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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 30, 2000
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Date of Report (Date of earliest event reported)
INTERCELL CORPORATION
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(Exact name of Registrant as specified in its charter)
Colorado 0-14306 84-0928627
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
370 17th Street, Suite 3580
Denver, CO 80202
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(Address of principal executive offices)
(Zip Code)
(303) 592-1010
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
On February 14, 2000, the Board of Directors (the "Board") of Intercell
Corporation (the "Company") authorized the issuance of a newly created series of
preferred stock of the Company, the Series E Convertible Preferred Stock (the
"Series E Preferred Stock"), and approved a plan to re-incorporate the Company
from Colorado to Nevada as well as certain other actions which may be taken by
the newly formed corporation if the shareholders approve the re-incorporation.
The issuance of the Series E Preferred Stock, the re-incorporation plan to be
voted on by shareholders of the Company and the actions to be taken thereafter
by the new corporation address the Company's debt level, operating capital
deficiency, insufficient authorized capital to honor outstanding convertible
instruments and its capital structure, all of which have deterred financing
opportunities. The Certificate of Designation and Rights for the Series E
Preferred Stock is set forth as an exhibit to this report. In addition, the
plan of which the re-incorporation is a part is set forth as an exhibit to this
report.
The issuance of the 1,000 shares of Series E Preferred Stock on March 30,
2000 will effect a temporary change in control of the Company. While the
Company is unaware of any person that controlled the Company before the issuance
of the Series E Preferred Stock, as a result of such issuance, the holders
thereof will have effective voting control of the Company in that they will vote
as a class with the Company's shares of common stock and will have in excess of
50% of the voting rights with respect to such class at any regular or special
meeting of the stockholders of the Company. This change in control of the
Company is intended to be temporary, as, pursuant to the Certificate of
Designation and Rights for the Series E Preferred Stock, all of the Series E
Preferred Stock will be automatically converted into common stock representing
5% of the outstanding common stock of the Company on the date of conversion, on
a fully diluted basis, at such time as the re-incorporation plan is approved and
certain other actions are taken by the new corporation.
Technology Investors, LLC ("Technology Investors") purchased, from cash
reserves, 700 shares of the Series E Preferred Stock for $70,000. Technology
Investors is a Colorado limited liability company that is controlled by R. Mark
Richards. In addition, Triad Technologies, LLC ("Triad") purchased, from its
working capital, the remaining 300 shares of Series E Preferred Stock for
$30,000. Triad is a Nevada limited liability company that is controlled by H.
Glenn Bagwell, Jr., Esq and that is unaffiliated with Technology Investors,
Corporate Advisors (referred to below), Gemini (referred to below) or with the
Company. Collectively, Triad and Technology Investors are referred to as the
"Series E Holders." The Series E Holders purchased the Series E Preferred Stock
pursuant to a Letter Agreement, dated as of February 14, 2000. In connection
with the purchase of the Series E Preferred Stock, the Board appointed two
nominees of the Series E Holders to the Board, who are R. Mark Richards and
Mallory M. Smith. The Series E Holders have agreed with each other and with the
Company that they will vote in favor of the re-incorporation plan.
As of the date of this report and as described below, the Series E Holders
and certain persons affiliated with the Company have invested additional funds
and have taken certain actions to rehabilitate the Company.
The Series E Holders purchased from the Company for $900,000, 1,500,000
restricted shares of common stock of Nanopierce Technologies Inc., in order to
provide funds for the Company to compromise creditors, to acquire new businesses
or technologies and for operating capital. As of the date of this report, the
purchase price has been paid to the Company in the form of $700,000 in cash and
the remaining $200,000 of the purchase price is in the form of a promissory note
secured by 60,000 shares of common stock of Nanopierce Technologies, Inc.
For approximately $1,200,000, Triad purchased from an unaffiliated person
432 shares of the
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outstanding Series D Preferred Convertible Shares of the Company (the "Series D
Preferred Shares") which were acquired to avoid the conversion of such shares
until such time as the Company has sufficient authorized capital. Those Series D
Preferred Shares were and are entitled to be converted into approximately
7,602,583 shares of common stock of the Company.
To provide additional working capital and operating funds to the Company,
the father of R. Mark Richards, who has an outstanding note payable to the
Company in the amount of $422,500, has agreed to accelerate the payment due date
thereon and pay the balance of the note on the effective date of the approval of
the amendment to Articles of Incorporation of the Company increasing the
authorized capital of the Company.
Item 5. Other Events.
The Company used 170,000 restricted shares of Nanopierce Technologies, Inc.
to purchase, among other things, a $750,000 convertible debenture owned by the
Augustine Fund, L.P. that could have been converted into at least 75,000,000
shares of the common stock of the Company in order to avoid the conversion of
that debenture. As a result of this transaction, the Company also reacquired
certain assets which had formerly been pledged as collateral to the Augustine
Fund, L.P.
The Company has been informed that Corporate Advisors, Inc. ("Corporate
Advisors"), which is owned beneficially by the wife of Paul Metzinger, the
President and Chief Executive Officer of the Company and Gemini Investments,
Ltd. ("Gemini"), an unaffiliated entity, have acquired certain convertible
securities from third parties to eliminate the potential threat of or threatened
litigation against the Company as a result of the Company's lack of sufficient
authorized capital to honor the conversion rights of certain of its outstanding
securities. Corporate Advisors purchased from an unaffiliated person the
remaining 648 outstanding Series D Preferred Shares for approximately
$2,160,000. The Series D Preferred Shares were and are entitled to be converted
into approximately 11,403,875 shares of the common stock of the Company.
The Company also has been informed that Corporate Advisors and Gemini
Investments, Ltd. purchased a total of 22 of the outstanding Series C
Convertible Preferred Shares (the "Series C Preferred Shares") of the Company
from an unaffiliated institution for a purchase price of $150,000. Corporate
Advisors purchased 15.4 of such shares and Gemini Investments, Ltd. purchased
6.6 of such shares. The Series C Preferred Shares were and are entitled to be
converted into 32,092,935 shares of common stock of the Company.
Item 7. Exhibits and Financial Information.
The following is a complete list of Exhibits filed as part of this report
on Form 8-K. Exhibit numbers correspond to the numbers in the exhibit table of
Item 601 of Regulation S-B.
Exhibit No. Description
*2.00 Plan of re-incorporation and related matters
*4.00 Certificate of Designation of Series E Preferred Shares
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*Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized
INTERCELL CORPORATION
/s/ Paul H. Metzinger
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President, Chief Executive Officer
April 10, 2000
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EXHIBIT INDEX
Exhibit No. Description
*2.00 Plan of re-incorporation and related matters
*4.00 Certificate of Designation of Series E Preferred Shares
________________
*Filed herewith.
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EXHIBIT 2.00
The Plan of Re-Incorporation and Related Matters
The holders of the Series E Preferred Shares, which collectively control
the voting power of the Company to implement the plan and have the power to
approve all of the matters discussed in the plan described below, have agreed
with each other and with the Company that they will vote in favor of all of
these matters. Paragraphs (a) and (b) below describe the plan for the re-
incorporation of the Company that will be voted on by the shareholders of the
Company. Paragraphs (c) and (d) describe the circumstances that must be
fulfilled in order for the Series E Preferred Stock to be automatically
converted into shares of common stock as provided in the Certificate of
Designation of Series E Preferred Shares.
(a) The Company will call, notify and convene, in accordance with the
proxy solicitation rules of the Securities Exchange Act of 1934, as
amended, and applicable state laws, a Special Meeting of the
Shareholders to vote upon a proposed merger of the Company into its
proposed wholly owned subsidiary, Intercell International Corporation,
a Nevada corporation (the "New Company") and for the election of
Directors.
(b) The Company will merge into the New Company, on a share for share
basis. The authorized capital and the management team of the Company
and the New Company will be equivalent, and the Articles of
Incorporation of the New Company will be substantially similar to
Articles of Incorporation of the Company.
(c) Subsequent to, and apart from, the re-incorporation into New Company,
the New Company will, by action of its Board of Directors, consider
the effectuation of a reverse stock split of its common stock in which
each 20 shares of its outstanding common stock will be exchanged for
one share of common stock (1:20) and, correspondingly, the number of
authorized shares of common stock in the New Company's Articles of
Incorporation will be reduced by the same 20-to-one ratio (1:20). The
record date of this event will be determined by the Board of
Directors. Assuming the reverse stock split, the New Company will have
issued and outstanding, approximately 4,994,560 shares of common stock
and will have 5,000,000 shares of common stock authorized. If
effected, the New Company will have approximately 8,604,378 shares
outstanding on a fully diluted basis.
(d) Subsequent to, and apart from, the matters described above, the New
Company will consider the solicitation of a shareholder vote to
increase the authorized capital of the New Company to permit the
conversion or exercise of all the convertible or exercisable
securities of the New Company.
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EXHIBIT 4.00
SERIES E DESIGNATION OF RIGHTS AND PREFERENCE
CERTIFICATE OF DESIGNATION OF
SERIES E PREFERRED STOCK
OF
INTERCELL CORPORATION
It is hereby certified that:
1. The name of the company is Intercell Corporation, a Colorado
corporation (the "Company").
2. The Certificate of Incorporation of the Company authorizes the issuance
of Ten Million (10,000,000) shares of preferred stock, no par value per share,
and expressly vests in the Board of Directors of the Company the authority
provided therein to issue any or all of said shares in one (1) or more series
and by resolution or resolutions to establish the designation and number and to
fix the relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series E issue of Preferred Stock:
RESOLVED, that one thousand (1,000) of the Ten Million (10,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series E
Preferred Stock, no par value per share, and shall possess the rights and
preferences set forth below:
Section 1. Designation and Amount. The shares of such series shall have
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no par value and shall be designated as Series E Preferred Stock (the "Series E
Preferred Stock") and the number of shares constituting the Series E Preferred
Stock shall be one thousand (1,000). The Series E Preferred Stock shall have a
Deemed Purchase Price of One Hundred Dollars ($100) per share.
Section 2. Rank. Except for the voting rights specifically granted
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herein, the Series E Preferred Stock shall rank: (i) junior to any other class
or series of outstanding Preferred Shares or series of capital stock of the
Company hereafter created specifically ranking by its terms senior to the Series
E Preferred Stock (collectively, the "Senior Securities"); (ii) prior to all of
the Company's Common Stock, no par value per share ("Common Stock"); (iii) prior
to any class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series E
Preferred Stock of whatever subdivision (collectively, with the Common Stock and
the Existing Preferred Stock, "Junior Securities"); and (iv) on parity with any
class or series of capital stock of the Company hereafter created specifically
ranking by its terms on parity with the Series E Preferred Stock ("Parity
Securities") in each case as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary (all
such distributions being referred to collectively as "Distributions").
Section 3. Dividends. The Series E Preferred Stock shall bear a six
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percent (6%), cumulative dividend, commencing March 20, 2000. If such dividend
is not declared and paid, for any reason, the Deemed Purchase Price of the
Series E Preferred Shares shall be increased by such
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accrued dividend and shall, at the option of the holder, be convertible into
common stock of the Company or otherwise redeemed.
Section 4. Liquidation Preference.
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(a) In the event of any liquidation, dissolution or winding up of
the Company, either voluntary or involuntary, the Holders of shares of
Series E Preferred Stock shall be entitled to receive, immediately after
any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior
in preference to any distribution to Junior Securities but in parity with
any distribution to Parity Securities, an amount per share equal to the sum
of (i) the Series E Deemed Purchase Price for each outstanding share of
Series E Preferred Stock and (ii) an amount equal to six percent (6%) of
the Series E Demand Purchase Price per annum for the period that has passed
since March 20, 2000 to the date of the event of liquidation, dissolution
or winding up of the Company. If upon the occurrence of such event, and
after payment in full of the preferential amounts with respect to the
Senior Securities, the assets and funds available to be distributed among
the Holders of the Series E Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Series E Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders
of the Series E Preferred Stock and the Parity Securities, pro rata, based
on the respective liquidation amounts to which each such series of stock is
entitled by the Company's Certificate of Incorporation and any
certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in the Company, they shall be distributed to holders
of Junior Securities in accordance with the Company's Certificate of
Incorporation including any duly adopted certificate(s) of designation.
Section 5. Conversion Rights. The record Holders of this Series E
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Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Subject to the Company's right of redemption
set forth in Section 6(a), the Automatic Conversion provisions set forth in
Section 5A and the restrictions on the timing of any conversions specified
in Section 5(b), each record Holder of Series E Preferred Stock shall be
entitled (in the amounts set forth below), at the office of the Company or
any transfer agent for the Series E Preferred Stock (the "Transfer Agent"),
to convert (in multiples of one (1) share of Preferred Stock) at the
Conversion Ratio defined in Section 5(c) herein.
(b) Restriction on Timing of Conversion Rights. No conversion of
Series E Preferred Stock into common shares shall occur pursuant to Section
5(a) until the latest to occur of: (i) on or after March 29, 2000; (ii) a
re-incorporation merger in which shares of the Company are exchanged for
shares of a newly formed Nevada corporation, a wholly-owned subsidiary of
the Company (the "Nevada Company") (the record date for such re-
incorporation merger shall be determined by the Board of Directors, with
the approval of the Holders of the Series E Preferred Shares and the
Holders of Common Shares, voting as one class) is adopted by the Company
and is effective and (iii) after a reverse stock split of the shares of the
Nevada
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Company is effective (the record date for such reverse stock split shall be
determined by the Board of Directors of the Nevada Company, with the
approval of the Holders of the Series E Preferred Shares of the Nevada
Company and the Holders of Common Shares of the Nevada Company, voting as
one class); and (iv) after the authorized common shares of the Nevada
Company has been increased to an amount approved by Holders of the Series E
Preferred Shares and the Common Shares voting as one class
(c) Conversion Ratio. The Holders of the Series E Preferred Stock
shall, collectively, have the right to convert, pursuant to Section
5(a)(i), all of their Series E Preferred Shares into that number of
authorized but unissued shares of Common Stock of the Company which shall
be equal to 5.0% of all of the Common Stock of the Company on a fully
diluted basis (the "Conversion Ratio") outstanding as of the Date of
Conversion, as defined in Section 5(d)(iv) herein. Each record holder of a
Series E Preferred Share shall be entitled to its pro-rata share of the
common shares representing such 5.0% ownership.
(d) Mechanics of Conversion. In order to exercise the Conversion
Rights and convert Series E Preferred Stock into full shares of Common
Stock, the Holder shall (i) fax, on or prior to 11:59 p.m., Denver,
Colorado time on the date of conversion, a copy of the fully executed
notice of conversion ("Notice of Conversion") to the Company at the office
of the Company or its designated transfer agent (the "Transfer Agent") for
the Series E Preferred Stock stating that the Holder elects to convert,
which notice shall specify the date of conversion, the number of shares of
Series E Preferred Stock to be converted, the applicable Conversion Ratio
and a calculation of the number of shares of Common Stock issuable upon
such conversion (together with a copy of the front page of each certificate
to be converted) and (ii) surrender to a common courier for delivery to the
office of the Company or the Transfer Agent, the original certificates
representing the Series E Preferred Stock being converted (the "Preferred
Stock Certificates"), duly endorsed for transfer; provided, however, that
the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the
Preferred Stock Certificates are delivered to the Company or its Transfer
Agent as provided above, or the Holder notifies the Company or its Transfer
Agent that such certificates have been lost, stolen or destroyed (subject
to the requirements of subparagraph (i) below). Upon receipt by the
Company of a facsimile copy of a Notice of Conversion, the Company shall
immediately send, via facsimile, a confirmation of receipt of the Notice of
Conversion to Holder which shall specify that the Notice of Conversion has
been received and the name and telephone number of a contact person at the
Company whom the Holder should contact regarding information related to the
Conversion. In the case of a dispute as to the calculation of the
Conversion Rate, the Company shall promptly issue to the Holder the number
of Shares that are not disputed and shall submit the disputed calculations
to its outside accountant via facsimile within three (3) days of receipt of
Holder's Notice of Conversion. The Company shall cause the accountant to
perform the calculations and notify Company and Holder of the results no
later than forty-eight (48) hours from the time it receives the disputed
calculations. Accountant's calculation shall be deemed conclusive absent
manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series E
Preferred Stock, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and
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upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Company shall execute and deliver
new Preferred Stock Certificate(s) of like tenor and date. However,
the Company shall not be obligated to re-issue such lost or stolen
Preferred Stock Certificates if Holder contemporaneously requests
Company to convert such Series E Preferred Stock into Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The Transfer
Agent or the Company (as applicable) shall, no later than the close
of business on the third (3rd) business day (the "Deadline") after
receipt by the Company or the Transfer Agent of a facsimile copy of
a Notice of Conversion and receipt by the Company or the Transfer
Agent of all necessary documentation duly executed and in proper
form required for conversion, including the original Preferred Stock
Certificates to be converted (or after provision for security or
indemnification in the case of lost or destroyed certificates, if
required), issue and surrender to a common courier for either
overnight or (if delivery is outside the United States) two (2) day
delivery to the Holder at the address of the Holder as shown on the
stock records of the Company a certificate for the number of shares
of Common Stock to which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the Series E
Preferred Stock would create a fractional share of Common Stock or a
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, in the aggregate, shall be the next lower
number of shares.
(iv) Date of Conversion. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth
in such Notice of Conversion, provided (i) that the advance copy of
the Notice of Conversion is faxed to the Company before 11:59 p.m.,
Denver, Colorado time, on the Date of Conversion, and (ii) that the
original Preferred Stock Certificates representing the shares of
Series E Preferred Stock to be converted are surrendered by
depositing such certificates with a common courier, as provided
above, and received by the Transfer Agent or the Company as soon as
practicable after the Date of Conversion. The person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record Holder or
Holders of such shares of Common Stock on the Date of Conversion.
(e) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available or make provision to
increase, reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion
of the Series E Preferred Stock, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
then outstanding Series E 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 Series E Preferred
Stock, the Company will take such corporate action 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.
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(f) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Ratio Due to Stock Split,
Stock Dividend, Etc. If, prior to the conversion of all of the
Series E Preferred Stock, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend, or other
similar event, the Conversion Ratio shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is
decreased by a combination or reclassification of shares, or other
similar event, the Conversion Ratio shall be proportionately
increased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, prior
to the conversion of all Series E 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 Company shall be changed into the same or a
different number of shares of the same or another class or classes
of stock or securities of the Company or another entity or there is
a sale of all or substantially all the Company's assets, then the
Holders of Series E Preferred Stock shall thereafter have the right
to receive upon conversion of Series E 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 and/or other assets which the
Holder would have been entitled to receive in such transaction had
the Series E Preferred Stock been converted immediately prior to
such transaction, and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holders of
the Series E Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the
Conversion Ratio and of the number of shares issuable upon
conversion of the Series E Preferred Stock) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities thereafter deliverable upon the exercise hereof.
(iii) No Fractional Shares. If any adjustment under this
Section 5(f) would create a fractional share of Common Stock or a
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 shall be the next lower number of shares.
Section 5A. Automatic Conversion. Upon occurrence of all of the
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conditions specified in Section 5A(a), the record Holders of the Series E
Preferred Stock shall have their Series E Preferred Stock automatically
converted into common shares as follows ("Automatic Conversion"):
(a) Conditions to Automatic Conversion. The automatic conversion
provisions in this Section 5A are applicable only if the following
conditions are met: (i) a re-incorporation merger, in which the shares of
the Company are exchanged for shares the Nevada Company, is adopted by the
Company and is effective; (ii) subsequent to the re-incorporation a reverse
stock split on a 1 for 20 basis of the shares of the Nevada Company is
effective; (iii) subsequent to the reverse split, the authorized common
shares of the Nevada Company has been increased to an amount approved by
Holders of the Series E Preferred Shares and the Common Shares voting as
one class sufficient to provide for the conversion or exercise of all
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of the outstanding securities of the Nevada Company; and (iv) the amendment
to the articles of incorporation of the Nevada Company evidencing the
increase in the number of authorized common is filed with the Secretary of
State of Nevada and is effective. The date of the amendment to the
articles of incorporation of the Nevada Company in 5A(a)(iv) is the
"Automatic Conversion Date."
(b) Automatic Conversion Ratio. On the Automatic Conversion Date,
the Series E Preferred Stock shall automatically be converted into that
number of authorized but unissued shares of Common Stock of the Company
which shall be equal to 5.0% of all of the Common Stock of the Company on a
fully diluted basis (the "Automatic Conversion Ratio") outstanding as of
Automatic Conversion Date. Each record holder of a Series E Preferred
Share shall be entitled to its pro-rata share of the common shares
representing such 5.0% ownership.
(c) Mechanics of Automatic Conversion. To effect the Automatic
Conversion and convert Series E Preferred Stock into full shares of Common
Stock, the Company shall (i) fax, on or prior to 11:59 p.m., Denver,
Colorado time on the Automatic Conversion Date, a copy of the fully
executed notice of automatic conversion ("Notice of Automatic Conversion")
to the Holder of the Series E Preferred Stock at the address designated by
such Holder, which notice shall specify the date of conversion, the number
of shares of Series E Preferred Stock to be converted, the applicable
Automatic Conversion Ratio, a calculation of the number of shares of Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Company whom the Holder should contact regarding
information related to the Automatic Conversion; provided, however, that
the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the
original certificates representing the Series E Preferred Stock being
converted are surrendered to a common courier for delivery to the office of
the Company or the Transfer Agent, duly endorsed for transfer, or the
Holder notifies the Company or its Transfer Agent that such certificates
have been lost, stolen or destroyed. In the case of a dispute as to the
calculation of the Automatic Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and shall
submit the disputed calculations to its outside accountant via facsimile
within three (3) days of sending the Notice of Automatic Conversion. The
Company shall cause the accountant to perform the calculations and notify
Company and Holder of the results no later than forty-eight (48) hours from
the time it receives the disputed calculations. Accountant's calculation
shall be deemed conclusive absent manifest error.
(i) Delivery of Common Stock Upon Automatic Conversion. The
Transfer Agent or the Company (as applicable) shall, no later than
the close of business on the third (3rd) business day after delivery
by the Company or the Transfer Agent of a facsimile copy of an
Automatic Notice of Conversion and receipt by the Company or the
Transfer Agent of all necessary documentation duly executed and in
proper form required for conversion, including receipt of the
original Preferred Stock Certificates to be converted (or after
provision for security or indemnification in the case of lost or
destroyed certificates, if required), issue and surrender to a
common courier for either overnight or (if delivery is outside the
United States) two (2) day delivery to the Holder at the address of
the Holder as shown on the stock records of the Company, a
certificate for the number of shares of Common Stock to which the
Holder shall be
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entitled as aforesaid. The Common Stock Certificate shall be
appropriately legended for compliance with the Securities Act of
1933, as amended.
(ii) Delivery of Series E Preferred Stock Upon Automatic
Conversion. The original Preferred Stock Certificates representing
the shares of Series E Preferred Stock to be converted shall be
surrendered by the holder thereof by depositing such certificates
with a common courier, as provided in Section 5(c) above, to be
received by the Transfer Agent or the Company as soon as practicable
after the Automatic Conversion Date.
(iii) No Fractional Shares. If any automatic conversion of
the Series E Preferred Stock would create a fractional share of
Common Stock or a 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, in the aggregate,
shall be the next lower number of shares.
(iv) Automatic Conversion Date. The Automatic Conversion
Date shall be deemed to be the date the increase in the authorized
capital of the Nevada Corporation is filed with the Secretary of
State of Nevada as provided in Section 5A(a). The person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record Holder or
Holders of such shares of Common Stock on the Automatic Conversion
Date.
Section 6. Redemption by the Company.
-------------------------
(a) Company's Right to Redeem at its Election. On and after
December 31, 2002, the Company shall have the right, in its sole
discretion, to redeem ("Redemption at Company's Election"), from time to
time, any or all of the Series E Preferred Stock; provided (i) Company
shall first provide six (6) months advance written notice as provided in
subparagraph 6(b)(ii) below. If the Company elects to redeem some, but not
all, of the Series E Preferred Stock, the Company shall redeem a pro-rata
amount from each Holder of the Series E Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption
Price At Company's Election" shall be the Deemed Purchase Price.
For purposes hereof, "Deemed Purchase Price" shall mean the
Series E Deemed Purchase Price (as defined in Section 4(a)) of the
shares of Series E Preferred Stock being redeemed pursuant to this
Section 6(a), together with the accrued but unpaid dividends (as
defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The
Company shall effect each such redemption by giving at least six (6)
months prior written notice ("Notice of Redemption At Company's
Election") to the Holders of the Series E Preferred Stock selected
for redemption, at the address and facsimile number of such Holder
appearing in the Company's Series E Preferred Stock register and to
the Transfer Agent, which Notice of Redemption At Company's Election
shall be deemed to have been delivered three (3) business days after
the Company's mailing
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(by overnight or two (2) day courier, with a copy by facsimile) of
such Notice of Redemption At Company's Election. Such Notice of
Redemption At Company's Election shall indicate (i) the number of
shares of Series E Preferred Stock that have been selected for
redemption, (ii) the date which such redemption is to become
effective (the "Date of Redemption At Company's Election") and (iii)
the Redemption Price At Company's Election, as defined in subsection
(a)(i) above.
(b) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption
Notice and begin the redemption procedure under Section 6(a) and unless it
has:
(i) the full amount of the redemption price in cash,
available in a demand or other immediately available account in a
bank or similar financial institution; or
(ii) immediately available credit facilities, in the full
amount of the redemption price with a bank or similar financial
institution; or
(iii) an agreement with a standby underwriter willing to
purchase from the Company a sufficient number of shares of stock to
provide proceeds necessary to redeem any stock that is not converted
prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and
(iii) above, aggregating the full amount of the redemption price.
(c) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed
under this Section 6 shall send their Series E Preferred Stock
Certificates so redeemed to the Company or its Transfer Agent, and
the Company shall pay the applicable redemption price to that Holder
within five (5) business days of the Date of Redemption at Company's
Election. The Company shall not be obligated to deliver the
redemption price unless the Preferred Stock Certificates so redeemed
are delivered to the Company or its Transfer Agent, or, in the event
one (1) or more certificates have been lost, stolen, mutilated or
destroyed, unless the Holder has complied with Section 5(b)(i).
(d) Blackout Period. Notwithstanding the foregoing, the Company
may not either send out a redemption notice or effect a redemption pursuant
to Section 6(b) above during a Blackout Period (defined as a period during
which the Company's officers or directors would not be entitled to buy or
sell stock because of their holding of material non-public information),
unless the Company shall first disclose the non-public information that
resulted in the Blackout Period; provided, however, that no redemption
shall be effected until at least ten (10) days after the Company shall have
given the Holder written notice that the Blackout Period has been lifted.
Section 7. Voting Rights. The Record Holders of the Series E Preferred
-------------
Shares shall have the right to vote on any matter with holders of common stock
voting together as one (1) class.
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The Record Holder of a Series E Preferred Share shall have 120,000 votes per
Series E Preferred Share. The votes on the Series E Preferred Shares shall be
identical in every other respect to the voting rights of the holders of common
stock entitled to vote at any Regular or Special Meeting of the Shareholders.
The Record Holders of the Series E Preferred Shares shall be entitled to
the same notice of any Regular or Special Meeting of the Shareholders as may or
shall be given to holders of common shares entitled to vote at such meetings.
For purposes of determining a quorum for any Regular or Special Meeting of
the Shareholders, each Series E Preferred Share represents 120,000 votes.
Section 8. Protective Provision. So long as shares of Series E Preferred
--------------------
Stock are outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by Colorado Law) of the
Holders of at least seventy-five percent (75%) of the then outstanding shares of
Series E Preferred Stock, and at least seventy-five percent (75%) of the then
outstanding Holders:
(a) alter or change the rights, preferences or privileges of the
Series E Preferred Stock so as to affect adversely the Series E Preferred
Stock.
(b) create any new class or series of stock having a preference
over the Series E Preferred Stock with respect to Distributions (as defined
in Section 2 above) or increase the size of the authorized number of Series
E Preferred.
In the event Holders of at least seventy-five percent (75%) of the
then outstanding shares of Series E Preferred Stock and at least seventy-
five percent (75%) of the then outstanding Holders agree to allow the
Company to alter or change the rights, preferences or privileges of the
shares of Series E Preferred Stock, pursuant to subsection (a) above, so as
to affect the Series E Preferred Stock, then the Company will deliver
notice of such approved change to the Holders of the Series E Preferred
Stock that did not agree to such alteration or change (the "Dissenting
Holders") and the Dissenting Holders shall have the right for a period of
thirty (30) business days to convert pursuant to the terms of this
Certificate of Designation as they exist prior to such alteration or change
or continue to hold their shares of Series E Preferred Stock.
Section 9. Status of Converted or Redeemed Stock. In the event any shares
-------------------------------------
of Series E Preferred Stock shall be converted or redeemed pursuant to Section
5, Section 5A or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred Stock
of no designated series, and shall not be issuable by the Company as Series E
Preferred Stock.
Section 10. Preference Rights. Nothing contained herein shall be
-----------------
construed to prevent the Board of Directors of the Company from issuing one (1)
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to the dividend and liquidation preferences of the Series E Preferred
Stock.
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SIGNATURE PAGE
[Certificate of Designation of Series E Preferred Stock]
By:/s/ Paul H. Metzinger
-----------------------------------
Paul H. Metzinger,
President & Chief Executive Officer
Dated March 29, 2000
STATE OF COLORADO )
) SS.
COUNTY OF DENVER )
I, Kristi J. Kampmann, a Notary Public, hereby certify that on the 20th day
of March 2000, Paul H. Metzinger, personally appeared before me, Kristi J.
Kampmann, who being by me first duly sworn declared that he is the person who
signed the foregoing, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on the date
hereinbefore mentioned.
My commission expires April 18, 2000.
/s/ Kristi J. Kampmann
---------------------------------
Notary Public
Kristi J. Kampmann
5250 S. Cherry Creek Dr. Apt. 18K
Denver, CO 80246
10
