DESCRIPTION AND DESIGNATION OF SERIES B PREFERRED STOCK
1. Designation and Definitions.
(a) Designation. A total of 444 shares of the Corporation's previously
undesignated Preferred Stock, $.001 par value, shall be designated as the
"Series B Preferred Stock." The original issue price per share of the Series B
Preferred Stock shall be deemed to be $3,003 (the "Original Issue Price").
(b) Certain Definitions. As used herein, the following terms, unless the
context otherwise requires, have the following respective meanings:
(i) "Common Stock" means the common stock, par value $.001 per share,
of the Corporation.
(ii) "Conversion Date" means each date on which the Corporation
receives by telecopy written notice in accordance with Section 5(g) hereof
from a holder of Series B Preferred Stock that such holder elects to
convert shares of its Series B Preferred Stock.
(iii) "Issue Date" means, with respect to each share of Series B
Preferred Stock held by any holder, the date on which the Corporation
originally issued such share to a holder (regardless of the number of times
transfer of such share is made on the stock transfer books maintained by or
for the Corporation, and regardless of the number of certificates which may
be issued to evidence such share, and irrespective of any subsequent
transfer or other disposition of such share to any other holder).
2. Dividends.
(a) The Series B Preferred Stock shall not bear any dividends.
(b) If the Board of Directors shall declare any dividend or distribution
payable upon the then outstanding shares of Common Stock, the holders of the
Series B Preferred Stock shall be entitled to the amount of dividends and
distributions on the Series B Preferred Stock as would be declared payable on
the largest number of whole shares of Common Stock into which the shares of
Series B Preferred Stock held by each holder thereof could be converted pursuant
to the provisions of Section 5 hereof, such number determined as of the record
date for the determination of holders of Common Stock entitled to receive such
dividend. Such determination of "whole shares" shall be based upon the aggregate
number of shares of Series B Preferred Stock held by each holder, and not upon
each share of Series B Preferred Stock so held by the holder.
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(c) Subject to the foregoing provisions of this Section 2, the Board of
Directors may declare and the Corporation may pay or set apart for payment, or
cause the accrual of, stated or cumulative dividends and other distributions on
any other series of preferred stock hereafter designated, and may purchase or
otherwise redeem any of the same (or any warrants, rights, options or other
securities exercisable therefor or convertible or exchangeable thereinto), and
the holders of Series B Preferred Stock shall not be entitled to share therein.
3. Liquidation, Dissolution Or Winding Up.
(a) Treatment At Liquidation, Dissolution or Winding Up. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, or in the event of its insolvency, before any distribution or
payment is made to any holders of Common Stock or any other class or series of
capital stock of the Corporation designated to be junior to the Series B
Preferred Stock, and subject to the liquidation rights and preferences of any
class or series of Preferred Stock designated by the Board of Directors in the
future to be senior ("Senior Stock") to or on a parity ("Pari Passu Stock") with
the Series B Preferred Stock with respect to liquidation preferences, the holder
of each share of Series B Preferred Stock shall be entitled to be paid first out
of the assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus or earnings, an amount equal to $2252.25 per share (the "Liquidation
Value").
If, upon liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation available for distribution to its stockholders after
appropriate deduction is made for payment in full of the liquidation preference
of all Senior Stock shall be insufficient to pay the holders of the Series B
Preferred Stock and any Pari Passu Stock the full amount to which they otherwise
would be entitled, the holders of Series B Preferred Stock and any Pari Passu
Stock shall share ratably in any distribution of available assets pro rata in
proportion to the respective liquidation preference amounts which would
otherwise be payable upon liquidation with respect to the outstanding shares of
the Series B Preferred Stock and any Pari Passu Stock if all liquidation
preference amounts with respect to such shares were paid in full, based upon the
aggregate Liquidation Value payable upon all shares of Series B Preferred Stock
and Pari Passu Stock then outstanding.
After such payment shall have been made in full to the holders of the
Senior Stock, Series B Preferred Stock and any Pari Passu Stock, or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of holders of the Series B Preferred Stock so as to be available
for such payment, the remaining assets available for distribution shall be
distributed ratably among the holders of the Common Stock and any class or
series of capital stock designated to be junior to the Series B Preferred Stock
(if any) in right of payment upon any liquidation, dissolution or winding up of
the Corporation.
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The amounts set forth above shall be subject to equitable adjustment by the
Board of Directors whenever there shall occur a stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series B Preferred
Stock.
(b) Distributions Other Than Cash. Whenever the distributions provided for
in this Section shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors. All distributions (including distributions
other than cash) made hereunder shall be made pro rata to the holders of Series
B Preferred Stock.
(c) Merger. If any merger or consolidation of the Corporation into or with
another corporation shall occur and in such merger or consolidation, the
Corporation's Common Stock shall be converted or exchanged into stock,
securities or other property, the Series B Preferred Stock shall be converted
into the same such stock, securities or property in an amount per share equal to
the largest number of whole shares of Common Stock into which such holder's
shares of Series B Preferred Stock could be converted on the date of such
transaction.
4. Voting Power.
(a) General. Except as otherwise expressly provided in this Section 4 or as
otherwise required by the General Corporation Law of the State of Delaware, each
holder of Series B Preferred Stock shall be entitled to vote on all matters and
shall be entitled to that number of votes equal to the largest number of whole
shares of Common Stock into which such holder's shares of Series B Preferred
Stock could be converted, pursuant to the provisions of Section 5 hereof, at the
record date for the determination of stockholders entitled to vote on any matter
or, if no such record date is established, at the date such vote is taken or any
written consent of stockholders is solicited. Except as otherwise expressly
required by law, the holders of shares of Series B Preferred Stock and Common
Stock shall vote together (or render written consents in lieu of a vote) as a
single class on all matters submitted to the stockholders of the Corporation.
Such determination of "whole shares" shall be based upon the aggregate
number of shares of Series B Preferred Stock held by each holder, and not upon
each share of Series B Preferred Stock so held by the holder.
(b) Amendments To Charter. For so long as there are any shares of Series B
Preferred Stock outstanding, the Corporation shall not amend its Certificate of
Incorporation or this Certificate of Designation in any manner adverse to the
holders of Series B Preferred Stock (including, without limitation, pursuant to
or as a result of any merger, consolidation or otherwise) without the approval,
by vote or written consent, of the holders of at least
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a majority of the then outstanding shares of Series B Preferred Stock, voting
together as a class, each share of Series B Preferred Stock to be entitled to
one vote in each instance. Without limiting the generality of the foregoing, the
creation, or increase in the authorized number of shares, of any class or series
of stock ranking prior to or on a parity with the Series B Preferred Stock
either as to dividends or upon liquidation shall be deemed not to adversely
affect the rights of the holders of Series B Preferred Stock for purposes of
this Section 4(b).
5. Conversion Rights.
(a) Conversion. Each holder of Series B Preferred Stock shall have the
right, at such holder's option, to convert at any time any of the shares of
Series B Preferred Stock held by such holder into such number of fully paid and
nonassessable shares of Common Stock as shall be determined by multiplying the
number of shares of Series B Preferred Stock to be converted by the Conversion
Ratio (as defined below).
(b) Conversion Ratio. The conversion ratio (the "Conversion Ratio") shall
initially be 1001. The initial Conversion Price shall be subject to adjustment,
in order to adjust the number of shares of Common Stock into which the Series B
Preferred Stock is convertible, as hereinafter provided.
(c) Automatic Conversion. Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price on the first anniversary of the Issue Date.
(d) Adjustment for Subdivisions, Combinations or Consolidations of Common
Stock. In the event of a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), the Conversion Ratio in effect immediately
prior to the record date or effectiveness, as the case may be, of such
subdivision shall, concurrently with such record date or effectiveness, be
proportionately increased. In the event the outstanding shares of Common Stock
shall be combined or consolidated (by reclassification or otherwise) into a
lesser number of shares of Common Stock, the Conversion Ratio in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
decreased.
(e) Adjustment For Reclassification, Exchange, or Substitution. In the
event that at any time or from time to time after the Issue Date, the Common
Stock issuable upon the conversion of the Series B Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares provided for above or stock
dividend, or a merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of each such share of Series B Preferred
Stock shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other
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securities and property receivable upon such reorganization, reclassification,
or other change, by a holder of the number of shares of Common Stock into which
such share of Series B Preferred Stock might have been converted immediately
prior to such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(f) Certificate As To Adjustments; Notice By Corporation. In each case of
an adjustment or readjustment of the Conversion Ratio, the Corporation at its
expense will furnish each holder of Series B Preferred Stock so affected with a
certificate prepared by an officer of the Corporation, showing such adjustment
or readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(g) Exercise of Conversion Privilege. To exercise its conversion privilege,
a holder of Series B Preferred Stock shall give written notice by telecopy to
the Corporation at its principal office that such holder elects to convert
shares of its Series B Preferred Stock and shall thereafter surrender the
original certificate(s) representing the shares being converted to the
Corporation at its principal office together with an originally executed copy of
such notice. Such notice shall also state the name or names (with its address or
addresses, as well as the address(es) for delivery) in which the certificate(s)
for shares of Common Stock issuable upon such conversion shall be issued. The
certificate(s) for the shares of Series B Preferred Stock surrendered for
conversion shall be accompanied by proper assignment thereof to the Corporation
or in blank. As promptly as practicable after the Corporation receives the
original certificate(s) for the shares of Series B Preferred Stock surrendered
for conversion, the proper assignment thereof to the Corporation or in blank and
the original notice of conversion (collectively, the "Original Documentation"),
but in no event more than three (3) business days after the Corporation's
receipt of the Original Documentation, the Corporation shall issue and shall
deliver to the holder of the shares of Series B Preferred Stock being converted,
at the addresses set forth therefor by the holder, such certificate(s) as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series B Preferred Stock in accordance with the
provisions of this Section 5, and cash, as provided in Section 5(h), in respect
of any fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series B Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the shares of Common Stock represented thereby.
(h) Cash In Lieu of Fractional Shares. No fractional shares of Common Stock
or scrip representing fractional shares shall be issued upon the conversion of
shares of Series B Preferred Stock. Instead of any fractional shares of Common
Stock that would otherwise be issuable upon conversion of Series B Preferred
Stock, the Corporation shall pay to
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the holder of the shares of Series B Preferred Stock being converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the aggregate number of shares of Series
B Preferred Stock being converted at any one time by any holder thereof, not
upon each share of Series B Preferred Stock being converted.
(i) Partial Conversion. In the event some but not all of the shares of
Series B Preferred Stock represented by a certificate(s) surrendered by a holder
are converted, the Corporation shall execute and deliver to or on the order of
the holder, at the expense of the Corporation, a new certificate representing
the number of shares of Series B Preferred Stock which were not converted. Such
new certificate shall be so delivered on or prior to the date set forth in
Section 5(h) for the delivery of certificates for shares of Common Stock.
(j) Reservation of Common Stock. 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 B
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 B Preferred Stock (including any shares of Series B Preferred Stock
represented by any warrants, options, subscription or purchase rights for the
Series B Preferred Stock), and 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 the Series B Preferred Stock (including any
shares of Series B Preferred Stock represented by any warrants, options,
subscriptions or purchase rights for the Series B Preferred Stock), then the
Corporation shall be deemed to be in breach and default of its obligations
hereunder, and in addition to all charges, claims and rights at law or in equity
that each holder shall be entitled to, the Corporation shall use all means
reasonably available to it, and promptly take any and all actions as may be
necessary, to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
6. Redemption and Repurchase Rights. The Corporation shall have no right to
redeem, and holders of shares of Series B Preferred Stock shall have no right to
cause the Corporation to redeem, any or all of the outstanding shares of Series
B Preferred Stock.
7. Notices of Record Date. In the event of any:
(a) 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 or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of
any class or any other securities or property, or to receive any other
right, or
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(b) capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any other
entity or person, or
(c) voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then and in each such event the Corporation shall telecopy
and thereafter mail or cause to be mailed to each holder of Series B
Preferred Stock a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right and
a description of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (iii) the time, if any, that is to be
fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice
shall be telecopied and thereafter mailed by first class mail, postage
prepaid, or by express overnight courier service, at least ten (10) days
prior to the date specified in such notice on which such action is to be
taken.
8. General.
(a) Replacement of Certificates. Upon the Corporation's receipt, from the
holder of any certificate evidencing shares of Series B Preferred Stock, of
evidence reasonably satisfactory to the Corporation (an affidavit of such holder
will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of such certificate, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, and in the case of any such mutilation, upon surrender of such
certificate, the Corporation (at its expense) shall execute and deliver to such
holder, in lieu of such certificate, a new certificate that represents the
number of shares represented by, is dated the date of, is issued in the name of
the holder of, and is substantially identical in form of, such lost, stolen,
destroyed or mutilated certificate.
(b) Payment of Taxes. The Corporation shall pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed in
connection with the issuance or delivery of any shares of Common Stock (or other
of the Corporation's securities) that results from the conversion of shares of
Series B Preferred Stock pursuant to this Certificate of Designation.
Notwithstanding the foregoing, if the Corporation, pursuant to a notice from a
holder of any shares of Series B Preferred Stock, effects the issuance or
delivery of any shares of Common Stock (or other of the Corporation's
securities) in any name(s)
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other than such holder's name, then such holder shall deliver to the Corporation
with the aforesaid notice (A) all transfer taxes and other governmental charges
payable upon the issuance or delivery of securities in such other name(s) or (B)
evidence satisfactory to the Corporation that such taxes and charges have been
or shall be paid in full.
(c) Status of Converted Shares. Shares of Series B Preferred Stock that are
converted or otherwise acquired by the Corporation in any manner (including by
purchase or exchange) shall be canceled and upon cancellation (i) shall no
longer be deemed to be outstanding, (ii) shall become authorized but unissued
shares of preferred stock undesignated as to series and (iii) may be reissued as
part of another series of preferred stock.
(d) Waiver. Any provision of the Certificate of Designations may be amended
and observance thereof may be waived only with the written consent of the
holders of not less than fifty-one percent (51%) of the outstanding shares of
the Series B Preferred Stock.
