UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 1996
Commission File No. 0-12116
ComTec International, Inc.
(Name of Small Business Issuer in its charter)
New Mexico 75-2456757
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10855 E. Bethany Drive, Aurora, CO 80014
(Address of principal executive offices)
(303) 743-7983
(IssuerOs Telephone Number Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No __
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrantOs
knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB: [ ]
The aggregate market value of the 11,265,022 shares of voting
stock held by non-affiliates of the issuer was
approximately $2,253,004. The aggregate market value was based
upon the mean between the closing bid
and asked price for the common shares as reported in the Over-The-
Counter Bulletin Board as of June 28, 1996.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Number of shares outstanding of each of the issuerOs classes of
common stock as of June 30, 1996 was 41,299,254.
State issuerOs revenues for its most recent fiscal year: $0.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Sections 12,13 or
15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.
Yes X No__
DOCUMENTS INCORPORATED BY REFERENCE: None
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
This Form 10-KSB/A is filed to incorporate all Exhibits not
included with the initial filing.
(a)Exhibits. The following documents are filed herewith or inc
orporated herein by reference as Exhibits:
2.0 Acquisition of Keystone Holding Corp. dated May 10, 1995
(incorporated by reference to the CompanyOs Form 8-K dated May
10, 1995).
2.1 Definitive Acquisition Agreement By and Between Key
Communications Group, Inc. and Omni-Range Communications dated
August 5, 1995. (1)
2.2 Agreement between the Company and Video Licensing Group,
Inc. dated January 24, 1996. (1)
2.3 Acquisition Agreement between the Company and DCL Associates
dated April 29, 1996. (1)
2.4 Letter of Intent between the Company and Telecosm dated May
31, 1996. (1)
3.1 Articles of Incorporation of the Company. (incorporated by
reference to Exhibit 3.1 to the CompanyOs Form S-1 Registration
Statement No. 82-88530 dated December 20, 1983).
3.2 By-laws. (incorporated by reference to Exhibit 3.2 to the
CompanyOs Form S-1 Registration Statement No. 82-88530 dated
December 20, 1983).
4.0 Certificate of Designation of Series A Preferred Shares. (1)
4.1 Certificate of Designation of Series B Preferred Shares.
4.2 Certificate of Designation of Series C Preferred Shares.
10.01 Form of Employment Agreement between the Company and
its officers. (1)
10.02 Commercial contract to buy and sell real estate between
Keystone Holding Corp. and Local Service Corporation dated May 5,
1995. Exhibit header reads OInternational Network.O (1)
10.03 Warranty Deed dated May 30, 1995 from Local Service
Corporation to Nattem USA, Inc.. (1)
10.04 Deed of Trust, security agreement and financing
statement executed by David L. Terry and Celia M. Terry dated
September 9, 1986. (1)
10.05 Promissory Note and Deed of Trust dated May 30, 1995
executed by Key Car Finance Company in favor of Local Service
Corporation. (1)
10.06 Agreement of Sale By and Between Nattem USA, Inc. and
John Sandy Productions, Inc. dated July 26, 1995, together with
Exhibits. (1)
10.07 Option Agreement By and Between Key Communications
Group, Inc. and Mobile-One Communications, Inc. dated July 31,
1995. (1)
10.08 Agreement among the Company, Proxhill Marketing Limited
and Adex Corp. dated December 15, 1995. (1)
16 Letters on change in certifying accountant. (incorporated by
reference to the CompanyOs Form 8-K dated August 22, 1996 and
September 12. 1996).
21 Subsidiaries of the registrant. (1)
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
_________________
(1) Incorporated by reference to the exhibits filed with the
CompanyOs Form 10-KSB for the fiscal year ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report signed on its behalf by the Undersigned, thereunto duly
authorized.
COMTEC INTERNATIONAL, INC.
Date: October 29, 1996 By: /s/ donald g. mack
Donald G. Mack, President and
Chief Executive Officer
By: /s/ kelsey T. Kennedy
Kelsey T. Kennedy, Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
Signature Title Date
/s/ donald g. mack Director October 29, 1996
Donald G. Mack
/s/ robert clauson Director October 29, 1996
Robert Clauson
/s/ mitchell b. chi Director October 29, 1996
Mitchell B. Chi
Clifford Perlman Director October 29, 1996
Tom Moscariello Director October 29, 1996
1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
COMTEC INTERNATIONAL, INC.
ComTec International, Inc. (the "Company"), a corporation organized
and existing under the Business Corporation Act of the State of New
Mexico ("Act"), pursuant to Section 53-11-16 of the Act HEREBY
CERTIFIES:
FIRST: That, pursuant to the following resolution of the Board of
Directors adopted by unanimous consent in lieu of a meeting, a series
of Preferred Stock was approved by the Board of Directors on behalf
of the Company and the relative rights and preferences of such series
of Preferred Stock was fixed and established as follows:
RESOLVED, Pursuant to authority granted under the Company's Articles
of Incorporation, as amended, the Board of Directors hereby approves
the designation of a series of Preferred Stock of the Company to be
known as "Series B Convertible Preferred Stock"; and further
RESOLVED, the Board of Directors hereby ratifies and approves the
following rights, preferences of the Series B Convertible Preferred
Stock:
SERIES B CONVERTIBLE PREFERRED STOCK
1. The number of shares constituting the Series B Convertible Stock
shall be 1,500,000, which may be issued in such amounts as shall be
determined by the Board of Directors in accordance with the
provisions of this Certificate.
2. The series shall be designated Series B Convertible Preferred
Stock with a par value of $.001 per share and an issue price of $5.00
per share.
3. Holders of the Series B Convertible Preferred Stock shall be
entitled to an annual dividend preference equal to ten (10%) percent
of the issue price of the Series B Convertible Preferred Stock and
calculated on June 30th of the each year and paid in the form of the
Corporation's Common Stock valued at the bid price on June 30th of
each year. This annual dividend preference shall be paid no later
than forty five (45) days from the Corporation's June 30th fiscal
year end. The holders of the Series B Convertible Preferred Stock
shall also be entitled to those dividends as may accrue to holders of
the Corporation's Common Stock following any conversion of the Series
B Convertible Preferred Stock.
4. In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation, whether voluntary or involuntary, the
holder of the Series B Convertible Preferred Stock shall be
subordinate to the Series A Convertible Preferred Stock, and after
the Series A entitled to, before any assets of the Corporation shall
be distributed among or paid over the holders of the Common Stock or
any other Preferred Stock, to be paid $5.00 per share of Series B
Convertible Preferred Stock. If upon voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the
amounts payable with respect to the Series B Convertible Preferred
Stock are not paid in full, the holders will share ratably in such
distribution of assets in proportion to the full respective
preferential rights to which they are entitled. After payment of the
full amount of liquidating distribution to which they are entitled.
After payment of the full amount of liquidating distribution to which
they are entitled, the holders of the Series B Convertible Preferred
Stock will not be entitled to any further participating in any
distribution of assets of the Corporation. In the event of any
authorization of a new series of Preferred Stock, other than Series A
and Series B Convertible Preferred Stock having liquidattion
preferences, the shares having liquidation preferences shall be
subordinate to and not be entitled to share in any distributions
accruing to the Series B Convertible Preferred Stock until the holder
of the Series B Convertible Preferred Stock shall have received the
full distribution to which it is entitled under this paragraph 4.
After the making of full payment of liquidation preferences to the
holders of the Series B Convertible Preferred Stock, the remaining
assets of the Corporation shall be distributed ratably to any other
Preferred Stock having liquidation preferences in accordance with
their priorities and then ratably among the holders of the Common
Stock and any other series of Preferred Stock without liquidation
preferences.
5.(a) The holder of the shares of the Series B Convertible Stock
shall have the right, at its option, at any time and from time
to time, on any business day, to convert, subject to the terms
and provisions of this section (including adjustment), all
(but not less than all) of the shares of the Series B
Convertible Preferred Stock into a number of shares of fully
paid and non-assessable whole share of Common Stock determined
on the basis of the formula set forth herein ("Convertible
Formula"). Only whole shares of Series B Convertible
Preferred Stock may be converted and only whole shares of
Common Stock may be issued as a result of conversion;
provided, that an equivalent cash payment (as determined by
the board of directors of the Corporation) shall be made in
lieu of any fractional share of Common Stock to which the
holder would be entitled upon conversion of the Series B
Preferred Stock.
(b) The number of shares of Common Stock to be issued upon
conversion of the Series B Convertible Preferred Stock shall be one
(1) share of Common Stock; provided, however, that no conversion may
be made unless and until the closing bid price shall be reached $7.50
per share of Common Stock for more than 20 consecutive trading days
prior to the date of conversion, or unless having received approval
in written resolution form by the Corporation's Board of Directors
prior to the bid price of the Common Stock having reached $7.50 per
share.
(c) In order to convert shares of the Series B Convertible Preferred
Stock into Common Stock, the holder thereof shall deliver the stock
certificates representing the Shares to be converted to the
Corporation at its then principal office, accompanied by not less
than 5 days advance written notice ("Conversion Notice") that it
elects to convert the shares represented thereby into shares of
Common Stock in accordance with the provisions of this paragraph 5.
Said Conversion Notice shall specify to whom the certificate shall be
made and delivered.
(d) As promptly as practicable after the surrender as hereinabove
provided of stock certificates representing the shares to be
converted into Common Stock, accompanied by a duly completed and
executed Conversion Notice, the Corporation shall deliver or cause to
be delivered to the holder, certificates representing the whole
number of fully paid and non-assessable shares of Common Stock of the
Corporation into which said shares are being converted. Such
conversion shall be deemed to have been made immediately following
the close of business on the date that such shares, accompanied by
the duly completed and executed Conversion Notice, shall have been
duly surrendered for conversion of the Series B Convertible Preferred
Stock shall at such time be treated for all purpose as having become
the record holder of such shares of Common Stock immediately
following the close of business on such date and the rights of the
holder of such converted shares, as such holder, shall cease at such
time. The issuance of certificates for shares for any stock transfer
or issue tax in respect of the surrender of shares for conversion, or
the issuance of such certificates for the shares receivable on
conversion. Converted shares shall be canceled and shall not be
issued. The Corporation shall at all times reserve and deep
available out of its authorized but unissued shares of Common Stock a
sufficient number of shares for the purpose of effecting the
conversion of exchange for the Series B Convertible Preferred Stock
then deliverable upon the conversion of exchange of the entire Series
B Convertible Preferred Stock at the time outstanding.
(e) The Conversion Rate shall be subject to adjustment from time to
time as follows:
(i) If at any time after the date hereof the Corporation shall
effect a reorganization, shall merge with or consolidate into another
corporation, or shall sell, transfer or other wise dispose of all or
substantially all of its property, assets or business, and pursuant
to the terms of such reorganization, merger, consolidation or
disposition of assets, shares of stock or other securities, property
or assets of the corporation (or the successor, transferee or
affiliate of the corporation) or cash are to be received by or
distributed to the holders of Common Stock, then the holders of the
Series B Convertible Preferred Stock shall have the right thereafter
to receive, upon conversion thereof, the number of shares of stock or
other securities, property or assets of the corporation (or the
successor, transferee or affiliate of the corporation,) or cash
receivable upon or as a result of such reorganization merger,
consolidation or disposition of assets by a holder of the number of
shares of Common Stock into which such Series B Convertible Preferred
Stock was convertible immediately prior to such event and the
corporation shall make lawful provision therefore as part of such
transaction. The provisions of this subdivision (i) shall similarly
apply to successive reorganizations, mergers, consolidations or
dispositions of assets.
(ii) In the event the outstanding of Common Stock of the
Corporation shall be combined or consolidated, by reclassification of
otherwise, to a lesser number of shares without a corresponding
combination or consolidation with respect to the Series B Convertible
Preferred Stock, the Conversion Formula in effect immediately prior
to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be
proportionately decreased. Conversely, in the event the outstanding
shares of Common Stock shall be split into a greater number of shares
or the Corporation shall declare a dividend with respect to Common
Stock without a corresponding split with respect to the Series A
Convertible Preferred Stock, the Conversion Formula in effect
immediately prior to such action shall, concurrently with the
effectiveness of such dividend or stock split, be proportionately
increased.
(iii) Whenever the Conversion Rate shall be adjusted pursuant to
this paragraph 5(e), the Corporation shall forthwith obtain, and
cause to be delivered to the holders of the Series B Convertible
Preferred Stock, a certificate signed by the President, Vice
President or Treasurer of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method
by which such adjustment was calculated and specifying the new
Conversion Rate. In the case referred to in subdivision (i), such a
certificate shall be issued describing the amount and kind of stock,
securities, property or assets or cash which shall be receivable upon
conversion of the Series B Convertible Preferred Stock after giving
effect to the provisions of such subdivision (i).
(f) In case any time and Corporation shall offer for subscription
pro rata to the holders of its Common Stock in any additional shares
of stock of any class or other rights, and in each event, the
Corporation will mail or cause to be mailed to the holder of Series B
Convertible Preferred Stock a notice specifying the date on which any
such record is to be taken for the purpose of distribution of such
subscription right, and stating the amount and character of such
subscription right. Such notice shall be mailed at least twenty (20)
days prior to the date therein specified in lawful and practicable.
6. The Series B Convertible Preferred Stock and the shares of
Common Stock issuable on conversion thereof may not be transferred
without prior compliance with the Securities Act of 1933 and
restrictive legends to such effect may be placed upon and stop
transfer orders issued with respect to the stock certificates
representing such shares.
7. At any time during which the Series B Convertible Preferred
Stock shall be outstanding, the Corporation shall be entitled to
redeem the stock upon thirty (30) days advance written notice to the
then holder of the Series B Convertible Preferred Stock. Upon the
redemption date, which shall not be less than thirty (30) days after
such notice ("Redemption Date"), the Company shall have the right to
redeem the Series B Convertible Preferred Stock for an amount equal
to the number of shares then outstanding multiplied by the issue
price of $5.00 per share. Such notice of redemption shall require
the holder of the Series B Convertible Preferred Stock to surrender
to the Corporation on the Redemption Date, a certificate representing
the Series B Convertible Preferred Stock. Notwithstanding the fact
that the certificate may not be surrendered for redemption and
cancellation, upon the Redemption Date, the Series B Convertible
Preferred Stock shall be deemed to be expired and all rights of the
holder shall cease and terminate, other than the right to receive the
redemption price of $5.00 for each share of Series B Convertible
Preferred Stock, including the an annual dividend preference equal to
ten (10%) percent: provided, the Redemption Date. Notwithstanding
notice of the Corporation's right to redeem, the holder shall have
the right to convert the Series B. Convertible Preferred Stock into
Common Stock at the primary Conversion Formula set forth above, until
the Redemption Date, following which the right to convert shall
expire and be of no further force or effect.
8. Except as otherwise permitted by the applicable provisions of
the Act, holders of the Series B Preferred Stock shall not be
entitled to voting rights or notice of any matter proposed to be
submitted by the Corporation to its shareholders for consideration.
9. Upon receiving the consent of the holders of at least a fifty
one (51%) percent majority of the Series B Convertible Preferred
Stock then outstanding, the Corporation may amend or modify any of
the foregoing rights, privileges and preferences with respect to the
Series B Convertible Preferred Stock.
IN WITNESS WHEREOF, said COMTEC INTERNATIONAL, INC. has caused this
Certificate to be signed by Donald G. Mack, its President, and
attested by Mitchell B. Chi, its Assistant Secretary, this 19th day
of August, 1996.
COMTEC INTERNATIONAL, INC.
By: \Donald G. Mack\
Donald G. Mack, President
ATTEST:
By:\Mitchell B. Chi\
Assistant Secretary, Mitchell B. Chi
I hereby verify that I have signed this instrument on behalf of
ComTec International, Inc. and that, to the best of my knowledge and
belief, the foregoing is true and correct as of the date set forth
above.
By:\Donald G. Mack\
Donald G. Mack, President
STATE OF COLORADO )
)ss
COUNTY OF ARAPAHOE )
On this 19th Day of August, 1996 before me appeared Donald G. Mack,
known personally to be to be the President of ComTec International,
Inc., and that he, as such officer, being authorized so to do,
executed the foregoing instrument for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
\Joanne B. Brawley\
Notary Public
My commission expires: 12-27-97
STATE OF COLORADO )
)ss
COUNTY OF ARAPAHOE )
On this 19th day of August, 1996 before me appeared Mitchell B. Chi,
known personally to me to be the Assistant Secretary of ComTec
International, Inc., and that he, as such officer, being authorized
so to do, executed the foregoing instrument for the purpose therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
\Joanne B. Brawley\
Notary Public
My commission expires: 12-27-97
0
EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
OF
SERIES C REDEEMABLE
CONVERTIBLE PREFERRED STOCK
OF
COMTEC INTERNATIONAL, INC.
ComTec International, Inc. (the "Company"), a corporation organized
and existing under the Business Corporation Act of the State of New
Mexico ("Act"), pursuant to Section 53-11-16 of the Act, HEREBY
CERTIFIES:
FIRST: That, pursuant to the following resolution of the Board of
Directors adopted by unanimous consent in lieu of a meeting, a series
of Preferred Stock was approved by the Board of Directors on behalf
of the Company and the relative rights and preferences of such series
of Preferred Stock was fixed and established as follows:
RESOLVED, Pursuant to authority granted under the Company's Articles
of Incorporation, as amended, the Board of Directors hereby approves
the designation of a series of Preferred Stock of the Company to be
known as "Series C Redeemable Convertible Preferred Stock"; and
further
RESOLVED, the Board of Directors hereby ratifies and approves the
following rights, preferences of the Series C Redeemable Preferred
Stock:
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
1. The number of shares constituting the Series C Redeemable
Convertible Stock shall be 1,500,000, which may be issued in such
amounts as shall be determined by the Board of Directors in
accordance with the provisions of this Certificate.
2. The series shall be designated Series C Redeemable Convertible
Preferred Stock with a par value of $.001 per share and an issue
price of $10.00 per share.
3. Holders of the Series C Redeemable Convertible Preferred Stock
shall not be entitled to dividends, except as may accrue to holders
of the Corporation's Common Stock following any conversion of the
Series C Redeemable Convertible Preferred Stock.
4. In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation, whether voluntary or involuntary, the
holder of the Series C Redeemable Convertible Preferred Stock shall
be subordinate to the Series A and Series B Convertible Preferred
Stock, and after the Series A and the Series B, entitled to, before
any assets of the Corporation shall be distributed among or paid over
the holders of the Common Stock or any other Preferred Stock, to be
paid $10.00 per share of Series C Redeemable Convertible Preferred
Stock. If upon voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the amounts payable with respect to
the Series C Redeemable Convertible Preferred Stock are not paid in
full, the holders will share ratably in such distribution of assets
in proportion to the full respective preferential rights to which
they are entitled. After payment of the full amount of liquidating
distribution to which they are entitled. After payment of the full
amount of liquidating distribution to which they are entitled, the
holders of the Series C Redeemable Convertible Preferred Stock will
not be entitled to any further participating in any distribution of
assets of the Corporation. In the event of any authorization of a
new series of Preferred Stock, other than Series A and Series B
Convertible Preferred Stock and Series C Redeemable Convertible
Preferred Stock, having liquidation preferences, the shares having
liquidation preferences shall be subordinate to and not be entitled
to share in any distributions accruing to the Series C Redeemable
Convertible Preferred Stock until the holder of the Series C
Redeemable Convertible Preferred Stock shall have received the full
distribution to which it is entitled under this paragraph 4. After
the making of full payment of liquidation preferences to the holders
of the Series C Redeemable Convertible Preferred Stock, the remaining
assets of the Corporation shall be distributed ratably to any other
Preferred Stock having liquidation preferences in accordance with
their priorities and then ratably among the holders of the Common
Stock and any other series of Preferred Stock without liquidation
preferences.
5.(a) The holder of the shares of the Series C Redeemable
Convertible Stock shall have the right, at its option, at any
time and from time to time, on any business day, to convert,
subject to the terms and provisions of this section (including
adjustment), all (but not less than all) of the shares of the
Series C Redeemable Convertible Preferred Stock into a number
of shares of fully paid and non-assessable whole share of
Common Stock determined on the basis of the formula set forth
herein ("Convertible Formula"). Only whole shares of Series C
Redeemable Convertible Preferred Stock may be converted and
only whole shares of Common Stock may be issued as a result of
conversion; provided, that an equivalent cash payment (as
determined by the board of directors of the Corporation) shall
be made in lieu of any fractional share of Common Stock to
which the holder would be entitled upon conversion of the
Series C Redeemable Convertible Preferred Stock.
(b) The number of shares of Common Stock to be issued upon
conversion of the Series B Convertible Preferred Stock shall be equal
to the bid price of the Common stock on the date redeemable actually
takes place (the "Conversion Date") and as quoted by NASDAQ, the
Electronic Bulletin Board or any other such Exchange that the
Corporation's Common Shares might be traded.
(c) In order to convert shares of the Series C Redeemable
Convertible Preferred Stock into Common Stock, the holder thereof
shall deliver the stock certificates representing the Shares to be
converted to the Corporation at its then principal office,
accompanied by not less than 30 days advance written notice
("Conversion Notice") that it elects to convert the shares
represented thereby into shares of Common Stock in accordance with
the provisions of this paragraph 5. Said Conversion Notice shall
specify to whom the certificate shall be made and delivered.
However, at all times prior to any conversion, the Company shall have
the first right to redeem the Series C. Redeemable Convertible
Preferred Stock for an amount equal to the number of shares then
multiplied by the issue price of $10.00 per share. In the event the
Company elects not to redeem any shares of Series C Redeemable
Convertible Preferred Stock giving Conversion Notice, then the
Company shall issue an amount of Common shares based upon the
Conversion Formula on the Conversion Date.
(d) As promptly as practicable after the surrender as hereinabove
provided of stock certificates representing the shares to be
converted into Common Stock, accompanied by a duly completed and
executed Conversion Notice, the Corporation shall deliver or cause to
be delivered to the holder, certificates representing the whole
number of fully paid and non-assessable shares of Common Stock of the
Corporation into which said shares are being converted. Such
conversion shall be deemed to have been made immediately following
the close of business on the date that such shares, accompanied by
the duly completed and executed Conversion Notice, shall have been
duly surrendered for conversion as herein provided, so that the
holder entitled to receive the shares of Common Stock upon conversion
of the Series C Redeemable Convertible Preferred Stock shall at such
time be treated for all purposes as having become the record holder
of such shares of Common Stock immediately following the close of
business on such date and the rights of the holder of such converted
shares, as such holder, shall cease at such time. The issuance of
certificates for shares of Common Stock upon the conversion shall be
made without charge to the holder of the converted shares for any
stock transfer or issue tax on respect of the surrender of shares for
conversion, or the issuance of such certificates for the shares
receivable on conversion. Converted shares shall be canceled and
shall not be issued. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common
Stock a sufficient number of shares for the purpose of effecting the
conversion of exchange for the Series C Redeemable Convertible
Preferred Stock then deliverable upon the conversion of exchange of
the entire Series C Redeemable Convertible Preferred Stock at the
that time outstanding.
(e) The Conversion Rate shall be subject to adjustment from time to
time as follows:
(i) If at any time after the date hereof the Corporation shall
effect a reorganization, shall merge with or consolidate into another
corporation, or shall sell, transfer or other wise dispose of all or
substantially all of its property, assets or business, and pursuant
to the terms of such reorganization, merger, consolidation or
disposition of assets, shares of stock or other securities, property
or assets of the corporation (or the successor, transferee or
affiliate of the corporation) or cash are to be received by or
distributed to the holders of Common Stock, then the holders of the
Series C Redeemable Convertible Preferred Stock shall have the right
thereafter to receive, upon conversion thereof, the number of shares
of stock or other securities, property or assets of the corporation
(or the successor, transferee or affiliate of the corporation,) or
cash receivable upon or as a result of such reorganization merger,
consolidation or disposition of assets by a holder of the number of
shares of Common Stock into which such Series C Redeemable
Convertible Preferred Stock was convertible immediately prior to such
event and the corporation shall make lawful provision therefore as
part of such transaction. The provisions of this subdivision (i)
shall similarly apply to successive reorganizations, mergers,
consolidations or dispositions of assets.
(ii) In the event the outstanding of Common Stock of the
Corporation shall be combined or consolidated, by reclassification of
otherwise, to a lesser number of shares without a corresponding
combination or consolidation with respect to the Series C Redeemable
Convertible Preferred Stock, the Conversion Formula in effect
immediately prior to such combination or consolidation shall, be
proportionately decreased. Conversely, in the event the outstanding
shares of Common Stock shall be split into a greater number of shares
or the Corporation shall declare a dividend with respect to Common
Stock without a corresponding split with respect to the Series C
Redeemable Convertible Preferred Stock, the Conversion Formula in
effect immediately prior to such action shall, concurrently with the
effectiveness of such dividend or stock split, be proportionately
increased.
(iii) Whenever the Conversion Rate shall be adjusted pursuant to
this paragraph 5(e), the Corporation shall forthwith obtain, and
cause to be delivered to the holders of the Series C Redeemable
Convertible Preferred Stock, a certificate signed by the President,
Vice President or Treasurer of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method
by which such adjustment was calculated and specifying the new
Conversion Rate. In the case referred to in subdivision (I), such a
certificate shall be issued describing the amount and kind of stock,
securities, property or assets or cash which shall be receivable upon
conversion of the Series C Redeemable Convertible Preferred Stock
after giving effect to the provisions of such subdivision (I).
(f) In case any time and Corporation shall offer for subscription
pro rata to the holders of its Common Stock in any additional shares
of stock of any class or other rights, and in each event, the
Corporation will mail or cause to be mailed to the holder of Series C
Redeemable Convertible Preferred Stock a notice specifying the date
on which any such record is to be taken for the purpose of
distribution of such subscription right, and stating the amount and
character of such subscription right. Such notice shall be mailed at
least twenty (20) days prior to the date therein specified in lawful
and practicable.
6. The Series C Redeemable Convertible Preferred Stock and the
shares of Common Stock issuable on conversion thereof may not be
transferred without prior compliance with the Securities Act of 1933
and restrictive legends to such effect may be placed upon and stop
transfer orders issued with respect to the stock certificates
representing such shares.
7. At any time during which the Series C Redeemable Convertible
Preferred Stock shall be outstanding, including any Conversion Notice
period as defined in paragraph 5, the Corporation shall be entitled
to redeem the stock upon thirty (30) days advance written notice to
the then holder of the Series C Redeemable convertible Preferred
Stock. Upon the redemption date, which shall not be less than thirty
(30) days after such notice ("Redemption Date"), the Company shall
have the right to redeem the Series C Redeemable Convertible
Preferred Stock for an amount equal to the number of shares then
outstanding multiplied by the issue price of $10.00 per share. Such
notice of redemption shall require the holder of the Series C
Redeemable Convertible Preferred Stock to surrender to the
Corporation on the Redemption Date, a certificate representing the
Series C. Redeemable Convertible Preferred Stock. Notwithstanding
the fact that the certificate may not be surrendered for redemption
and cancellation, upon the Redemption Date, the Series C Redeemable
Convertible Preferred Stock shall be deemed to be expired and all
rights of the holder shall cease and terminate, other than the right
to receive the redemption price of $10.00 for each share of Series C
Redeemable Convertible Preferred Stock; provided, however, that such
right to receive the redemption price shall itself expire one (1)
year from the Redemption Date. Notwithstanding notice of the
Corporation's right to redeem, the holder shall have the right to
convert the Series C Redeemable Convertible Preferred Stock into
Common Stock at the primary Conversion Formula set forth above, until
the Redemption Date, following which the right to convert shall
expire and be of no further force or effect.
8. Except as otherwise permitted by the applicable provisions of
the Act, holders of the Series C Redeemable Preferred Stock shall not
be entitled to voting rights or notice of any matter proposed to be
submitted by the Corporation to its shareholders for consideration.
9. Upon receiving the consent of the holders of at least a fifty
one (51%) percent majority of the Series B Convertible Preferred
Stock then outstanding, the Corporation may amend or modify any of
the foregoing rights, privileges and preferences with respect to the
Series B Convertible Preferred Stock.
IN WITNESS WHEREOF, said COMTEC INTERNATIONAL, INC. has caused this
Certificate to be signed by Donald G. Mack, its President, and
attested by Mitchell B. Chi, its Assistant Secretary, this 16th day
of September, 1996.
COMTEC INTERNATIONAL, INC.
By: \Donald G. Mack\
Donald G. Mack, President
ATTEST:
By:\Mitchell B. Chi\
Assistant Secretary, Mitchell B. Chi
I hereby verify that I have signed this instrument on behalf of
ComTec International, Inc. and that, to the best of my knowledge and
belief, the foregoing is true and correct as of the date set forth
above.
By:\Donald G. Mack\
Donald G. Mack, President
STATE OF COLORADO )
)ss
COUNTY OF )
On this 16th Day of September, 1996 before me appeared Donald G.
Mack, known personally to be to be the President of ComTec
International, Inc., and that he, as such officer, being authorized
so to do, executed the foregoing instrument for the purpose therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
\Joanne B. Brawley\
Notary Public
My commission expires: 12-27-97
STATE OF COLORADO )
)ss
COUNTY OF )
On this 16th day of September, 1996 before me appeared Mitchell B.
Chi, known personally to me to be the Assistant Secretary of ComTec
International, Inc., and that he, as such officer, being authorized
so to do, executed the foregoing instrument for the purpose therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
\Joanne B. Brawley\
Notary Public
My commission expires: 12-27-97
