SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 2)*
AMERICAN COUNTRY HOLDINGS INC.
------------------------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
------------------------------
(Title of class of securities)
025278 20 1
(CUSIP Number)
American Country Holdings Inc.
222 North LaSalle Street, Suite 1600
Chicago, Illinois 60601-1105
------------------------------------
(Name, Address, and Telephone Number of person
authorized to receive notices and communications)
December 29, 2000
------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule
13D/A, and is filing this schedule because of Rule 13d-1 (b)(3) or
(4), check the following box: [__].
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 (the "Exchange Act") or otherwise
subject to the liabilities of that section of the Exchange Act but
shall be subject to all other provisions of the Exchange Act (however,
see the Notes).
CUSIP No. 025278 20 1 13D/A Page 2
1. Name of Reporting Person / I.R.S. Identification No. of Above
Person (Entities Only)
Martin L. Solomon, S.S. ####-##-####
2. Check the appropriate box if a member of a group: (a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds: PF and BK
5. Check box if disclosure of legal proceedings is required pursuant
to Item 2(d) or 2(e): [ ]
6. Citizenship or Place of Organization:
United States of America
Number of Shares Beneficially Owned By Each Reporting Person
With:
7. Sole Voting Power: 2,582,585 (1)
8. Shared Voting Power: 0
9. Sole Dispositive Power: 2,582,585 (1)
10. Shared Dispositive Power: 0
11. Aggregate Amount Beneficially Owned By Each Reporting Person:
2,582,585 (1)
12. Check box if the aggregate amount in Row (11) excludes certain
shares: [_]
13. Percent of Class represented by amount in Row (11):
21.9%
14. Type of Reporting Person: IN
_______________
(1) Amount includes 570,000 shares which may be acquired by converting
the Series A Convertible Preferred Stock.
CUSIP No. 025278 20 1 13D/A Page 3
Item 1. Security and Issuer.
The securities to which this Amendment No. 2 to Schedule 13D
relate are the shares of Common Stock, $.01 par value per share (the
"Common Stock"), of American Country Holdings Inc., a corporation
organized under the laws of Delaware (the "Issuer"). The address of
the Issuer's principal place of business is 222 North LaSalle Street,
Suite 1600, Chicago, Illinois 60601-1105.
This Amendment No. 2 to Schedule 13D is being filed to give
notice of the purchase of 100,000 shares of Series A 6% Convertible
Preferred Stock with a stated value of $10 per share (the "Preferred
Stock") by the Reporting Person. The conversion price of the
Preferred Stock is $1.75, subject to adjustment. The Issuer sold
405,000 shares of Series A convertible preferred stock and 814,286
Units, each consisting of one share of common stock and a five year
common stock purchase warrant at $1 3/4 per Unit, in an offering
exempt from registration under Regulation D of the Securities Act of
1933, as amended.
Item 2. Identity and Background.
The person signing his statement (the "Reporting Person")is:
Martin L. Solomon
P.O. Box 70
Coconut Grove, Florida 33233
Occupation: Co-Chairman of the Board of Directors of the
Issuer/Investor
Citizenship: United States
The Reporting Person has not been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors),
and has not been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which
proceeding the Reporting Person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Reporting Person obtained funds from banks and from
personal funds of the Reporting Person to pay for the Series A
convertible preferred stock.
Item 4. Purpose of Transaction
The Reporting Person does not have any plans or proposals
which relate to or would result in any of the actions or transactions
specified in clauses (a) through (j) of Item 4 of Schedule 13D. The
CUSIP No. 025278 20 1 13D/A Page 4
Issuer is obligated to register the common stock underlying the Series
A convertible preferred stock and the Reporting Person, upon effective
registration of such securities, will be able to freely trade such
securities.
Item 5. Interest and Securities of Issuer.
(a) The aggregate shares of Common Stock and the percentage
of the total outstanding shares of Common Stock beneficially owned by
the Reporting Person, based on the 11,816,204 shares of Common Stock
outstanding on December 29, 2000, are set forth below:
No. of Shares Percentage of
Beneficially Owned Outstanding Shares
------------------ ------------------
2,582,585 (1) 21.9%
------------------
(1) Includes the 100,000 share of Series A convertible preferred
stock which the Reporting Person may be deemed to beneficially
own on an as-converted basis.
(b) The Reporting Person has sole power to vote or direct
the vote and sole power to dispose of or direct the disposition of the
shares of Common Stock beneficially owned by him; and the Reporting
Person will have sole power to vote or direct the vote and sole power
to dispose of or direct the disposition of the shares of Common Stock
issuable upon warrants owned by him.
(c) The following transactions were effected with respect
to shares of Common Stock beneficially owned by the Reporting Person
in the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
PREFERRED STOCK
The preferred stock may be issued from time to time without
stockholder approval in one or more classes or series, and the board
of directors is authorized to fix the dividend rights, dividend rates,
conversion rights, rights of exchange, voting rights, rights and terms
or redemption (including sinking fund provisions), redemption prices,
CUSIP No. 025278 20 1 13D/A Page 5
liquidation preferences and any other rights, preferences, privileges
and restrictions of any class or series of preferred stock as well as
the number of shares constituting such class or series and the
designation thereof. The shares of any class or series of preferred
stock need not be identical. Depending upon the rights of such
preferred stock, the issuance of preferred stock could have an adverse
effect on holders of common stock by delaying or preventing a change
in control of the Company, making removal of the present management
more difficult, or resulting in restrictions upon the payment of
dividends and other distributions to the holders of common stock.
SERIES A CONVERTIBLE PREFERRED STOCK
We are authorized to issue 500,000 shares of Series A
convertible preferred stock, of which 405,000 shares are outstanding
as of January 28, 2001. We issued those shares to the selling
shareholders, on December 29, 2000. The shares each have a stated
value of $10. The Series A convertible preferred stock ranks senior
to our common stock and on parity with any class or series of capital
stock we subsequently create.
DIVIDENDS
Shares of the Series A convertible preferred stock accrue
dividends on a quarterly basis at an annual rate of 6.0% per share
payable out of any assets or funds legally available for payment of
dividends payable on January 1, April 1, July 1 and October 1,
commencing April 1, 2001. Dividends are cumulative and accrue,
whether or not declared by our board of directors, but are payable
only when and if declared by our board of directors. Dividends may be
paid, at our option, either in cash or by the issuance of additional
shares of preferred stock and, at our option, payment of cash in lieu
of fractional shares.
We must pay all accrued but unpaid dividends on any share of
Series A convertible preferred stock upon conversion of the shares of
preferred stock.
We may not pay any dividends or any distribution on any
class or series of capital stock on parity with or ranking junior to
the Series A convertible preferred stock, and we may not repurchase,
redeem or otherwise retire nor set funds apart for payment on any
junior stock or parity stock without the consent of a majority of the
holders of the Series A convertible preferred stock.
VOTING RIGHTS
The holders of the Series A convertible preferred stock are
entitled to vote on all matters submitted to a vote of our
stockholders. In addition, if we fail to pay any dividends for four
CUSIP No. 025278 20 1 13D/A Page 6
or more dividend periods then the holders are entitled to elect two
directors to our board until the default is remedied.
LIQUIDATION
The liquidation preference of the Series A convertible
preferred stock is $10 per share plus all accrued but unpaid
dividends. Upon liquidation, dissolution or winding up of the
Company, each holder of the Series A convertible preferred stock is
entitled to be paid in cash out of our assets available for
distribution to its shareholders an amount equal to the liquidation
preference of the Series A convertible preferred stock before any
amounts may be paid to any class or series of capital stock on parity
with or ranking junior to the Series A convertible preferred stock.
If the assets available for distribution to the holders of
Series A convertible preferred stock and any other parity security
with the preferred stock are insufficient to pay in full all amounts
payable to the holders of the Series A convertible preferred stock and
all other parity securities, then all of the assets available for
distribution to the holders of the Series A convertible preferred
stock and parity securities will be distributed among the holders
ratably in proportion to the amounts that would be payable if there
were sufficient assets to permit payment in full. After payment in
full, the holders of the Series A convertible preferred stock will not
be entitled to any further distribution of assets.
RESERVATION OF SHARES
We have authorized and will reserve and keep available
2,000,000 shares of our common stock as will be issuable upon the
conversion of all outstanding shares of Series A convertible preferred
stock and dividends payable thereon. These shares of our common
stock, when paid for and issued, will be duly and validly issued,
fully paid and non-assessable, and free of preemptive rights.
OPTIONAL REDEMPTION
The preferred stock will be redeemable at our option, in
whole or in part, at any time on or after December 29, 2002, in an
amount equal to the liquidation preference which is the stated value
and an amount equal to all accrued and unpaid dividends. If we redeem
less than all outstanding shares of Series A convertible preferred
stock, we will redeem the shares of preferred stock ratably among the
holders.
OPTIONAL CONVERSION
Shares of Series A convertible preferred stock are
convertible, at any time, at the option of the holder into shares of
common stock. The conversion of the Series A convertible preferred
CUSIP No. 025278 20 1 13D/A Page 7
stock into common stock is determined by dividing the stated value
plus all accrued but unpaid dividends by the conversion price of
$1.75, subject to adjustment as described below.
ADJUSTMENTS TO CONVERSION PRICE
The conversion price and the number of shares of common
stock issuable upon conversion of the Series A convertible preferred
stock are subject to adjustment from time to time upon the occurrence
of any of the following events at any time:
* If we (A) pay a dividend or makes a distribution with
respect to our common stock in any shares of any class
or series of its capital stock or other securities, (B)
subdivide or combine our outstanding shares of common
stock into a greater or smaller number of shares, as
applicable, or (C) issues any shares of our capital
stock in a reclassification of our shares of common
stock;
* If there occurs a change in control, which includes any
merger, consolidation, exchange of shares,
recapitalization, reorganization or conveyance of all
or substantially all of our assets;
* If we declare or make any distribution of our assets to
holders of our common stock;
* If we issue or sell warrants, rights, options or other
convertible security entitling the holders thereof to
acquire shares of common stock at a price per share of
common stock that is below the conversion price; or
* If we issue or sell any shares of common stock at a
price that is lower than the conversion price
immediately prior to such sale or issuance.
If the options expire or the convertible securities are not
exercised that caused an adjustment in the conversion price, then the
conversion price will be readjusted to the conversion price which
would have been in effect had the options or convertible securities
never been issued.
FRACTIONAL SHARES
We will not issue any fractional shares of common stock
issuable upon the conversion of the Series A convertible preferred
stock.
CUSIP No. 025278 20 1 13D/A Page 8
Without first obtaining the approval of a majority of the
then outstanding shares of Series A convertible preferred stock, we
may not:
* issue any security senior to or on par with the Series
A convertible preferred stock;
* alter, repeal or amend the rights, preferences or
privileges of the Series A convertible preferred stock;
* create any new class or series of capital stock having
a preference over or ranking on par with the Series A
convertible preferred stock as to distribution of
assets upon liquidation, dissolution or winding up of
the Company;
* increase the authorized number of shares of the Series
A convertible preferred stock; and
* increase the par value of the common stock.
This description of the Series A convertible preferred stock is
qualified in its entirety by the Certificate of Designations,
Preferences, and Rights of Series A Convertible Preferred Stock and
any amendments thereto.
Item 7. Materials to be Filed as Exhibits.
Certificate of Designations,Preferences, and Rights of Series A
Convertible Preferred Stock.
CUSIP No. 025278 20 1 13D/A Page 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
Date: January 8, 2001
By: /s/ Martin L. Solomon
----------------------
Martin L. Solomon
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
AMERICAN COUNTRY HOLDINGS INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
AMERICAN COUNTRY HOLDINGS INC., a corporation organized and
existing under the Delaware General Corporation Law (the
"Corporation"), hereby certifies that the following resolutions were
adopted by the Board of Directors of the Corporation on December 15,
2000 pursuant to authority of the Board of Directors as required by
Section 151 of the Delaware General Corporation Law ("DGCL"):
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (the "Board of Directors"
or the "Board") in accordance with the provisions of its Certificate
of Incorporation, the Board of Directors hereby authorizes a series of
the Corporation's preferred stock, par value $.10 per share (the
"Preferred Stock"), and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges, powers
and restrictions thereof as follows:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 500,000 shares
of Preferred Stock, is Series A 6% Convertible Preferred Stock (the
"Series A Preferred Stock") and the stated value shall be Ten Dollars
($10) per share (the "Stated Value").
II. RANK
The Series A Preferred Stock shall rank senior to (i) the
Corporation's common stock, par value $.01 per share (the "Common
Stock") and (ii) on parity with any class or series of capital stock
of the Corporation hereafter created (unless, with the consent of the
holders of Series A Preferred Stock obtained in accordance with
Article VIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to the Series A Preferred
Stock) (the "Pari Passu Securities") in each case as to distribution
of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary. The definition of Pari
Passu Securities shall also include any rights or options exercisable
for or convertible into any of the Pari Passu Securities.
III. VOTING RIGHTS
A. Right to Vote as a Single Class with the Common Stock. The
holders of Series A Preferred Stock shall be entitled to vote on all
matters submitted to a vote of stockholders of the Corporation at all
stockholders meetings and in all actions by written consent of
stockholders of the Corporation. Each holder of Series A Preferred
Stock shall be entitled to (i) such number of votes as such holder
would be entitled to cast if such holder had converted all of its
shares of Series A Preferred Stock into Common Stock pursuant to
Article VII hereof immediately prior to the record date for such
stockholders meeting or action by written consent and (ii) notice of
any stockholders meeting in accordance with the Certificate of
Incorporation and By-laws of the Corporation.
B. Right to Designate Directors. In the event that the
Corporation shall have failed to pay in full dividends on the Series A
Preferred Stock for a period of twelve consecutive months ("Default"),
then in addition to any other rights that may otherwise be available
to the holders of the Series A Preferred Stock pursuant to this
Certificate of Designation or otherwise, the total number of directors
of the Corporation shall be increased by two, and the holders of the
Series A Preferred Stock, voting together as a single class, shall by
an affirmative vote of holders of a plurality of the total number of
shares of Series A Preferred Stock voting thereon, be entitled to
elect to the Board of Directors, at a meeting of such stockholders or
by written consent in lieu thereof, two additional directors ("Default
Directors") who shall be required to satisfy any qualifications
existing under applicable law and shall be entitled to all rights of
voting and participation as are directors of the Corporation
generally, and shall be entitled by affirmative vote of holders of a
majority of the total number of shares of Series A Preferred Stock
then outstanding or by written consent in lieu thereof, at any time to
remove a director so elected. No Default Director may be removed
except in accordance with this Section. Vacancies among the Default
Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled at
any time, but only by the affirmative vote of holders of a plurality
of the total number of shares of Series A Preferred Stock then
outstanding, voting together as a single class, or by written consent
in lieu thereof, and any director so chosen shall hold office for a
term expiring on the date the term of office of the director such
newly-elected director shall have replaced would have expired. At any
time during which the holders of the Series A Preferred Stock are
entitled to elect Default Directors, in the event the Corporation pays
all theretofore unpaid dividends then the term of the Default
Directors then in office shall be deemed to have expired as of the
time such payments are made, and the total number of directors of the
Corporation shall be reduced by the number of Default Directors then
in office whose term shall have expired and the holders of the Series
A Preferred Stock shall cease to have any rights hereunder to elect
Default Directors unless and until a Default shall recur.
IV. DIVIDENDS
The holders of the Series A Preferred Stock shall be entitled to
receive dividends on a semi-annual basis at a rate of 6% per annum per
share, payable out of any assets or funds legally available for that
purpose and payable on July 1 and January 1, commencing July 1, 2001.
2
Such dividends shall be cumulative and shall accrue, whether or not
declared by the Board of Directors, but shall be payable only when, as
and if declared by the Board of Directors. Accrued but unpaid
dividends will be paid upon conversion of the Series A Preferred
Stock. The Corporation shall have the option to pay such dividends on
the Series A Preferred Stock in additional Series A Preferred Stock or
in cash. In no event, so long as any Series A Preferred Stock shall
remain outstanding, shall any dividend whatsoever be declared or paid
upon, nor shall any distribution be made upon any Pari Passu
Securities, nor shall any such securities be purchased or redeemed by
the Corporation nor shall any moneys be paid to or made available for
a sinking fund for the purchase or redemption of any such securities
(other than a distribution of Pari Passu Securities), without, in each
such case, the written consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting together as a
class.
V. LIQUIDATION PREFERENCE
Liquidation Event. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation (a "Liquidation"), each of the holders of shares of Series
A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the Series A Liquidation
Preference with respect to each share of Series A Preferred Stock held
by such holder on the date fixed for Liquidation, before any payment
or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Pari Passu
Securities. If the assets of the Corporation available for
distribution to the holders of Series A Preferred Stock and the Pari
Passu Securities shall be insufficient to permit payment in full to
such holders of the sums which such holders are entitled to receive in
a Liquidation, then all of the assets available for distribution to
the holders of Series A Preferred Stock and Pari Passu Securities
shall be distributed among and paid to such holders ratably in
proportion to the amounts that would be payable to such holders if
such assets were sufficient to permit payment in full. Immediately
prior to a Liquidation of the Corporation, to the extend funds of the
Corporation are legally available for the payment of dividends, the
Corporation shall declare for payment all accrued and unpaid dividends
with respect to the Series A Preferred Stock and any Pari Passu
Securities ratably in accordance with the respective amounts that
would be payable on such shares of Series A Preferred Stock and any
such other Pari Passu Securities if all amounts payable thereon were
paid in full. After payment in full of the Series A Liquidation
Preference, the holders of the Series A Preferred Stock will not be
entitled to any further participation in any distribution of assets by
the Corporation.
B. Remaining Assets. Upon any such Liquidation, after the
holders of Series A Preferred Stock shall have been paid in full the
3
Liquidation Preference, the remaining assets of the Corporation shall
be distributed to the holders of the Pari Passu Securities.
C. Liquidation Preference. For purposes hereof, the
"Liquidation Preference" with respect to each share of the Series A
Preferred Stock shall mean an amount equal to the sum of (i) the
Stated Value thereof plus (ii) an amount (the "Premium Amount") equal
to all accrued but unpaid dividends as set forth in Article IV for the
period beginning on the date of issuance of the Series A Preferred
Stock (the "Issue Date") and ending on the date of final distribution
to the holder thereof (prorated for any portion of such period). The
liquidation preference with respect to any Pari Passu Securities shall
be as set forth in the Certificate of Designation filed in respect
thereof.
VI. REDEMPTION
A. Optional Redemption
The outstanding shares of Series A Preferred Stock may be
redeemed at the option of the Corporation (the "Optional Redemption"),
in whole or in part, at any time and from time to time after the
issuance thereof, out of funds legally available therefor. The
Corporation may redeem the Series A Preferred Stock by payment in
cash, for each share of Series A Preferred Stock to be redeemed, in an
amount (the "Series A Redemption Amount") equal to the Series A Stated
Amount, plus the Premium Amount. The date on which the Series A
Redemption Amount is payable is referred to herein as the "Series A
Redemption Date." If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, the Corporation shall
redeem a pro rata portion of the shares of Series A Preferred Stock
held by each holder.
B. Notice of Redemption
A notice of redemption shall be provided by the Corporation to
the Holder in writing not less than ten nor more than 15 days prior to
the Redemption Date and such notice shall refer to this Section.
VII. CONVERSION AT THE OPTION OF THE HOLDER
A. Optional Conversion
(1) Conversion Amount. Each holder of shares of Series A
Preferred Stock may, at its option at any time and from time to time,
upon surrender of the certificates therefor, convert any or all of its
shares of Series A Preferred Stock into Common Stock as set forth
below (an "Optional Conversion"). Each share of Series A Preferred
Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as such Common Stock exists on
the Issue Date, or any other shares of capital stock or other
securities of the Corporation into which such Common Stock is
4
thereafter changed or reclassified, as is determined by dividing (a)
the total Stated Value per share to be converted plus (i) the Premium
Amount per share to be converted by (b) the then effective Conversion
Price (as defined below).
B. Conversion Price. The "Conversion Price" as used herein,
shall initially be equal to the high bid price of the Common Stock on
the Issue Date per share and shall be subject to adjustment as set
forth in this Certificate. All such adjustments shall be successive.
C. Adjustments to Conversion Price. The Conversion Price shall
be subject to the following provisions:
(1) Adjustment to Conversion Price Due to Stock Split,
Stock Dividend, Etc. If at any time when Series A Preferred Stock is
issued and outstanding, the number of outstanding shares of Common
Stock is increased or decreased by a stock split, stock dividend,
combination, reclassification, to all holders of Common Stock or other
similar event, then the Conversion Price shall be calculated giving
appropriate effect to the stock split, stock dividend, Combination,
reclassification, or other similar event.
(2) Adjustment Due to Merger, Consolidation, Etc. If, at
any time when Series A Preferred Stock is issued and outstanding and
prior to the conversion of all Series A Preferred Stock, there shall
be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of
Common Stock of the Corporation shall be changed into the same or a
different number of shares of another class or classes of stock or
securities of the Corporation or another entity, or in case of any
sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete
liquidation of the Corporation (each, a "Change of Control
Transaction"), then the holders of Series A Preferred Stock shall
thereafter have the right to receive upon conversion of the Series A
Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or assets
which the holders of Series A Preferred Stock would have been entitled
to receive in such transaction had the Series A Preferred Stock been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion contained herein), and in any
such case appropriate provisions shall be made with respect to the
rights and interests of the holders of Series A Preferred Stock to the
end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter
deliverable upon the conversion of Series A Preferred Stock.
5
(3) Adjustment Due to Distribution. Subject to Article IV,
if the Corporation shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as
a dividend, stock repurchase, by way of return of capital or otherwise
(including any dividend or distribution to the Corporation's
shareholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"),
then the holders of Series A Preferred Stock shall be entitled, upon
any conversion of shares of Series A Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the
holder with respect to the shares of Common Stock issuable upon such
conversion had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders
entitled to such Distribution.
(4) Antidilution Provisions. The Conversion Price shall be
subject to adjustment from time to time as provided below:
(a) Adjustment of Conversion Price. If and whenever
on or after the Issue Date, the Corporation is deemed to have issued
or sold, any shares of Common Stock for no consideration or for less
than the then effective Conversion Price (before deduction of
reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Conversion Price will be
adjusted to a price determined by multiplying the Conversion Price in
effect immediately prior to the Dilutive Issuance by a fraction, (I)
the numerator of which is an amount equal to the sum of (x) the number
of shares of Common Stock actually outstanding immediately prior to
the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in subsection (b) below,
received by the Corporation upon such Dilutive Issuance divided by the
Conversion Price in effect immediately prior to the Dilutive Issuance,
and (II) the denominator of which is the total number of shares of
Common Stock actually outstanding immediately prior to the Dilutive
Issuance plus the number of shares of Common Stock issued or to be
issued in the Dilutive Issuance.
(b) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price, the following
will be applicable:
(i) Issuance of Rights or Options. If the
Corporation in any manner issues or grants any warrants, rights or
options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock or other securities convertible into or
exchangeable for Common Stock ("Convertible Securities") (such
warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per
share for which Common Stock is issuable upon the exercise of such
Options is less than the Conversion Price, then the Conversion Price
6
shall be adjusted in the manner set forth in subsection (4)(a) above.
For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the number of shares
of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable).
No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are
issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is
less than the Conversion Price, then the Conversion Price shall be
adjusted in the manner set forth in subsection (4)(a) above. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (a) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or
sale of all such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (b) the number
of shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities. No further adjustment to the
Conversion Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate.
If there is a change at any time in (a) the amount of additional
consideration payable to the Corporation upon the exercise of any
Options; (b) the amount of additional consideration, if any, payable
to the Corporation upon the conversion or exchange of any Convertible
Securities; or (c) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than under or
by reason of provisions designed to protect against dilution or to
automatically adjust for stock splits, stock dividends, combinations,
reclassifications or other similar events), the Conversion Price in
effect at the time of such change will be readjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
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additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. If, in any case, the total number of shares
of Common Stock issuable upon exercise of any Option or upon
conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or
exchange such Convertible Securities shall have expired or terminated,
the Conversion Price then in effect will be readjusted to the
Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of
Common Stock issued upon exercise or conversion thereof) never been
issued.
(v) Exceptions to Adjustment of Conversion Price.
No adjustment to the Conversion Price will be made (a) upon the
exercise of any warrants, options or convertible securities granted,
issued and outstanding on the Issue Date, including the Series A
Preferred Stock or any Convertible Securities outstanding as of the
Issue Date including the Warrants; (b) upon the payment of any
dividends on the Series A Preferred Stock and any conversions thereof;
or (c) upon the grant or exercise of any stock or options which may
hereafter be granted or exercised under any employee benefit plan of
the Corporation now existing or to be implemented in the future, so
long as in the case of any grant in the future the issuance of such
stock or options is approved by a majority of the independent members
of the Board of Directors of the Corporation or a majority of the
members of a committee of independent directors established for such
purpose.
D. Mechanics of Conversion. In order to convert Series A
Preferred Stock into full shares of Common Stock, a holder of Series A
Preferred Stock shall: (a) submit a copy of the fully executed notice
of conversion ("Notice of Conversion") to the Corporation by facsimile
dispatched prior to Midnight, New York City time (the "Conversion
Notice Deadline") on the date specified therein as the Conversion Date
(as defined below) (or by other means resulting in, or reasonably
expected to result in, notice to the Corporation on the Conversion
Date) to the office of the Corporation, which notice shall specify the
number of shares of Series A Preferred Stock to be converted, the
Conversion Price and a calculation of the number of shares of Common
Stock issuable upon such conversion (together with a copy of the first
page of each certificate to be converted); and (b) surrender the
original certificates representing the Series A Preferred Stock being
converted (the "Preferred Stock Certificates"), duly endorsed, along
with a copy of the Notice of Conversion to the office of the
Corporation as soon as practicable thereafter. The Corporation shall
not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
8
Certificates are delivered to the Corporation as provided above, or
the holder notifies the Corporation that such certificates have been
lost, stolen or destroyed (subject to the requirements of subparagraph
(i) below).
(1) Lost or Stolen Certificates. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation
of any Series A Preferred Stock Certificates, and (in the case of
loss, theft or destruction) of indemnity reasonably satisfactory to
the Corporation, and upon surrender and cancellation of the Series A
Preferred Stock Certificate(s), if mutilated, the Corporation shall
execute and deliver new Series A Preferred Stock Certificate(s) of
like tenor and date.
(2) Delivery of Common Stock Upon Conversion. Upon the
surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within five (5) business
days after such surrender (or, in the case of lost, stolen or
destroyed certificates, after provision of agreement and
indemnification pursuant to subparagraph (1) above) (the "Delivery
Period"), deliver to or upon the order of the holder (a) that number
of shares of Common Stock for the portion of the shares of Series A
Preferred Stock converted as shall be determined in accordance
herewith and (b) a certificate representing the balance of the shares
of Series A Preferred Stock not converted, if any.
(3) No Fractional Shares. If any conversion of Series A
Preferred Stock would result in a fractional share of Common Stock or
the right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of
Common Stock issuable upon Conversion of the Series A Preferred Stock
shall be rounded down to the next highest number of shares.
(4) Conversion Date. The "Conversion Date" shall be the
date specified in the Notice of Conversion, provided that the Notice
of Conversion is submitted by facsimile (or by other means resulting
in, or reasonably expected to result in, notice) to the Corporation
before 12:00 noon, New York City time, on the date so specified,
otherwise the Conversion Date shall be the first business day after
the date so specified on which the Notice of Conversion is actually
received by the Corporation. The person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such
securities as of the Conversion Date and all rights with respect to
the shares of Series A Preferred Stock surrendered shall forthwith
terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion and except
that the holders preferential rights as a holder of Series A Preferred
Stock shall survive to the extent the Corporation fails to deliver
such securities.
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(5) Reservation of Shares. A number of shares of the
authorized but unissued Common Stock sufficient to provide for the
conversion of the Series A Preferred Stock outstanding (based on the
Conversion Price then in effect) shall at all times be reserved by the
Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series A Preferred Stock,
2,000,000 authorized and unissued shares of Common Stock have been
duly reserved for issuance upon conversion of the Series A Preferred
Stock (the "Reserved Amount"). If the Corporation shall issue any
securities or make any change in its capital structure which would
change the number of shares of Common Stock into which each share of
the Series A Preferred Stock shall be convertible, the Corporation
shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion
of the outstanding Series A Preferred Stock.
E. Notice of Conversion Price Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to
this Article VII, 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 A 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 A Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (a) such
adjustment or 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 securities or property which at the time would be
received upon conversion of a share of Series A Preferred Stock.
F. Status as Stockholders. Upon submission of a Notice of
Conversion by a holder of Series A Preferred Stock, (a) the shares
covered thereby (other than the shares, if any, which cannot be issued
because their issuance would exceed such holder's allocated portion of
the Reserved Amount) shall be deemed converted into shares of Common
Stock and (b) the holder's rights as a holder of such converted shares
of Series A Preferred Stock shall cease and terminate, excepting only
the right to receive certificates for such shares of Common Stock and
to any remedies provided herein or otherwise available at law or in
equity to such holder because of a failure by the Corporation to
comply with the terms of this Certificate of Designation.
Notwithstanding the foregoing, if a holder has not received
certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect
to a conversion of shares of Series A Preferred Stock for any reason,
then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation) the holder
shall regain the rights of a holder of such shares of Series A
Preferred Stock with respect to such unconverted shares of Series A
Preferred Stock and the Corporation shall, as soon as practicable,
10
return such unconverted shares of Series A Preferred Stock to the
holder or, if such shares of Series A Preferred Stock have not been
surrendered, adjust its records to reflect that such shares of Series
A Preferred Stock have not been converted.
VIII. PROTECTIVE PROVISIONS
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by the DGCL) of the holders of at
least a majority of the then outstanding shares of Series A Preferred
Stock:
(a) alter, amend or repeal (whether by merger,
consolidation or otherwise) the rights, preferences or privileges of
the Series A Preferred Stock or any capital stock of the Corporation
so as to affect adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock
having a preference over the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of
the Corporation ("Senior Securities");
(c) create any new class or series of capital stock
ranking pari passu with the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of
the Corporation (as previously defined in Article II hereof, "Pari
Passu Securities");
(d) increase the authorized number of shares of Series
A Preferred Stock;
(e) issue any Senior Securities or Pari Passu
Securities;
(f) increase the par value of the Common Stock, or
(g) do any act or thing not authorized or contemplated
by this Certificate of Designation which would result in taxation of
the holders of shares of the Series A Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended (or any
comparable provision of the Internal Revenue Code as hereafter from
time to time amended).
IX. SINKING FUND
The Series A Preferred Stock shall not be subject to the
operation of a sinking fund.
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X. MISCELLANEOUS
A. Register. The Corporation shall keep at its principal
office a register in which the Corporation shall provide for the
registration of the Series A Preferred Stock. Upon any transfer of
the Series A Preferred Stock in accordance with the provisions hereof,
the Corporation shall register such transfer on the register of Series
A Preferred Stock.
B. Withholding. To the extent required by law, the Corporation
may withhold amounts for or on account of any taxes imposed or levied
by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to
the Series A Preferred Stock.
C. Headings. The headings of the Articles and Sections of the
Certificate of Designation are inserted for convenience only and do
not constitute a part of this Certificate of Designation.
D. Severability. If any provision of this Certificate of
Designation or the application thereof to any person or entity or any
circumstances is invalid or unenforceable, a suitable and equitable
provision shall be substituted therefore in order to carry out so far
as may be valid and enforceable the intent and purpose of this
Certificate of Designation and the application of such provision to
other persons, entities or circumstances shall not be affected by such
invalidity or enforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
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IN WITNESS WHEREOF, this Certificate of Designation is executed
on behalf of the Corporation this 15th day of December 2000.
AMERICAN COUNTRY HOLDINGS INC.
By: /s/ John A. Dore
--------------------------
John A. Dore
Co-Chairman and Chief Executive
Officer
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