery to the Company as soon as practicable
following such date, the originally executed Revocation Notice. If the holder
has delivered a Revocation Notice to the Company, then the Company's
obligation to pay additional damages to the holder (in accordance with the
preceding sentence) shall terminate. If the Company fails to pay the
additional damages set forth in this Article IV, Section 3E5(b)(v) within five
business days of the date incurred, then such payment shall bear interest at
the rate of 2% per month (pro rated for partial months) until such payments
are made.
(c) Mandatory Conversion.
(i) Each share of Series E Preferred Stock
outstanding on the Mandatory Conversion Date (as defined below) shall,
automatically and without any action on the part of the holder thereof,
convert (a "Mandatory Conversion") into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i) the
Liquidation Preference Amount of the shares of Series E Preferred Stock
outstanding on the Mandatory Conversion Date divided by (ii) the Conversion
Price (as defined below) in effect on the Mandatory Conversion Date.
(ii) As used herein, a "Mandatory Conversion Date"
shall be the date which is three years after the date of issuance of the
shares of Series E Preferred Stock by SCI-Colorado (the "Issuance Date"),
provided that the Mandatory Conversion Date shall be extended for any shares
of Series E Preferred Stock (i) for as long as the conversion of such shares
of Series E Preferred Stock would violate Article IV, Section 3E7, (ii)
pursuant to Article IV, Section 3E3(n) of the Registration Rights Agreement
dated as of May 6, 1999 by and among the SCI-Colorado and the initial holders
of the Series E Preferred Stock named therein (the "Registration Rights
Agreement"), which extension shall be one day for each of the days in any
Blackout Period (as defined in Article IV, Section 3E3(n) of the Registration
Rights Agreement), (iii) until the shares of Common Stock to which the holder
is entitled upon a Mandatory Conversion are duly authorized and available for
issuance in connection with such Mandatory Conversion, (iv) until a
registration statement registering such shares of Common Stock has been
declared effective by the Securities and Exchange Commission (the
"Commission") and is currently effective as of the Mandatory Conversion Date
and (v) until such shares of Common Stock are listed on the OTC Bulletin
Board, the Nasdaq SmallCap Market, the Nasdaq National Market, The New York
Stock Exchange, Inc. or the American Stock Exchange, Inc. The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred to
in this Article IV, Section 3E as the "Conversion Date."
(iii) On the Mandatory Conversion Date, the
outstanding shares of Series E Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the Preferred Stock Certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Series E Preferred
Stock unless the Preferred Stock Certificates evidencing such shares of Series
E Preferred Stock are either delivered to the Company or the holder notifies
the Company that such Preferred Stock Certificates have been lost, stolen, or
destroyed, and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. Upon the
occurrence of the automatic conversion of the Series E Preferred Stock
pursuant to this Article IV, Section 3E5, the holders of the Series E
Preferred Stock shall surrender the Preferred Stock Certificates representing
the Series E Preferred Stock for which the Mandatory Conversion Date has
occurred to the Company and the Company shall deliver the shares of Common
Stock issuable upon such conversion (in the same manner set forth in Article
IV, Section 3E5(b)(ii)) to the holder within three business days of the
holder's delivery of the applicable Preferred Stock Certificates.
(d) Conversion Price.
(i) The term "Five Day Average Share Price" shall
mean the average of the Closing Bid Prices of the Company's shares of Common
Stock (as reported by Bloomberg Financial Markets ("Bloomberg")) in the OTC
Bulletin Board for such security (or on such other United States stock
exchange or public trading market on which the Common Stock trades (an
"Alternative Exchange") if, at the time of the conversion, the Common Stock is
not trading in the OTC Bulletin Board), for the five (5) consecutive trading
days immediately preceding the Voluntary Conversion Date or Mandatory
Conversion Date, as applicable.
(ii) The term "Conversion Price" shall mean, with
respect to any conversion of Series E Preferred Stock converted prior to
December 31, 1999, $3.00 (as adjusted herein), except that if a Registration
Violation has occurred and/or the Conversion Date occurs after December 31,
1999, then the "Conversion Price" shall be equal to the lesser of (x) $3.00
(as adjusted herein) and (y) an amount equal to 105% of the Five Day Average
Share Price, as applicable; provided, however, that if (i) the Company has
filed a Registration Statement (as defined below in Article IV, Section
3E5(d)(iv)) which has been declared effective by the Commission, (ii) the
Company has filed a registration statement on Form S-1 registering shares of
Common Stock (a "Form S-1") in an underwritten public offering which has been
declared effective by the Commission and (iii) the Closing Bid Price of the
Common Stock has been at least $8.00 per share for a period of ten (10)
consecutive trading days with such period commencing at any time after the
ninetieth (90th) day after which the Form S-1 has been declared effective by
the Commission, then the "Conversion Price" shall be $3.00 (as adjusted
herein).
(iii) The term "Closing Bid Price" shall mean,
for any security as of any trading day, the closing bid price of such security
in the OTC Bulletin Board for such security as reported by Bloomberg (or the
closing bid price for such security as reported on an Alternative Exchange),
or, if no closing bid price is reported for such security by Bloomberg (or on
such Alternative Exchange), the closing trade price of such security as
reported by Bloomberg (or on such Alternative Exchange), or, if no closing
trade price is reported for such security by Bloomberg (or on such Alternative
Exchange), the average of the bid prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing basis, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of a majority of the outstanding shares of Series E Preferred
Stock. If the Company and the holders of Series E Preferred Stock are unable
to agree upon the fair market value of the Common Stock, then such dispute
shall be resolved pursuant to Article IV, Section 3E5(b)(iii) above with the
term "Closing Bid Price" being substituted for the term "Average Share
Prices." (All such determinations to be appropriately adjusted for any stock
dividend, stock split or other similar transaction during such period).
(iv) The term "Registration Violation" shall mean the
failure of the Company to (A) prepare and file with the Commission on or prior
to the Filing Date a Registration Statement pursuant to the terms and
conditions of the Registration Rights Agreement , (B) cause the Registration
Statement to be declared effective under the Commission as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and (C) otherwise comply with the terms and conditions of the
Registration Rights Agreement. All capitalized terms in this Article IV,
Section 3E5(d)(iv) shall have the meanings assigned to them in the
Registration Rights Agreement.
(e) Adjustments of Conversion Price.
(i) Adjustments for Stock Splits and Combinations.
If the Company shall, at any time or from time to time after the Issuance
Date, effect a stock split of the outstanding Common Stock, the applicable
Conversion Price in effect immediately prior to the stock split shall be
proportionately decreased. If the Company shall at any time or from time to
time after the Issuance Date, combine the outstanding shares of Common Stock,
the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased. Any adjustments under this Article IV,
Section 3E5(e)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii) Adjustments for Certain Dividends and
Distributions. If the Company shall at any time or from time to time after
the Issuance Date, make or issue, or set a record date for the determination
of holders of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each event, the
applicable Conversion Price in effect immediately prior to such event shall be
decreased as of the time of such issuance or, in the event such record date
shall have been fixed, as of the close of business on such record date, by
multiplying, as applicable, the applicable Conversion Price then in effect by
a fraction:
(A) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date; and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution.
(iii) Adjustment for Other Dividends and
Distributions. If the Company shall at any time or from time to time after
the Issuance Date, make or issue, or set a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other
distribution payable in other than shares of Common Stock, then, and in each
event, an appropriate revision to the applicable Conversion Price shall be
made and provision shall be made (by adjustments of the Conversion Price or
otherwise) so that the holder of Series E Preferred Stock shall receive upon
conversions thereof, in addition to the number of shares of Common Stock
receivable thereon, such dividend or other distribution which the holders
would have received had their Series E Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the Conversion Date, retained
such dividend or other distribution (together with any distributions payable
thereon during such period), giving application to all adjustments called for
during such period under this Article IV, Section 3E5(e)(iii) with respect to
the rights of the holders of the Series E Preferred Stock.
(iv) Adjustments for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon conversion of the Series E
Preferred Stock at any time or from time to time after the Issuance Date shall
be changed to the same or different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Article IV, Section 3E5(e)(i), (ii)
and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Article IV, Section 3E5(e)(v)), then, and in each event, an
appropriate revision to the Conversion Price shall be made and provisions
shall be made (by adjustments of the Conversion Price or otherwise) so that
the holders of the Series E Preferred Stock shall have the right thereafter to
convert the Series E Preferred Stock into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, which such holders would have received had such
holders' Series E Preferred Stock been converted immediately prior to such
reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger,
Consolidation or Sales of Assets. If at any time or from time to time after
the Issuance Date there shall be a capital reorganization of the Company
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Article IV, Section 3E5(e)(i), (ii)
and (iii), or a reclassification, exchange or substitution of shares provided
for in Article IV, Section 3E5(e)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person (an "Organic
Change"), then as a part of such Organic Change an appropriate revision to the
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the holder of each share of Series
E Preferred Stock shall have the right thereafter to convert such share of
Series E Preferred Stock into the kind and amount of shares of stock and other
securities or property of the Company or any successor corporation resulting
from Organic Change. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Article IV, Section 3E5(e)(v)
with respect to the rights of the holders of the Series E Preferred Stock
after the Organic Change to the end that the provisions of this Article IV,
Section 3E5(e)(v) (including any adjustment in the applicable Conversion Price
then in effect and the number of shares of stock or other securities
deliverable upon conversion of the Series E Preferred Stock) shall be applied
after that event in as nearly an equivalent manner as may be practicable.
(vi) Consideration for Stock. In case any shares of
Common Stock or any securities convertible into or exchangeable for, directly
or indirectly, Common Stock ("Convertible Securities"), other than the Series
E Preferred Stock, or any rights or warrants or options to purchase any such
Common Stock or Convertible Securities, shall be issued or sold:
(A) in connection with any merger or
consolidation in which the Company is the surviving corporation (other than
any consolidation or merger in which the previously outstanding shares of
Common Stock shall be changed to or exchanged for the stock or other
securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board of Directors of the Company, of such portion of the assets
and business of the nonsurviving corporation as such Board may determine to be
attributable to such shares of Common Stock, Convertible Securities, rights or
warrants or options, as the case may be; or
(B) in the event of any consolidation or merger
of the Company in which the Company is not the surviving corporation or in
which the previously outstanding shares of Common Stock of the Company shall
be changed into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of shares of its Common Stock
for stock or securities or other property of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was
predicated, and for a consideration equal to the fair market value on the date
of such transaction of all such stock or securities or other property of the
other corporation. If any such calculation results in adjustment of the
applicable Conversion Price, or the number of shares of Common Stock issuable
upon conversion of the Series E Preferred Stock, the determination of the
applicable Conversion Price or the number of shares of Common Stock issuable
upon conversion of the Series E Preferred Stock immediately prior to such
merger, consolidation or sale, shall be made after giving effect to such
adjustment of the number of shares of Common Stock issuable upon conversion of
the Series E Preferred Stock.
(vii) Record Date. In case the Company shall
have failed to take record of the holders of its Common Stock or any other
Preferred Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale of
the shares of Common Stock or Convertible Securities shall be deemed to be
such record date.
(viii) Certain Issues Excepted. Anything herein
to the contrary notwithstanding, the Company shall not be required to make any
adjustment of the number of shares of Common Stock issuable upon conversion of
the Series E Preferred Stock upon the grant after the Issuance Date of, or the
exercise after the Issuance Date of, options or warrants or rights to purchase
stock under the Company's stock option plan.
(f) No Impairment. The Company shall not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith, assist in the carrying out of all the
provisions of this Article IV, Section 3E5 and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series E Preferred Stock against impairment.
(g) Certificates as to Adjustments. Upon occurrence of
each adjustment or readjustment of the Conversion Price or number of shares of
Common Stock issuable upon conversion of the Series E Preferred Stock pursuant
to this Article IV, Section 3E5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and furnish to each holder of such Series E Preferred Stock a certificate
setting forth such adjustment and readjustment, showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon
written request of the holder of such affected Series E Preferred Stock, at
any time, furnish or cause to be furnished to such holder a like certificate
setting forth such adjustments and readjustments, the applicable Conversion
Price in effect at the time, and the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon the conversion of a share of such Series E Preferred Stock.
Notwithstanding the foregoing, the Company shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or decrease of
at least one percent of such adjusted amount.
(h) Issue Taxes. The Company shall pay any and all issue
and other taxes, excluding federal, state or local income taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series E Preferred Stock pursuant thereto; provided,
however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any
such conversion.
(i) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or by facsimile or three business days following being mailed by
certified or registered mail, postage prepaid, return-receipt requested,
addressed to the holder of record at its address appearing on the books of the
Company. The Company will give written notice to each holder of Series E
Preferred Stock at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-
up and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Company will also give
written notice to each holder of Series E Preferred Stock at least twenty (20)
days prior to the date on which any Organic Change, dissolution, liquidation
or winding-up will take place and in no event shall such notice be provided to
such holder prior to such information being made known to the public.
(j) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of the Series E Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to the product of such fraction multiplied by
the average of the Closing Bid Prices of the Common Stock for the five
consecutive trading days immediately preceding the Voluntary Conversion Date
or Mandatory Conversion Date, as applicable.
(k) Reservation of Common Stock. The Company shall, so
long as any shares of Series E Preferred Stock are outstanding, reserve and
keep available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series E Preferred Stock, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series E Preferred Stock then outstanding;
provided that the number of shares of Common Stock so reserved shall at no
time be less than 200% of the number of shares of Common Stock for which the
shares of Series E Preferred Stock are at any time convertible. The initial
number of shares of Common Stock reserved for conversions of the Series E
Preferred Stock and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Series E Preferred Stock based on
the number of shares of Series E Preferred Stock held by each holder at the
time of issuance of the Series E Preferred Stock or increase in the number of
reserved shares, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder's shares of Series E Preferred Stock,
each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any shares of Series E Preferred Stock shall be allocated to the
remaining holders of Series E Preferred Stock, pro rata based on the number of
shares of Series E Preferred Stock then held by such holder. The Company
shall, from time to time in accordance with the GCL, as amended, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Company's
obligations under this Article IV, Section 3E5(k).
(l) Retirement of Series E Preferred Stock. Conversion
of Series E Preferred Stock shall be deemed to have been effected on the
applicable Voluntary Conversion Date or Mandatory Conversion Date (subject to
revocation). Upon conversion of only a portion of the number of shares of
Series E Preferred Stock represented by a certificate surrendered for
conversion, the Company shall issue and deliver to such holder at the expense
of the Company, a new certificate covering the number of shares of Series E
Preferred Stock representing the unconverted portion of the certificate so
surrendered as required by Article IV, Section 3E5(b)(ii).
(m) Regulatory Compliance. If any shares of Common Stock
to be reserved for the purpose of conversion of Series E Preferred Stock
require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Company shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
6. No Preemptive Rights. Except as provided in Article IV,
Section 3E5 hereof and in the Securities Purchase Agreement, no holder of the
Series E Preferred Stock shall be entitled to rights to subscribe for,
purchase or receive any part of any new or additional shares of any class,
whether now or hereinafter authorized, or of bonds or debentures, or other
evidences of indebtedness convertible into or exchangeable for shares of any
class, but all such new or additional shares of any class, or any bond,
debentures or other evidences of indebtedness convertible into or exchangeable
for shares, may be issued and disposed of by the Board of Directors on such
terms and for such consideration (to the extent permitted by law), and to such
person or persons as the Board of Directors in their absolute discretion may
deem advisable.
7. Conversion Restrictions. Notwithstanding anything to the
contrary set forth in Article IV, Section 3E5 of this Article IV, Section 3E,
in no event shall any holder be entitled to convert Series E Preferred Stock
in excess of that number of shares of Series E Preferred Stock which, upon
giving effect to such conversion, would cause the aggregate number of shares
of Common Stock beneficially owned by the holder and its affiliates to exceed
4.99% of the outstanding shares of the Common Stock following such conversion.
For purposes of the foregoing proviso, the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of the shares of
Series E Preferred Stock with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) conversion of the remaining, nonconverted
shares of Series E Preferred Stock beneficially owned by the holder and its
affiliates, and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without limitation,
any warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the holder and its
affiliates. Except as set forth in the preceding sentence, for purposes of
this Article IV, Section 3E7, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended.
8. Redemptions.
(a) If at any time after the one year anniversary of the
Issuance Date, the Company's Common Stock is trading for less than $3.00 per
share, the Company may redeem all or a portion of the Series E Preferred Stock
outstanding upon 30 days prior written notice (the "Company's Redemption
Notice") at a price per share of Series E Preferred Stock equal to 120% of the
Liquidation Preference, plus any accrued but unpaid dividends (the "Company's
Redemption Price"); provided, that if a holder has delivered a Conversion
Notice to the Company or delivers a Conversion Notice within 30 days of
receipt of the Company's Redemption Notice, the shares of Series E Preferred
Stock designated to be converted may not be redeemed by the Company pursuant
to this Article IV, Section 3E8(a). The Company's Redemption Notice shall
state the date of redemption, which shall not be later than 30 days following
the date of the Company's Redemption Notice (the "Redemption Date"), the
Company's Redemption Price and the number of shares to be redeemed by the
Company. The Company shall deliver the Company's Redemption Price to the
holders on or prior to the Redemption Date. If the Company fails to pay the
Redemption Price by the trading day following the Redemption Date, the
redemption will be declared null and void and the Company shall lose its right
to serve a Company's Redemption Notice in the future.
(b) If at any time the Company redeems shares of the
Company's Series D Preferred Stock, the Company shall redeem all of the Series
E Preferred Stock outstanding upon 30 days prior written notice (a "Series D
Redemption Notice") at a price per share equal to the Company Redemption
Price; provided, that if a holder has delivered a Conversion Notice to the
Company or delivers a Conversion Notice within 30 days of receipt of a Series
D Redemption Notice, the shares of Series E Preferred Stock covered by such
Conversion Notice shall not be redeemed by the Company. The Series D
Redemption Notice shall state the date of redemption, which shall not be later
than 30 days following the date of the Series D Redemption Notice (the "Series
D Redemption Date") and the Company's Redemption Price. The Company shall
deliver the Company's Redemption Price to the holder on or prior to the Series
D Redemption Date.
9. Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If,
upon the Company's receipt of a Conversion Notice or on the Mandatory
Conversion Date, the Company can not issue shares of Common Stock registered
for resale under the Registration Statement for any reason, including, without
limitation, because the Company (x) does not have a sufficient number of
shares of Common Stock authorized and available, (y) is otherwise prohibited
by applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its securities from issuing all of the Common
Stock which is to be issued to a holder of Series E Preferred Stock pursuant
to a Conversion Notice or (z) fails to have a sufficient number of shares of
Common Stock registered for resale under the Registration Statement, then the
Company shall issue as many shares of Common Stock registered for resale under
the Registration Statement as it is able to issue in accordance with such
holder's Conversion Notice and pursuant to Article IV, Section 3E5(b)(ii)
above and, with respect to the unconverted Series E Preferred Stock, the
holder, solely at such holder's option, can elect to:
(i) require the Company to redeem from the holder
those Series E Preferred Stock for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("Mandatory
Redemption") at a price per share equal to the Company's Redemption Price as
of such Conversion Date (the "Mandatory Redemption Price");
(ii) if the Company's inability to fully convert
Series E Preferred Stock is pursuant to Article IV, Section 3E9(a)(z) above,
require the Company to issue restricted shares of Common Stock in accordance
with such holder's Conversion Notice and pursuant to 5(b)(ii) above; and/or
(iii) void its Conversion Notice and retain or
have returned, as the case may be, the shares of Series E Preferred Stock that
were to be converted pursuant to such holder's Conversion Notice (provided
that a holder's voiding its Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of such
notice).
(b) Mechanics of Fulfilling Holder's Election. The
Company shall immediately send via facsimile to a holder of Series E Preferred
Stock, upon receipt of a facsimile copy of a Conversion Notice from such
holder which cannot be fully satisfied as described in Article IV, Section
3E9(a) above, a notice of the Company's inability to fully satisfy such
holder's Conversion Notice (the "Inability to Fully Convert Notice"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such holder's Conversion Notice, (ii) the
number of Series E Preferred Stock which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder shall notify the Company
within fifteen (15) days of its election pursuant to Article IV, Section
3E9(a) above by delivering written notice via facsimile to the Company
("Notice in Response to Inability to Convert").
(c) Payment of Redemption Price. If such holder shall
elect to have its shares redeemed pursuant to Article IV, Section 3E9(a)(i)
above, the Company shall pay the Mandatory Redemption Price in cash to such
holder within thirty (30) days of the Company's receipt of the holder's Notice
in Response to Inability to Convert, provided that prior to the Company's
receipt of the holder's Notice in Response to Inability to Convert the Company
has not delivered a notice to such holder stating, to the satisfaction of the
holder, that the event or condition resulting in the Mandatory Redemption has
been cured and all Conversion Shares issuable to such holder can and will be
delivered to the holder in accordance with the terms of Article IV, Section
3E9(a). If the Company shall fail to pay the applicable Mandatory Redemption
Price to such holder on a timely basis as described in this Article IV,
Section 3E9(c) (other than pursuant to a dispute as to the determination of
the arithmetic calculation of the Redemption Price), in addition to any remedy
such holder of Series E Preferred Stock may have under this Article IV,
Section 3E and the Securities Purchase Agreement, such unpaid amount shall
bear interest at the rate of 2.0% per month (prorated for partial months)
until paid in full. Until the full Mandatory Redemption Price is paid in full
to such holder, such holder may (i) void the Mandatory Redemption with respect
to those Series E Preferred Stock for which the full Mandatory Redemption
Price has not been paid, (ii) receive back such Series E Preferred Stock, and
(iii) require that the Conversion Price of such returned Series E Preferred
Stock be adjusted to the lesser of (A) the Conversion Price as in effect on
the date on which the holder voided the Mandatory Redemption and (B) the
lowest Closing Bid Price during the period beginning on the Conversion Date
and ending on the date the holder voided the Mandatory Redemption.
Notwithstanding the foregoing, if the Company fails to pay the applicable
Mandatory Redemption Price within such thirty (30) days time period due to a
dispute as to the determination of the arithmetic calculation of the
Redemption Rate, such dispute shall be resolved pursuant to Article IV,
Section 3E5(b)(iii) above with the term "Redemption Price" being substituted
for the term "Conversion Price".
(d) Pro-Rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one holder of Series E
Preferred Stock on the same day and the Company can convert and redeem some,
but not all, of the Series E Preferred Stock pursuant to this Article IV,
Section 3E9, the Company shall convert and redeem from each holder of Series E
Preferred Stock electing to have Series E Preferred Stock converted and
redeemed at such time an amount equal to such holder's pro-rata amount (based
on the number shares of Series E Preferred Stock held by such holder relative
to the number shares of Series E Preferred Stock being converted and redeemed
at such time).
10. Vote to Change the Terms of or Issue Preferred Stock. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than three-fourths (3/4)
of the then outstanding shares of Series E Preferred Stock, shall be required
(a) for any change to this Article IV, Section 3E which would amend, alter,
change or repeal any of the powers, designations, preferences and rights of
the Series E Preferred Stock or (b) for the issuance of shares of Series E
Preferred Stock other than pursuant to the Securities Purchase Agreement.
11. Lost or Stolen Certificates. Upon receipt by the Company
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the shares of
Series E Preferred Stock, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the holder to the Company and, in the case
of mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
certificate(s) of like tenor and date; provided, however, the Company shall
not be obligated to re-issue Preferred Stock certificates if the holder
contemporaneously requests the Company to convert such shares of Series E
Preferred Stock into Common Stock.
12. Remedies, Characterizations, Other Obligations, Breaches
and Injunctive Relief. The remedies provided in this Article IV, Section 3E
shall be cumulative and in addition to all other remedies available under this
Article IV, Section 3E, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit a holder's right to pursue actual
damages for any failure by the Company to comply with the terms of this
Article IV, Section 3E. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be
the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the holders of the
Series E Preferred Stock and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, any holder of the Series E Preferred Stock shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
13. Specific Shall Not Limit General; Construction. No
specific provision contained in this Article IV, Section 3E shall limit or
modify any more general provision contained herein.
14. Failure or Indulgence Not Waiver. No failure or delay on
the part of a holder of Series E Preferred Stock in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
ARTICLE V
REGISTERED OFFICE AND AGENT
The name and address of the initial registered office of the Company in
the State of Delaware is Corporation Service Company, 1013 Centre Road, County
of New Castle, Wilmington, Delaware 19805.
ARTICLE VI
DIRECTORS
Section 1. The business and affairs of this Company and the
management thereof shall be vested in a Board of Directors consisting of at
least one (1) but not more than ten (10) members. Directors need not be
stockholders of the Company.
Section 2. The number of directors may be increased or decreased from
time to time, within the limits stated above, by action of the majority of the
whole Board of Directors.
Section 3. The election of directors need not be by written ballot.
Section 4. The Board of Directors shall have the power to adopt,
amend or repeal the Bylaws of the Company.
ARTICLE VII
INDEMNIFICATION
Section 1. Each person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Company or any of its direct or
indirect subsidiaries or is or was serving at the request of the Company as a
director, officer, employee, or agent of any other corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving
as a director, officer, employee, or agent, shall be indemnified and held
harmless by the Company to the fullest extent authorized by GCL, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than permitted prior thereto), against all expense,
liability, and loss (including attorneys' fees, judgments, fines, excise or
other taxes assessed with respect to an employee benefit plan, penalties, and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith, and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the indemnitee's heirs, executors, and
administrators; provided, however, that, except as provided in Paragraph C of
the Article VII with respect to proceedings to enforce rights to
indemnification, the Company shall indemnify any such indemnitee in connection
with a proceeding (or part thereof) was authorized by the Board of Directors
of the Company.
Section 2. The right to indemnification conferred in Section 1 of
this Article VII shall include the right to be paid by the Company the
expenses incurred in defending any proceeding for which such right to
indemnification is applicable in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the GCL requires,
an advancement of expenses incurred by an indemnitee in his or her capacity as
a director or officer (and not in any other capacity in which service was or
is rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Company of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Article VII or
otherwise.
Section 3. The rights to indemnification and to the advancement of
expenses conferred in Sections 1 and 2 of this Article VII shall be contract
rights. If a claim under Sections 1 and 2 of this Article VII is not paid in
full by the Company within 60 days after a written claim has been received by
the Company, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Company to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by an indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that the indemnitee has not met any applicable standard for
indemnification set forth in the GCL, and (ii) any suit by the Company to
recover an advancement of expenses pursuant to the terms of an undertaking,
the Company shall be entitled to recover such expenses upon a final
adjudication that the indemnitee has not met any applicable standard for
indemnification set forth in the GCL. Neither the failure of the Company
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable standard
of conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement or expenses, under this
Article VII or otherwise, shall be on the Company.
Section 4. The rights to indemnification and to the advancement of
expenses conferred in this Article VII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, this
Certificate of Incorporation, Bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
Section 5. The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent of the Company or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Company would have
the power to indemnify such person against such expense, liability, or loss
under the GCL.
Section 6. The Company's obligation, if any, to indemnify any person
who was or is serving as a director, officer, employee, or agent of any direct
or indirect subsidiary of the Company or, at the request of the Company, or
any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture,
trust, or other enterprise.
Section 7. Any repeal or modification of the foregoing provisions of
this Article VII shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE VIII
LIABILITY OF DIRECTORS
No director of the Company shall be liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this provision does not eliminate the liability of the director
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of Title 8 of GCL, or (vi) for any transaction from which the director derived
an improper personal benefit. For purposes of the prior sentence, the term
"damages" shall, to the extent permitted by law, include without limitation,
any judgment, fine, amount paid in settlement, penalty, punitive damages,
excise or other tax assessed with respect to an employee benefit plan, or
expense or any nature (including, without limitation, counsel fees and
disbursement). Each person who serves as a director of the Company while this
Article VIII is in effect shall be deemed to be doing so in reliance on the
provisions of this Article VIII, and neither the amendment or repeal of this
Article VIII, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article VIII, shall apply to or have any
effect on the liability or alleged liability of any director of the Company
for, arising out of, based upon, or in connection with any acts or omissions
of such director occurring prior to such amendment, repeal, or adoption or an
inconsistent provision. The provisions of this Article VIII are cumulative
and shall be in addition to and independent of any and all other limitations
on or eliminations of the liabilities of directors of the Company, as such,
whether such limitations or eliminations arise under or are created by any
law, rule, regulation, by-law, agreement, vote of shareholders or
disinterested directors, or otherwise.
ARTICLE IX
COMPROMISE SETTLEMENTS
Whenever a compromise or arrangement is proposed between the Company and
its creditors or any class of them and/or between the Company and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the Company
or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for the under the provisions of Section 291
of Title 8 of the GCL or on the application or trustees in dissolution or of
any receiver or receivers appointed for the under the provisions of Section
279 of Title 8 of the GCL order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the Company,
as the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three-fourths in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
the Company, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Company as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Company, as the case may be, and
also on the Company.
<PAGE>
<PAGE>
EXHIBIT I
SKYLYNX COMMUNICATIONS INC.
CONVERSION NOTICE
Reference is made to the Amended and Restated Certificate of
Incorporation of SkyLynx Communications, Inc. for Series ___ Convertible
Preferred Stock (the "Amended and Restated Certificate"). In accordance with
and pursuant to the Amended and Restated Certificate, the undersigned hereby
elects to convert the number of shares of Series __ Convertible Preferred
Stock, par value $.01 per share (the "Preferred Shares"), of SkyLynx
Communications, Inc., a Delaware corporation (the "Company"), indicated below
into shares of Common Stock, par value $.001 per share (the "Common Stock") of
the Company, by tendering the stock certificate(s) representing the share(s)
of Preferred Shares specified below as of the date specified below.
Date of Conversion: ______________________________
Number of Preferred Shares to be converted: ______________________________
Stock certificate no(s). of Preferred Shares to be converted: _________
The Common Stock have been sold pursuant to the Registration Statement (as
defined in the Registration Rights Agreement): YES ___ NO ___
Please confirm the following information:
Conversion Price: ______________________________
Number of shares of Common Stock to be issued:____________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the company in
the following name and to the following address:
Issue to: ____________________________
Facsimile Number: ____________________________
Authorization: ____________________________
By:_________________________
Title:________________________
Dated: ____________________________
Account number:
(if electronic book entry transfer): ____________________________
Transaction Code Number
(if electronic book entry transfer): ____________________________
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by the undersigned duly authorized officer of the corporation this 13th
day of December, 1999.
SKYLYNX COMMUNICATIONS, INC.
By: /s/ Jeffery A. Mathias
--------------------------
Jeffery A. Mathias,
Chief Executive Officer
