ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION TO DESIGNATE SERIES II
CONVERTIBLE PREFERRED STOCK OF
MERIDIAN USA HOLDINGS, INC.,
A FLORIDA CORPORATION
(PURSUANT TO SECTION 607.1006 OF THE
FLORIDA GENERAL CORPORATION ACT)
___________________
The undersigned, Mark Streisfeld and Alan Posner do hereby certify that:
(i) They are the duly elected and acting President and Secretary,
respectively, of Meridian USA Holdings, Inc., a Florida corporation (the
"Corporation").They are the duly elected and acting President and Secretary,
respectively, of Meridian USA Holdings, Inc., a Florida corporation (the
Corporation).
(ii) Pursuant to the authority conferred upon the Board of Directors of
the Corporation (the "Board") by the Corporation's Articles of Incorporation
(the "Certificate"), the Board on May 31, 2000 adopted the following resolutions
creating a series of preferred stock designated as Series II Convertible
Preferred Stock:
WHEREAS, the Certificate provides for a class of shares known as Preferred
Stock, issuable from time to time in one or more series; and
WHEREAS, the Board is authorized by the Certificate to determine the powers,
rights, preferences, qualifications, limitations and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, to fix the number of
shares constituting any such series, and to determine the designation thereof,
or any of them;
WHEREAS, the Board desires, pursuant to its authority as aforesaid, to determine
and fix the powers, rights, preferences, qualifications, limitations and
restrictions relating to Series II Convertible Preferred Stock and the number of
shares constituting, and the designation of, such series:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority vested in the
Board in accordance with the provisions of the Certificate, a series of
Preferred Stock is hereby created, and the Board of Directors hereby fixes and
determines the designation of, the number of shares constituting, and the
rights, preferences, privileges, powers and restrictions relating to, such
series of Preferred Stock as follows:
1. Designation. The series of Preferred Stock of the Corporation shall
be designated as "Series II Convertible Preferred Stock," $.01 par
value per share (the "Series II Preferred Stock").
2. Authorized Number. The number of shares constituting the Series II
Preferred Stock shall be Eight Thousand Five Hundred (8,500) shares. The
rights, preferences, privileges, powers, restrictions and other matters relating
to the Series II Preferred Stock set forth below are subject to the issuance of
any subsequent series of preferred stock. The Board is also authorized to
decrease the number of shares of Series II Preferred Stock prior or
subsequent to the issue of that series, but not below the number of shares of
Series II Preferred Stock then outstanding.
3. Dividend Provisions.
(a) General. When and as declared by the Board or as
otherwise provided herein, and to the extent permitted under the Delaware
General Corporation Law, the Corporation will pay preferential cumulative
dividends to the holders of Series II Preferred Stock as provided in this
Section 3. Except as otherwise provided herein, dividends on each share of
Series II Preferred Stock will accrue on a daily basis at the rate of 5.0%
per annum, compounded quarterly, of the Liquidation Value thereof from and
including the date of issuance of such share of Series II Preferred
Stock to and including the earliest of (i) the date on which such share of
Series II Preferred Stock is converted into Common Stock in accordance with
Section 6, or (ii) the date on which such share of Series II Preferred Stock
is redeemed in accordance with Section 5. Such dividends will accrue whether
or not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
The date on which the corporation initially issues any share of Series
II Preferred Stock will be deemed to be its "date of issuance" regardless
of the number of times a transfer of such share of Series II Preferred Stock is
made on the stock records maintained by or for the Corporation and regardless
of the number of certificates that may be issued to evidence such share of
Series II Preferred Stock. Any dividend declared pursuant to this Section
3(a) shall be declared and distributed among the holders of Series II Preferred
Stock pro rata based on the number of shares of Series II Preferred Stock
held by each such holder.
Accrued and unpaid dividends shall be declared and paid in cash, from any
source of funds legally available therefor, concurrently with the consummation
of (i) a public offering of equity securities by the Corporation (other than
equity securities registered pursuant to registration statements on Form S-4 or
S-8 or any successor or similar forms), or (ii) a Designated Event.
Each share of Series II Preferred Stock shall entitle the holder thereof to
receive preferential dividends on the Series II Preferred Stock prior and in
preference to any dividend with respect to all other shares of preferred stock
and Common Stock - i.e., preferential dividends shall be declared and paid on
all of the shares of Series II Preferred Stock of the Corporation prior to the
declaration and payment of preferential dividend on any other series or class of
preferred stock or Common Stock. No dividend shall be paid on any other series
of preferred stock or the Common Stock unless and until the entire accrued
preferential dividend provided for in this Section 3(a) shall have been paid or
declared and a sum sufficient for the payment thereof set apart.
(b) Participating Dividends. After the preferential dividends on
the Series II Preferred Stock provided for in Section 3(a) and all other
preferential dividends on all other series of Preferred Stock shall have been
paid or declared and a sum sufficient for the payment thereof set apart, then
the Corporation may (when, as and if declared by the Board) declare and
distribute in such year dividends on the Common Stock; provided, however, that
from and after such time as the holders of the Common Stock have received
dividends on the Common Stock in an amount equal on a per share basis
(determined on an as-converted basis) to the preferential dividend paid or
declared and set aside for payment pursuant to Section 3(a), no subsequent
dividend on the shares of Common Stock shall be declared or paid unless and
until a dividend of an equal amount per share (determined on an as-converted
basis) is concurrently declared and paid to the holders of the Series II
Preferred Stock.
(c) Termination. The Corporation's obligation to pay
dividends, including accumulated and unpaid dividends, with respect to the
Series II Preferred Stock shall be extinguished on the Conversion Effective
Date.
4. Liquidation Preference.
(a) Special Liquidation Payment. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of Series II Preferred Stock shall be entitled to receive, prior and
in prefer ence to any distribution of any of the assets of the Corporation
to the holders of any other series of preferred stock and the holders of Common
Stock by reason of their ownership thereof, cash in an amount per share equal to
the sum of (i) $1,000.00 for each outstanding share of Series II Preferred Stock
(the "Original Series II Issue Price"), as adjusted for stock splits, stock
dividends or recapitalizations of the Series II Preferred Stock, and (ii) an
amount equal to all accrued but unpaid dividends, if any, in respect of such
share (the "Accrued Dividends" and together with the Original Series II Issue
Price, the "Special Liquidation Payment"). If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Series II
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series II Preferred Stock.
(b) Distributions after Special Liquidation Payment. Upon the
completion of the distribution required by Section 4(a) and any preferential
distribution to the Series I Preferred Stock or any other series of preferred
stock, the remaining assets of the Corporation available for distribution to
stockholders shall be distributed ratably among the holders of the Series II
Preferred Stock and the holders of the Common Stock according to the number of
shares of Common Stock (1) then held, with respect to holders of the Common
Stock, and (2) into which the then outstanding shares of Series II Preferred
Stock are then convertible, with respect to holders of the Series II Preferred
Stock.
5. Redemption.
(a) Mandatory Redemption.
(i) The Corporation shall redeem on the tenth
anniversary of the date of initial issuance of the Series II Preferred Stock,
from any source of funds legally available therefore, in the manner provided in
Section 5(c), all outstanding shares of Series II Preferred Stock for cash in an
amount per share equal to the Redemption Price.
(ii) If there remains outstanding any Series II
Preferred Stock on or after the occurrence of a Designated Event (such date, the
"Redemption Trigger Date"), each of the holders of the then outstanding shares
of Series II Preferred Stock shall have the right to require the Corporation to
redeem all or any of such holder's shares of Series II Preferred Stock in
accordance with this Section 5 for cash in an amount per share equal to the
Redemption Price, such right being referred to as the "Redemption Right".
The Corporation shall give each holder of record of Series II
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 5, and the Corporation shall thereafter give such holders prompt
notice of any material change. The transaction shall in no event take place
sooner than twenty (20) days after the Corporation has given the first notice
provided for herein or sooner than fifteen (15) days after the Corporation has
given notice of any material change provided for herein; provided, however, that
such periods may be shortened upon the written consent of the Majority Preferred
Stockholders.
Within ten (10) days after the Redemption Trigger Date, the
Corporation shall notify all holders of Series II Preferred Stock that the
Redemption Right may be exercised, and each holder of Series II Preferred Stock
shall have the right, exercisable by delivery of a Redemption Notice to the
Corporation within thirty (30) days after receipt of such notice from the
Corporation, to request that all or a portion of such holder's shares of Series
II Preferred Stock be redeemed on the Redemption Date. The Corporation shall be
obligated to redeem the total number of shares of Series II Preferred Stock
requested to be redeemed in accordance herewith on the Redemption Date.
In the event that the Corporation does not have sufficient funds
legally available for redemption of the Series II Preferred Stock in accordance
with this Section 5(a)(ii), the Corporation shall forthwith either:
(A) cause such closing to be postponed until such time
as the requirements of this Section 5(a)(ii) may be complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series II Preferred Stock
shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to
in Section 5(a)(ii).
(b) Optional Redemption.
(i) The Corporation may, at the option of the Board of Directors,
redeem at any time on or after the third anniversary of the date of initial
issuance of the Series II Preferred Stock, from any source of funds legally
available therefor, in whole or in part, in the manner provided in Section 5(c),
any or all of the shares of Series II Preferred Stock, for cash in an
amount per share equal to the Redemption Price; provided that no optional
redemption shall be made unless full, preferential dividends have been or
contemporaneously are declared and paid or declared and a sum set apart
sufficient for such payment on the Series II Preferred Stock in accordance with
Section 3(a) for the period ending on the Redemption Date.
(ii) In the event of a redemption pursuant to Section 5(b) (i)
of only a portion of the then outstanding shares of Series II Preferred Stock,
the Corporation shall effect such redemption pro rata according to the number of
shares held by each holder of Series II Preferred Stock, except that the
Corporation may redeem such shares held by holders of fewer than 100 shares (or
shares held by holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Corporation.
(iii) (A) At least thirty (30) days and not more than sixty (60)
days prior to the date fixed for any optional redemption of the Series II
Preferred Stock pursuant to Section 5(b), written notice (the "Optional
Redemption Notice") shall be given by first class mail, postage prepaid, to
each holder of record on the record date fixed for such redemption of the
Series II Preferred Stock at such holder's address as the same appears on the
stock register of the Corporation. The Optional Redemption Notice shall
state:
1. the Redemption Price;
2. whether all or less than all the outstanding
shares of the Series II Preferred Stock redeemable thereunder are to be
redeemed and the total number of shares of such Series II Preferred
Stock being redeemed;
3. the number of shares of Series II Preferred
Stock held, as of the appropriate record date, by the specific holder that
the Corporation intends to redeem;
4. the Redemption Date;
5. that dividends on the shares of the Series II
Preferred Stock to be redeemed shall cease to accumulate on the Redemption
Date unless the Corporation defaults in the payment of the amounts
necessary for such redemption, in which case, dividends shall continue
to accumulate until such payment is made.
(c) Procedure. Each holder of Series II Preferred Stock
shall surrender the certificate or certificates representing such shares of
Series II Preferred Stock to the Corporation, duly endorsed, at the office of
the Corporation or any transfer agent for the Series II Preferred Stock, and on
the Redemption Date the full Redemption Price for such shares so surrendered
shall be payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof.
(d) Inadequate Funds. In the event of a redemption pursuant
to Section 5(a)(i) or 5(b), if the funds of the Corporation legally available
for redemption of Series II Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series II Preferred Stock
to be redeemed on such date, those funds that are legally available will be used
to redeem the maximum possible number of shares of Series II Preferred Stock
ratably among the holders of such shares to be redeemed based upon the
respective Redemption Price amounts then owed to each holder. Thereafter, when
additional funds of the Corporation are legally available for the redemption of
Series II Preferred Stock, such funds will be used to redeem the balance of the
shares of the Series II Preferred Stock that the Corporation became obligated
to redeem on such Redemption Date but which it has not redeemed (such
redemptions to be made on a monthly basis).
(e) Reissuance of Certificate. In case fewer than the total
number of shares of Series II Preferred Stock represented by any certificate are
redeemed in any installment, a new certificate representing the number of
unredeemed shares of such of Series II Preferred Stock will be issued to the
holder thereof without cost to such holder promptly after surrender of the
certificate representing the redeemed shares of Series II Preferred Stock.
(f) Redeemed or Otherwise Acquired Shares. Any shares of
Series II Preferred Stock that are redeemed or otherwise acquired by the
Corporation will be canceled and will not be reissued, sold or otherwise
transferred.
(g) Termination. The rights of the Corporation and the
holders of the Series II Preferred Stock under this Section 5 shall terminate
and be of no effect upon the conversion of all shares of Series II Preferred
Stock into Common Stock.
6. Conversion. The holders of the Series II Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series II Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Corporation or
any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (x) the
Special Liquidation Payment by (y) the Conversion Price, as adjusted from time
to time in accordance with Sections 6(c), (d), (e), (f) and (g), in effect on
the date the certificate is surrendered for conversion.
(b) Mechanics of Conversion. Before any holder of Series II
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Series II Preferred Stock, and shall give written notice to the Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, but in no event later than three (3) business days
thereafter, issue and deliver at such office to such holder of Series II
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series II Preferred Stock to be converted (except as otherwise
provided in the immediately following sentence), and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act,
the conversion may, at the option of any holder tendering Series II Preferred
Stock for conversion, be conditioned upon the closing with the underwriters of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Series II Preferred
Stock shall not be deemed to have converted such Series II Preferred Stock until
the closing of such sale of securities.
(c) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of
the Series II Preferred Stock shall be subject to adjustment from time to time
as follows:
(i) In the event the Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or Common Stock
Equivalents without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase in the aggregate number of shares of Common Stock outstanding and
issuable with respect to such Common Stock Equivalents.In the event the
Corporation should at any time or from time to time after the Purchase Date fix
a record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or Common Stock Equivalents without payment of any consideration by
such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall
be increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and issuable with respect to such Common Stock
Equivalents.
(ii) If the number of shares of Common Stock outstanding
at any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be decreased in proportion to such decrease in outstanding shares.
(d) Conversion Price Adjustments for Sale of Shares Below
Conversion Price.
(i) If at any time or from time to time after the
Purchase Date hereof, the Corporation issues or sells, or is deemed by the
express provisions of this Section 6(d) to have issued or sold, Additional
Shares of Common Stock (as defined in clause (v) below)), other than upon a
subdivision or combination of, or as a dividend or other distribution on, the
Common Stock as provided in Section 6(c), for an Effective Price less than the
then existing Conversion Price, then the Conversion Price shall independently
be reduced, as of the opening of business on the date of such issue or sale, to
the price determined by multiplying the then existing Conversion Price by a
fraction (A) the numerator of which shall be (1) the number of shares of Common
Stock outstanding immediately preceding the date of such issue or sale, plus (2)
the number of shares of Common Stock that the aggregate consideration received
(or by the express provisions hereof deemed to have been received) by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at the applicable existing Conversion Price, and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date of such issue after giving effect to such
issue of Additional Shares of Common Stock; provided, however, that for the
purposes of this clause (i), all shares of Common Stock that would be issuable
upon conversion in full of all outstanding shares of Series I Preferred Stock
shall be deemed to be outstanding.
(ii) For the purpose of making any adjustment required
under this Section 6(d), the consideration received by the Corporation for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the gross amount of cash received by the Corporation before
deducting any expenses payable by the Corporation and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the
Corporation in connection with such issue or sale, (B) to the extent it consists
of property, be computed as determined in good faith by the Board and the
Majority Preferred Stockholders, and (C) if Additional Shares of Common Stock,
Convertible Securities or rights or options to purchase either Additional Shares
of Common Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Corporation for a consideration that
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options,
as the case may be.
(iii) For the purpose of the adjustment required under
this Section 6(d), if the Corporation issues or sells any Options to purchase
Common Stock or any Convertible Securities and if the Effective Price of the
Additional Shares of Common Stock underlying such Options or Convertible
Securities is less than the Conversion Price then in effect, the Corporation
shall be deemed to have issued at the time of the issuance of such Options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such Options or Convertible Securities, plus, in the case of such
Options, the minimum amount of consideration, if any, payable to the Corporation
upon the exercise of such Options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Corporation (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof. No further adjustment of the
Conversion Price, adjusted upon the issuance of such Options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such Options or the conversion of
any such Convertible Securities. If the purchase price provided for in any
Option or the additional consideration (if any) payable upon the issue,
conversion or exchange of any Convertible Securities or the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of such change
shall be adjusted immediately to the Conversion Price that would have been in
effect at such time had such Option or Convertible Security originally provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. For purposes of
this Section 6(d), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of the Convertible Preferred Stock are
changed in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change; provided, however, that no such change shall at any
time cause the Conversion Price thereunder to be increased. If any such Options
issued after the date hereof or the conversion privilege represented by any such
Convertible Securities issued after the date hereof shall expire without having
been exercised, the Conversion Price, adjusted upon the issuance of such Options
or Convertible Securities issued after the date hereof shall be readjusted to
the Conversion Price that would have been in effect had an adjustment been made
on the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such Options or rights of conversion of such Convertible Securities,
and such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such Options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(iv) For the purpose of the adjustment required under
this Section 6(d), if the Corporation issues or sells any Options for the
purchase of Convertible Securities and if the Effective Price of the Additional
Shares of Common Stock underlying such Convertible Securities is less than the
Conversion Price in effect, the Corporation shall be deemed to have issued at
the time of the issuance of such Options the maximum number of Additional Shares
of Common Stock issuable upon conversion of the total amount of Convertible
Securities covered by such Options and to have received as consideration for the
issuance of such Additional Shares of Common Stock an amount equal to the amount
of consideration, if any, received by the Corporation for the issuance of such
Options, plus the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such Options and plus the minimum amount of
consideration, if any, payable to the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion of such Convertible Securities. No further adjustment of the
Conversion Price, adjusted upon the issuance of such Options, shall be made as a
result of the actual issuance of the Convertible Securities upon the exercise of
such Options or upon the actual issuance of Additional Shares of Common Stock
upon the conversion of such Convertible Securities. If the purchase price
provided for in any Option or the additional consideration (if any) payable upon
the issue, conversion or exchange of any Convertible Securities or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Conversion Price in effect at the time of such
change shall be adjusted immediately to the Conversion Price that would have
been in effect at such time had such option or Convertible Security originally
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 6(d), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of the Series II
Preferred Stock are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change; provided that no such change shall at
any time cause the Conversion Price thereunder to be increased. The provisions
of clause (iii) above for the readjustment of the Conversion Price upon the
expiration of Options or the rights of conversion of Convertible Securities
shall apply, the necessary changes having been made, to the Options and
Convertible Securities referred to in this subpart (iv).
(v) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Corporation after the date hereof, whether
or not subsequently reacquired or retired by the Corporation, other than shares
of Common Stock issued (A) upon conversion of the Preferred Stock; (B) to
officers, employees or directors of, or consultants, contractors and advisors
to, the Corporation or any subsidiary pursuant to any stock purchase or stock
option plans or other awards, contracts or arrangements that are approved by the
Board, and the Majority Preferred Stockholders which when added together with
all such other plans, awards, contracts, or arrangements, if not to exceed [2
%] shares of Common Stock in the aggregate; (C) a stock split or stock
dividend; or (D) pursuant to Options, warrants, notes or other rights, if any,
to acquire securities of the Corporation, that are in existence on the date the
first shares of Series II Preferred Stock are issued hereunder (other than
Options, warrants or shares issued under plans or arrangements described in
clause (B)).
(vi) The "Effective Price" of Additional Shares of
Common Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold by the Corporation under this Section 6(d), into the aggregate
consideration received, or deemed to have been received by the Corporation for
such issue under this Section 6(d), for such Additional Shares of Common Stock.
(e) Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 6(d), then, in each
such case for the purpose of this Section 6(e), the holders of the Series II
Preferred Stock shall be entitled to a share of any such distribution in
accordance with Section 3 as though they were the holders of the number of
shares of Common Stock into which their shares of Series II Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock entitled to receive such distribution.
(f) Recapitalizations. If any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision
provided for elsewhere in this Section 6 or a combination or merger or sale of
assets transaction for which the Corporation is not obligated to pay the Special
Liquidation Payment pursuant to Section 4) provision shall be made so that the
holders of the Series II Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series II Preferred Stock the number of shares of stock
or other securities or property of the Corporation or otherwise, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 6 with respect to the
rights of the holders of the Series II Preferred Stock after the
recapitalization to the end that the provisions of this Section 6 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series II Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. The Corporation will not, by amendment of
the Certificate or through any reorganization, recapitalization, 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 Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 6 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 II Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series II Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share (with one-half being rounded upward) determined on the basis of the
total number of shares of Series II Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Within fifteen (15) days following the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section 6, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series II Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series II Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of a share of
Series II Preferred Stock.
(i) Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series II Preferred Stock, at least fifteen (15)
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series II Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series II Preferred Stock; provided
that, if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of Series II Preferred Stock, in addition to such other remedies as shall
be available to the holder of such Series II Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in its best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Certificate; and provided, further
that if at any time after the first anniversary of the date of initial issuance
of the Series II Preferred Stock (i) the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Series II Preferred Stock or (ii) the Corporation
fails for any other reason to honor the request of a holder of Series II
Preferred Stock to convert shares of Series II Preferred Stock into shares of
Common Stock pursuant to Section 6, in addition to such other remedies as shall
be available to the holder of such Series II Preferred Stock, the Corporation
shall pay to the holder of such Series II Preferred Stock liquidated damages in
cash in an amount equal to three percent (3%) of the then current Special
Liquidation Payment for each thirty (30) day period or portion thereof that such
condition continues.
(i) Notices. Any notice required or permitted by the
provisions of this Section 6 to be given to the holders of shares of Series II
Preferred Stock shall be in writing, shall be effective when given, and shall in
any event be deemed to be given upon receipt or, if earlier, (i) three (3) days
after deposit with the U.S. postal service or other applicable postal service,
if delivered by first class mail, postage prepaid, (ii) upon delivery, if
delivered by hand, (iii) one (1) business day after the day of deposit with
Federal Express or similar overnight courier, freight prepaid, if delivered by
overnight courier or (iv) one (1) business day after the day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed to each holder of record at such
holder's address appearing on the books of the Corporation.
7. Voting Rights.
(a) General. The holder of each share of Series II Preferred
Stock shall have the right to one (1) vote for each share of Common Stock into
which such holder's shares of Series II Preferred Stock could then be converted,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation, and
shall be entitled to vote together as a single class with the holders of Common
Stock (and any other series of Preferred Stock entitled to vote together as a
single class with the holders of Common Stock) with respect to any question upon
which holders of Common Stock have the right to vote. Except as provided in
Sections 7(b) and 7(c) or as required by applicable law, the Series II Preferred
Stock shall not vote as a separate class on any matter submitted to a
stockholder vote. Fractional votes shall not be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Preferred Stock held by each holder could be converted)
shall be rounded to the nearest whole number (with one-half being rounded
upward).
(b) Director. Notwithstanding any provision of Section 7(a)
to the contrary, so long as 1,000 shares of Series II Preferred Stock are
outstanding, the holders of the outstanding shares of Series II Preferred Stock,
voting separately as a single series, in person or by proxy, shall be entitled
to elect one member of the Board (or at the option of the Majority Preferred
Stockholders, to appoint one observer to the Board, such observer to receive all
notices, information and other materials as if such observer was a member of the
Board) and, subject to the provisions of the Certificate and of any other
certificate of designations relating to any other series of preferred stock, the
holders of the Common Stock, the Series II Preferred Stock and any other series
of preferred stock entitled to vote as a single class with the holders of Common
Stock, voting together as a single class, shall be entitled to elect the
remaining members of the Board.
(c) Series II Preferred Stock Vote Required. Notwithstanding
any provision of Section 7(a) to the contrary, so long as any shares of Series
II Preferred Stock are outstanding without first obtaining Preferred Stock
Approval, the Corporation shall not:
(i) amend, alter or repeal the Certificate, Bylaws, and
this Designation, in a manner adverse to the holders of Series II Preferred
Stock, including, without limitation, any increase in the total number of
authorized shares of Series II Preferred Stock.
(ii) create, incur, assume or suffer to exist any
Indebtedness in excess of $5,000,000;
(iii) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible or
exercisable for an equity security, on parity with or senior to the Series II
Preferred Stock as to dividend rights, liquidation preferences, voting rights,
redemption or conversion rights;
(iv) purchase, redeem, or otherwise acquire (or pay into
or set aside for a sinking fund for such purpose) any shares of the
Corporation's equity securities, other than redemptions of shares of Series II
Preferred Stock pursuant to Section 5;
(v) declare or pay any dividend or other distribution,
direct or indirect (or set apart any sum for such purpose) whether in cash,
indebtedness or other assets or securities, upon the Corporation's equity
securities other than a dividend or distribution on the Series II Preferred
Stock;
(vi) enter in to an agreement to effect any sale, lease,
assignment, transfer or other conveyance of any material assets of the
Corporation, or any merger, material acquisition, reorganization, or
recapitalization involving the Corporation other than the ordinary course of
business consistent with past practice;
(vii) enter into a single transaction or series of
transactions with an Affiliate of the Corporation the aggregate value of which
exceeds $100,000 in any fiscal year.
(viii) enter into a line of business that is unrelated
to the Company's line of business as it existed on the Purchase Date or
otherwise substantially change or modify the Corporation's line of business as
it existed on the Purchase Date;
(ix) purchase, lease or otherwise acquire assets or make
other capital expenditures in a single transaction or series of transactions
with an aggregate fair market value in excess of $750,000 in any fiscal year;
(x) increase the salary, wages or other compensation of
any officer, employee or consultant of the Corporation, establish or modify the
salary ranges, guidelines or similar provisions in respect of any benefit plan,
employment-related contract or other employee compensation arrangement;
(xi) make any payments or otherwise provide compensation
to any Affiliates, directors, officers or employees under management,
consulting, advisory, severance, employment or similar agreements or other
arrangements if the aggregate amount of such payments and other compensation
paid or payable thereunder during or for any fiscal year of the Company exceeds
$ in any such fiscal year;
(xii) directly or indirectly, pay or make a commitment
to pay any severance or termination pay to any officer, employee or agent who is
directly or indirectly a stockholder of the Corporation other than as required
by contracts or agreements existing on the Purchase Date or in the event such
amounts do not exceed $ in any such fiscal year;
(xiii) make or permit to remain outstanding any
Investments exceeding $ in any fiscal year other than loans, advances or
other extensions of credit in the nature of deposits with or advance payments to
subcontractors, suppliers and other made in the ordinary course of business
consistent with past practice;
(xiv) make any Investment in an Affiliate, transfer any
assets or property to an Affiliate, merge into or consolidate with or purchase
or acquire assets or property from an Affiliate, guarantee or assume any
Indebtedness or other obligation of an Affiliate, enter into any other
transaction, directly or indirectly, with or for the benefit of an Affiliate,
unless such transaction or series of related transactions are (i) between the
Company and a wholly-owned subsidiary or two wholly-owned subsidiaries of the
Company, or (ii) on arms-length terms and do not exceed $ in the aggregate
in any fiscal year;
(xv) effect any liquidation, dissolution or winding up
of the Corporation; and
(xvi) authorize or issue, or obligate itself to issue, any equity
security (including options, warrants and other similar rights) other than
pursuant to the Corporation's [Stock Option Plan] as such plan is in effect on
the date hereof or pursuant to the conversion of the Preferred Stock or the
exercise of warrants outstanding on the Purchase Date, or authorize or issue
shares of the Common Stock pursuant to such stock option/stock issuance plan in
an aggregate amount in excess of 1,000,000 shares of Common Stock.
8. Status of Converted Stock. In the event any shares of Series
II Preferred Stock shall be converted pursuant to Section 6, the shares so
converted shall be cancelled and shall not be issuable by the Corporation. The
Certificate shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
9. Definitions.
"Additional Shares of Common Stock" shall have the meaning set
forth in Section 6(d)(v).
"Affiliate" means any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Corporation.
"Board" shall mean the Corporation's Board of Directors.
"Certificate" shall mean the Corporation's articles of incorporation, as
from time to time in effect.
"Change of Control" means the occurrence of one or more of the following
events:(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the
assets of the Corporation; (ii) any other person or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "Group") (other than the
Permitted Holders) shall become the owner, directly or indirectly, beneficially
or of record, of shares representing greater than 50% of the aggregate ordinary
voting power for the election of directors of the Corporation; or (iii)
during any two-year period the directors who constituted the Board at the
beginning of such period, (together with any new directors whose election
by such Board or whose nomination for election by the shareholders of the
Corporation was approved by a vote of at least a majority of the directors of
the Corporation then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board then in office.
"Common Stock Equivalents" shall mean Options and Convertible Securities.
"Conversion Effective Date" shall mean, with respect to each share of
Series II Preferred Stock, the date so elected by the holder of such share
of Series II Preferred Stock pursuant to Section 6.
"Conversion Price" means initially $1.70 per share of Common Stock;
provided, however, that the Conversion Price shall be subject to adjustment as
provided in Section 6; and provided further, that on the first anniversary of
the Purchase Date the Conversion Price shall be reset to the lower of (x)
the Conversion Price per share of Common Stock, as adjusted pursuant to Section
6, on the first anniversary of the Purchase Date and (y) the average of the
closing prices of the Common Stock for the ten-day period ending on the first
anniversary of the Purchase Date.
"Conversion Rights" shall have the meaning set forth in Section 6.
"Convertible Securities" means securities convertible into or exchangeable
for Common Stock.
"Corporation" means Meridian USA Holdings, Inc., a Florida corporation.
A "Designated Event" means (i) the acquisition of the Corporation by
Another entity (including, without limitation, any reorganization, merger or
consolidation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation), (ii) a sale, lease, exchange or other
transfer of all or substantially all of the assets of the Corporation, (iii) a
sale of [all or substantially all] of the outstanding equity securities of the
Corporation (whether pursuant to a merger, consolidation, recapitalization,
share purchase or otherwise), or (iv) any other transaction or series of related
transactions resulting in a Change of Control of the Corporation.
"Effective Price" shall have the meaning set forth in Section 6(d)(vi).
"Indebtedness" means all liabilities, contingent, fixed or otherwise, (a) for
borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments
or representing the deferred portion of the purchase price of any property, (c)
secured by a lien, encumbrance or security interest upon property owned by the
Corporation or its subsidiaries, or (d) relating to a capitalized lease
obligation.
"Investment" means all investments in any Person (including Affiliates) in
the form of direct or indirect loans (including guarantees of Indebtedness or
other obligations), advances, capital contributions, transfers of assets outside
the ordinary course of business consistent with past practice, purchases or
other acquisitions for consideration of Indebtedness, equity interests
or other securities and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Liquidation Value" shall mean, as to each share of Series II Preferred
Stock, the Original Series II Issue Price, as adjusted for any stock split,
Combination or subdivision.
"Majority Preferred Stockholders" means holders of more than 50% of the
outstanding Series II Preferred Stock.
"Options" means any grant, issue or sale by the Corporation of any
warrants, options or other rights to subscribe for or to purchase
Common Stock or Convertible Securities.
"Original Series II Issue Price" shall have the meaning set forth in
Section 4(a).
"Permitted Holders" means Alan Posner, Mark Streisfeld and their respective
Affiliates.
"Preferred Stock" means the Series I Preferred Stock and the Series II
Preferred Stock.
"Preferred Stock Approval" means an affirmative vote, at a meeting or by
written consent, of the holders of more than 50% of the outstanding Series II
Preferred Stock.
"Purchase Date" means the date upon which shares of Series II Preferred
Stock are first issued.
"Redemption Date" means the date 45 days after the date of any Redemption
Notice.
"Redemption Notice" means a written notice by one or more holders of the
Series II Preferred Stock to the Corporation stating their intention to
exercise the Redemption Right and the number of each such holder's shares of
the Series II Preferred Stock to be redeemed.
"Redemption Price" means the per share Special Liquidation Payment
calculated as of the Redemption Date.
"Redemption Right" shall have the meaning set forth in Section 5.
"Redemption Trigger Date" shall have the meaning set forth in Section 5.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder, or
any similar United States federal statute.
"Series I Preferred Stock" means the Series I Convertible Preferred
Stock, $1.00 par value per share, of the Corporation.
"Series II Preferred Stock Purchase Agreement" means that certain
Series II Convertible Preferred Stock Purchase Agreement dated as of June 16,
2000, by and among the Corporation and those certain purchasers signatory
thereto.
"Series II Preferred Stock" shall have the meaning set forth in Section 1.
"Stockholders Agreement" means that certain Stockholders Agreement dated
as of June 16, 2000, by and among the Corporation, certain holders of
Common Stock signatory thereto, certain holders of Series I Preferred
Stock signatory thereto, and each purchaser of Series II Preferred Stock
pursuant to the Series II Preferred Stock Purchase Agreement.
"Special Liquidation Payment" shall have the meaning set forth in Section
4(a).
***
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designations on June 16, 2000, and hereby certify under penalties of perjury
that the Certificate of Designations is the act and deed of the Corporation, and
that the statements therein are true.
/s/ Mark Streisfeld
---------------------
Mark Streisfeld
President
/s/ Alan Posner
-------------------
Alan Posner
Secretary
