[DESCRIPTION] Minutes defining rights of Series B Preferred Stock
MINUTES OF ACTION TAKEN BY
CONSENT OF THE BOARD OF DIRECTORS OF
HAI ENTERPRISES, INC.
a Colorado corporation
The undersigned, constituting all of the Directors of HAI Enterprises, Inc., a
Colorado corporation (the "Company"), hereby consent to the adoption of the
following resolutions without the holding of a meeting, and the undersigned
hereby consent to, vote in favor of, and adopt these resolutions.
I.
AUTHORIZATION OF SERIES "B" REDEEMABLE
CONVERTIBLE PREFERRED STOCK
RESOLVED, that pursuant to authority expressly vested in the Board of Directors
of the Company in Article III of the Articles of Incorporation of the Company,
the Board of Directors hereby duly classifies up to 113,500 shares of the
Preferred Stock of the Corporation, as a class designated "Series B Redeemable
Convertible Preferred Stock," and it be
FURTHER RESOLVED, that a description of such "Series B Redeemable
Convertible Preferred Stock," including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions for redemption, all as set by the
Board of Directors of the Company, is as follows:
1. DESIGNATION AND INITIAL NUMBER. The class of shares of Preferred Stock
hereby classified shall be designated the "Series B Redeemable Convertible
Preferred Stock" (hereinafter referred to as the "Series B Stock"). The initial
number of authorized shares of the Series B Stock shall be 113,500.
2. DIVIDENDS. The dividend rate for the Series B Stock shall be ten
percent (10%) per annum of the face value of $10.00 per share, and no more.
Dividends on the Series B Stock shall at payable at the Company's election
either in cash or Series B Stock at face value semi-annually on June 1 and
December 1 of each calendar year. Dividends on shares of Series B Stock shall
commence and accrue and shall be cumulative from the date in which the Series B
Stock is issued. No dividends shall be paid or set apart for payment on any
shares ranking junior to the Series B Stock unless and until all accrued and
unpaid dividends on the Series B Stock shall have been declared and paid or a
sum sufficient for payment thereof set apart.
3. REDEMPTION. At the option of the Company, shares of Series B Stock
may be redeemed, in whole or in part, at any time and from time to time after
the date of issuance of the shares of Series B Stock to be redeemed, upon the
terms and conditions set forth in the Articles of Incorporation of the Company,
as amended, and as follows:
3.1 The redemption price per share under this paragraph 3 shall be
Ten Dollars ($10.00) per share, plus an amount equal to unpaid cumulative
dividends accrued to the date of redemption (whether or not declared), which
shall be accrued at the dividend rate provided in paragraph 2, pro rata to the
date of redemption.
3.2 Notice to the holders of shares of Series B Stock to be redeemed
shall be given by mailing to such holders a notice of such redemption, first
class, postage prepaid, not later than 30 days prior to the date fixed for
redemption, at their last addresses as they shall appear upon the books of the
Company. Any notice which is mailed herein shall be conclusively presumed to
have been duly given, whether or not the stockholder receives such notice; and
failure duly to give such notice by mail, or any defect in such notice, to the
holders of any stock designated for redemption shall not affect the validity of
the proceedings for the redemption of any other shares of Series B Stock.
3.3 The notice of redemption to each stockholder whose shares of
Series B Stock are to be redeemed shall specify the number of shares of Series
B Stock of such stockholder to be redeemed, the date fixed for redemption and
the redemption price at which shares of Series B Stock are to be redeemed, and
shall specify where payment of the redemption price is to be made upon
surrender of such shares, shall state the conversion rate then in effect, and
shall state that accrued dividends to the date fixed for redemption w111 be
paid as specified in said notice, that from and after said date dividends
thereon will cease to accrue, and that conversion rights of such shares shall
cease and terminate at the close of business on the date fixed for redemption.
4. LIQUIDATION OR DISSOLUTION. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of Series B Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
an amount per share equal to Ten Dollars ($10.00) per share (plus an amount
equal to unpaid cumulative dividends) without interest, and no more, before any
payment shall be made to the holders of any common stock or stock of the
Company ranking junior to Series B Stock.
A merger or consolidation of the Company with or into any other corporation,
share exchange or a sale or conveyance of all or any part of the assets of the
Company (which shall not in fact result in the liquidation of the Company and
the distribution of assets to stockholders) shall not be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up of the Company
within the meaning of this paragraph 4.
5. SINKING FUND. The shares of Series B Stock may, at the discretion of
the Board of Directors, be subject to the operation of a purchase, retirement
or sinking fund.
6. CONVERSION PRIVILEGE. The holders of shares of Series B Stock shall
have the right, at their option, to convert such shares into any shares of
preferred stock of the Company which are or become publicly traded shares
("Publicly Traded Preferred Stock") at any time after the date of issue, on
and subject to the following terms and conditions:
6.1 The shares of Series B Stock shall be convertible into fully
paid and non-assessable shares of publicly traded Preferred Stock of the
Company at the option of the holder thereof and in the manner hereinafter
provided- In case shares of Series B Stock are called for redemption, the
right to convert such shares shall terminate at the close of business on the
date fixed for redemption unless default shall be made in payment of the
redemption price.
6.2. Shares of the Series B Stock may be converted into full shares
of Publicly Traded Preferred Stock of the Company at the rate of one (1) share
of Publicly Traded Preferred Stock for each one (1) share of Series B Stock,
subject to adjustment as hereinafter provided. The conversion price shall be
on the basis of face value of the Series B Stock ($10.00) for the face value of
the Publicly Traded Preferred Stock.
6.2.1 Anything in this paragraph 6 to the contrary
notwithstanding, the Corporation shall be entitled to make such increases in
the conversion rate, in addition to those required by the provisions of this
paragraph 6, as it in its discretion may determine to be advisable in order
that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible or
exchangeable for stock, hereafter made by the Corporation to its stockholders,
shall not be taxable.
6.2.2 Except as provided in sub-paragraph 6.2.1, no
adjustment in the conversion rate of the Series B Stock shall occur upon the
issuance of any stock of the Company or for any other reason.
6.3 Any conversion rate determined or adjusted as herein provided
shall remain in effect until further adjustment as required herein. Upon each
adjustment of the conversion rate a written instrument signed by an officer of
the Company setting forth such adjustment and the computation and a summary of
the facts based upon which it is based, and accompanied by copies of the
resolutions, if any, of the Board of Directors passed in connection therewith
shall forthwith be filed with the Transfer Agent or Agents for the Series B
Stock and made available for inspection by the holders of Series B Stock; and
any adjustment so evidenced, made in good faith, shall be binding upon all
stockholders and upon the Company. The Company shall also promptly cause a
notice, stating that such an adjustment has been made and setting forth the
adjusted conversion rate, to be mailed, first-class postage prepaid, to all
holders of record of outstanding shares of this Series B Stock, at their
addresses as the same appear on the stock records of the Company.
Notwithstanding the foregoing notice provisions, failure of the Company to
give such notice shall not invalidate such corporate action of the Company.
6.4 No fraction of shares of stock of any class of the Company
at any time authorized shall be issuable upon any conversion of the Series B
Stock. In lieu of any such fraction of a share, the person entitled to an
interest in respect of such fraction shall be entitled to the cash equivalent
of such fraction based upon the face value thereof.
6.5 Any conversion of Series B Stock shall be made by the surrender
to the Company, at the office of any Transfer Agent for the Series B Stock and
at such other office or offices as the Board of Directors may designate, of the
certificate or certificates representing the share or shares of Series B Stock
to be converted, duly endorsed or assigned (unless such endorsement or
assignment be waived by the Company, together with a written request for
conversion. All shares which may be issued upon conversion of shares of the
Series B Stock shall upon issue be fully paid and non-assessable by the Company
and free from all taxes, liens, charges and security interests with respect to
the issue thereof. The Company shall not, however, be required to pay any tax
which may be payable in respect to any transfer involved in the issue and
delivery of shares of Publicly Traded Preferred Stock upon conversion in a
name other than that of the holder of the shares of the Series B Stock
converted, and the Company shall not be required to issue or deliver any such
share unless and until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
6.6 All shares of Series B Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall forthwith cease except only the right to
the holders thereof to receive Publicly Traded Preferred Stock (or other
securities or property herein provided) in exchange therefor. No payment or
adjustment shall be made upon any conversion on account of any dividends
accrued on the shares of the Series B Stock surrendered for conversion or on
account of any dividends on the Publicly Traded Preferred Stock issued upon
such conversion.
6.7 In the event the Company authorizes any shares of preferred
stock to be issued which are or become publicly traded, a number of shares of
such preferred stock sufficient to provide for the conversion of the Series B
Stock outstanding upon the basis hereinbefore provided shall at all times be
reserved, free from pre-emptive rights, for. such conversion.
7. VOTING RIGHTS. Holders of shares of the Series B Stock shall have no
general right to vote and shall not be entitled to notice of the meetings of
the stockholders of the Company, or to participate in such meetings, except as
specifically required under C.R.S. Section 7-110-104, or other applicable law
and except for the special voting rights set forth in the following sub-
paragraph 7.1 below.
7.1 So long as any shares of the Series B Stock are outstanding, the
Company shall not (a) without the affirmative vote of at least one-half of the
votes entitled to be cast by all shares of the Preferred Stock (including
Series B Stock) at the time outstanding amend or change any terms of the
Preferred Stock in Article III of the Articles of Incorporation of the Company
or other provisions of the Articles of Incorporation generally applicable to
the Preferred Stock, so as to affect materially and adversely any such terms;
(b) without the affirmative vote of at least one-half of the vote entitled to
be cast by shares of the Series B Stock at the time outstanding, amend or
change any terms of the Series B Stock particularly applicable to the Series B
Stock, so as to affect materially and adversely any such terms; and (c) without
the affirmative vote of one-half of the votes entitled to be cast by all shares
of Preferred Stock at the time outstanding, (i) increase the authorized number
of shares of Preferred Stock in excess of 10,000,000 or (ii) authorize shares
of any other class of stock ranking on a parity with shares of Preferred Stock
as to dividends or assets.
8. NO IMPLIED LIMITATIONS. Except as otherwise provided by express
provisions of this Statement, nothing herein shall limit, by influence or
otherwise, the discretionary right of the Board of Directors to classify
and reclassify and issue any shares of Preferred Stock and to fix or alter all
terms thereof to the full extent provided in the Articles of Incorporation of
the Company.
9. GENERAL PROVISIONS. In addition to the above provisions with respect to
the Series B Stock, such Series B Stock shall be subject to and be entitled to
the benefits of, the provisions set forth in the Company's Articles of
Incorporation with respect to Preferred Stock generally.
II.
APPROVAL OF AGREEMENT FOR MERGER
WHEREAS, the Company has entered into an Agreement ("Agreement") dated
effective January 28, 1998 between the Company, Wrapsters, L.L.C. (legally
named "Wrapster's, L.C.), Santa Cruz Squeeze (legally named "Santa Cruz
Squeeze Corp."), Mathis Family Partners, Ltd., Thomas E Metzger, Clyde E.
Culp, III and William Gallagher; and
WHEREAS, the Agreement provides in part that Wrapster's, L.C. be merged into
the Company in exchange for 3,800,000 shares of the Company's no par value
common stock ("Common Stock") after the Company affects a 5 for 2 reverse
split of its currently issued and outstanding shares of Common Stock (the
"Reverse Split"); and
WHEREAS, the Agreement further provides that as part of the merger of
Wrapster's, L.C. into the Company, Santa Cruz Squeeze Core. is to purchase
3,800,000 shares of Common Stock after the Reverse Split together with
113,500 shares of the Company's Series B Redeemable Convertible Preferred
Stock for an aggregate of $1,000,000; and
WHEREAS, the Company deems that the terms and conditions of the Agreement are
fair and equitable to the Company.
NOW THEREFORE BE IT RESOLVED, that the Agreement attached as Exhibit "A" hereto
and made a part hereof is approved and ratified and that the terms and
conditions of the Agreement are deemed to be fair and equitable to the Company.
FURTHER RESOLVED, that the offer of Wrapster's, L.C. to merge into the Company
in exchange for 3,800,000 shares of Common Stock after the Reverse Split and as
conditioned by the Agreement is accepted and the appropriate officers of the
Company are hereby authorized and directed to issue such shares pursuant to the
Agreement upon the closing of the transactions contemplated by the Agreement.
FURTHER RESOLVED, that the offer of Santa Cruz Squeeze Corp. to purchase
3,800,000 shares of Common Stock after the Reverse Split and 113,500 shares of
the Company's Series B Redeemable Convertible Preferred Stock for $1,000,000
cash is accepted and the appropriate officers of the Company are hereby
authorized and directed to issue such shares upon the closing of the
transactions contemplated by the Agreement and upon receipt by the Company of
$1,000,000 from Santa Cruz Squeeze Corp.
III.
APPROVAL OF MERGER
RESOLVED, that the merger of the Company on substantially the terms and
conditions as set forth in the form of the Plan of Merger of the Company
which is a summary of the basic terms of the Agreement for the merger of
Wrapster's, L.C. into the Company and which Plan of Merger is attached hereto
as Exhibit "B" and incorporated by reference herein, be and the same is
hereby approved and advised.
FURTHER RESOLVED, that the Plan of Merger be submitted for consideration by the
shareholders of the Company entitled to vote thereon at a special meeting of the
shareholders to be called, noticed and scheduled as provided in the Company's
By-Laws and as provided by the Colorado Business Corporation Act.
FURTHER RESOLVED, that the proper officers of the Company be and they are
hereby authorized and directed in the name and on behalf of the Company to
execute and file with the Secretary of State of Colorado such Statement of
Merger following the due approval thereof by the Shareholder of the Company,
and to take any and all other actions and to execute and file any and all
instruments and documents deemed necessary or proper in connection therewith.
IV.
APPROVAL OF REVERSE STOCK SPLIT
RESOLVED, that the proposed reverse stock split (the "Reverse Stock Split") to
effect a five (5) to two (2) reverse split of the issued and outstanding shares
of the Company's no par common stock ("Common Stock") whereby each five (5)
shares of the Company's issued and outstanding Common Stock will be converted
to two (2) shaers of Common Stock is hereby authorized and approved.
FURTHER RESOLVED, that the Reverse Stock Split is subject to and effective only
upon the closing of the merger as set forth in the Plan of Merger.
FURTHER RESOLVED, that the Reverse Stock Split be submitted for consideration
by the shareholders of the Company entitled to vote thereon at a special
meeting of the shareholders to be called, noticed and scheduled as provided in
the Company's By-Laws and as provided by the Colorado Business Corporation Act.
FURTHER RESOLVED, that upon shareholder approval and the closing of the merger
as set forth in the Plan of Merger, the Company's Secretary is hereby
authorized and directed to collect the outstanding pre-split certificates from
each shareholder and to exchange them for post-split certificates in the
appropriate amounts.
V.
APPROVAL OF AMENDMENT
TO ARTICLES OF INCORPORATION
RESOLVED, that the Company's Articles of Incorporation be amended as follows:
The first sentence of Article FOURTH shall read as follows:
"The number of directors of the corporation shall be fixed by the
bylaws, or if the bylaws fail to fix such a number, then by resolutions adopted
from time to time by the board of directors, provided that the number of
directors shall not be less than one."
FURTHER RESOLVED, that the Amendment to the Articles of Incorporation be
submitted for consideration by the shareholders of the Company entitled to vote
thereon at a special meeting of the shareholders to be called, noticed and
scheduled as provided in the Company's By-laws and as provided by the Colorado
Business Corporation Act.
FURTHER RESOLVED, that upon the shareholder's approval of the Amendment to the
Articles of Incorporation, the Company shall file the appropriate Articles of
Amendment with the Colorado Secretary of State.
VI.
ACCEPTANCE OF RESIGNATIONS
RESOLVED, that the resignation of Gary McAdam and Gary A. Agron, as officers
and directors of the Company effective upon the filing of the Amendment to the
Articles of Incorporation are hereby accepted.
FURTHER RESOLVED, that the resignation of Earnest Mathis as an officer and
director of the Company, effective upon the closing of the merger set forth in
the Plan of Merger is hereby accepted.
VII.
ELECTION OF OFFICER
RESOLVED, that upon the effectiveness of the resignation of Gary McAdam as
Secretary of the Company, Earnest Mathis is hereby elected as Secretary of the
Company in addition to his current office as President.
VIII.
ELECTION OF DIRECTORS
RESOLVED, that the following personsare nominated to be directors of the
Company upon the closing of the merger set forth in the Plan of Merger and
upon the closing of the merger set forth in the Plan of Merger and upon the
resignations of the current directors.
a. Tom Metzger
b. Clydde Culp
c. Bill Gallagher
FURTHER RESOLVED, that the election of the nominated directors be submitted for
consideration by the shareholders of the Company entitled to vote thereon at a
special meeting of the shareholders to be called, noticed and scheduled as
provided in the Company's By-Laws and as provided by the Colorado Business
Corporation Act.
IX.
AMENDMENT OF BY-LAWS
RESOLVED, that in accordance with Article VIII, Section 3 of the Company's
By-Laws, the first sentence of Article III, Section 2 of the Company's By-Laws
is hereby amended to read as follows: "The number of directors of the
Corporation shall be fixed from time to time by the board of directors so long
as there is at least one director; but no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director."
This Consent of Directors may be executed in counterparts. This Consent
of Directors is executed on, and is effective as of January 28, 1998.
ALL MEMBERS OF THE BOARD OF
DIRECTORS OF HAI ENTERPRISES, INC., a
Colorado corporation
Earnest Mathis, Jr.
Gary McAdam
Gary Agron
