Exhibit 4.5
CERTIFICATE OF DESIGNATION
OF
SERIES B 8% CONVERTIBLE PREFERRED STOCK
OF
DATAWORLD SOLUTIONS, INC.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
DataWorld Solutions, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were
adopted by the Board of Directors of the Corporation on May 26, 2000
pursuant to authority of the Board of Directors as required by Section 151
of the General Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (the "Board of
Directors" or the "Board") in accordance with the provisions of its
Certificate of Incorporation, the Board of Directors hereby authorizes a
series of the Corporation's previously authorized Preferred Stock, $.01 par
value per share (the "Preferred Stock"), and hereby states the designation
and number of shares, and fixes the relative rights, preferences, privileges,
powers and restrictions thereof as follows:
Series B 8% Convertible Preferred Stock:
Definitions
The terms defined in this Article whenever used in this
Certificate of Designation have the following respective meanings:
"Additional Capital Shares" has the meaning set forth in Section 6.1(c).
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of New York are authorized or obligated to close.
"Capital Shares" means the Common Shares and any other shares of any other
class or series of capital stock, whether now or hereafter authorized and
however designated, which have the right to participate in the distribution of
earnings and assets (upon dissolution, liquidation or winding-up) of the
Corporation.
"Closing Date" shall have the meaning set forth in the Securities Purchase
Agreement.
"Common Shares" or "Common Stock" means shares of the Corporation's
common stock, $.001 par value per share.
"Common Stock Issued at Conversion", when used with reference to the
securities issuable upon conversion of the Series B Preferred Stock, means all
Common Shares now or hereafter Outstanding and securities of any other class or
series into which the Series B Preferred Stock hereafter shall have been changed
or substituted, whether now or hereafter created and however designated.
"Conversion Date" means any day on which all or any portion of shares of the
Series B Preferred Stock is converted in accordance with the provisions hereof.
"Conversion Notice" means a written notice of conversion substantially in the
form annexed hereto as Annex I.
"Conversion Price" means on any date of determination the applicable price for
the conversion of shares of Series B Preferred Stock into Common Shares on such
day as set forth in Section 6.1.
"Corporation" means DataWorld Solutions, Inc., a Delaware corporation, and any
successor or resulting corporation by way of merger, consolidation, sale or
exchange of all or substantially all of the Corporation's assets, or otherwise.
"Current Market Price" means on any date of determination the closing bid price
of a Common Share on such day as reported on OTCBB; provided, if such security
is not listed or admitted to trading on OTCBB, as reported on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the closing bid
price of such security on the over-the-counter market on the day in question as
reported by Bloomberg LP, or a similar generally accepted reporting service, as
the case may be.
"Default Dividend Rate" is equal to the Dividend Rate plus an additional 4% per
annum.
"Dividend Period" means the semi-annual period commencing on and including
the Issue Date or, if a dividend has previously been paid, the day after the
immediately preceding Dividend Payment Due Date and ending on and including
the immediately subsequent Dividend Payment Due Date.
"Dividend Payment Due Date" means June 30 and December 31 of each year.
"Dividend Rate" means 8% per annum, computed on the basis of a 360-day year.
"Holder" means the initial holder of Series B Preferred Stock, any successor
thereto, or any Person or Persons to whom the Series B Preferred Stock is
subsequently transferred in accordance with the provisions hereof.
"Issue Date" means, as to any share of Series B Preferred Stock, the date of
issuance of such share.
"Junior Securities" means all capital stock of the Corporation except for the
Series B Preferred Stock.
"Liquidation Preference" means, with respect to a share of the Series B
Preferred Stock, an amount equal to the sum of (i) the Stated Value thereof,
plus (ii) an amount equal to 30% of such Stated Value, plus (iii) the
aggregate of all accrued and unpaid dividends (whether or not earned or
declared, whether or not there were funds legally available for the payment
of dividends and whether or not a Dividend Payment Due Date has occurred
since the last dividend payment) on such share of Series B Preferred Stock
until the most recent Dividend Payment Due Date; provided that, in the event
of an actual liquidation, dissolution or winding up of the
Corporation, the amount referred to in clause (iii) above shall be calculated by
including accrued and unpaid dividends to the actual date of such liquidation,
dissolution or winding up, rather than the Dividend Payment Due Date referred to
above.
"Mandatory Conversion Date" has the meaning set forth in Section 6.8.
"Market Price" per Common Share means the average of the closing bid prices of
the Common Shares as reported on OTCBB for the three Trading Days on which
the three lowest closing bid prices are reported during any Valuation Period, it
being understood that such three Trading Days need not be consecutive; provided,
if such security is not listed or admitted to trading on OTCBB, as reported on
the principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the over-the-
counter market on the day in question as reported by Bloomberg LP, or a similar
generally accepted reporting service, for the three Trading Days on which
the three lowest closing bid prices are reported during any Valuation Period,
it being understood that such three Trading Days need not be consecutive.
"Optional Redemption Price" has the meaning set forth in Section 6.5.
"OTCBB" means the OTC Bulletin Board service of the National Association of
Securities Dealers, Inc.
"Outstanding", when used with reference to Common Shares or Capital Shares
(collectively, "Shares"), means, on any date of determination, all issued and
outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Corporation or any Subsidiary of the
Corporation shall not be deemed "Outstanding" for purposes hereof.
"Person" means an individual, a corporation, a partnership, an association, a
limited liability company, an unincorporated business organization, a trust or
other entity or organization, and any government or political subdivision or any
agencyor instrumentality thereof.
"Redemption Date" has the meaning set forth in Section 6.5.
"Registration Rights Agreement" means that certain Registration Rights
Agreement to be dated as of May 26, 2000 between the Corporation and the initial
Holder hereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC thereunder, all as in effect at the time.
"Securities Purchase Agreement" means that certain Securities Purchase
Agreement to be dated as of May 26, 2000 between the Corporation and the initial
Holder hereof.
"Series B Preferred Shares" or "Series B Preferred Stock" means the shares of
Series B 8% Convertible Preferred Stock of the Corporation or such other
convertible preferred stock of the Corporation as may be exchanged therefor.
"Stated Value" has the meaning set forth in Article 2.
"Subsidiary" means any entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are owned directly or indirectly by
the Corporation.
"Trading Day" means any day on which (a) purchases and sales of securities
authorized for quotation on OTCBB are reported thereon, (b) no event which
results in a material suspension or limitation of trading of the Common Shares
on OTCBB has occurred and (c) at least one bid for the trading of Common Shares
is reported on OTCBB.
"Valuation Event" has the meaning set forth in Section 6.1.
"Valuation Period" means the period of 30 Trading Days immediately preceding
the Conversion Date; provided, however, that if a Valuation Event occurs during
a Valuation Period on a date less than 5 Trading Days before the Conversion
Date, the Valuation Period shall be extended until the date 5 Trading Days after
the occurrence of the Valuation Event.
"Warrant" means the Common Stock Purchase Warrant issued by the Company to
the initial Holder to purchase shares of Common Stock.
All references to "cash" or "$" herein mean currency of the
United States of America.
Designation and Amount
The designation of this series, which consists of 3,000
shares of Preferred Stock, shall be Series B 8% Convertible Preferred
Stock (the "Series B Preferred Stock") and the stated value shall be
$1,000 per share (the "Stated Value").
Rank
The Series B Preferred Stock shall rank prior to any other
capital stock of the Corporation.
Dividends
(c) The Holder shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for the payment of
dividends, dividends at the Dividend Rate on the Stated Value of each share
of Series B Preferred Stock on and as of each Dividend Payment Due Date
with respect to each Dividend Period; provided, however, that if any
dividend is not paid in full on any Dividend Payment Due Date, dividends
shall thereafter accrue and be payable at the Default Dividend Rate on the
Stated Value of each share of Series B Preferred Stock until all accrued
dividends are paid in full. Dividends on the Series B Preferred Stock shall
be cumulative from the date of issue, whether or not declared for any
reason, including if such declaration is prohibited under any outstanding
indebtedness or borrowings of the Corporation or any of its Subsidiaries, or
any other contractual provision binding on the Corporation or any of its
Subsidiaries, and whether or not there shall be funds legally available for
the payment thereof.
Each dividend shall be payable in equal semi-annual amounts on each Dividend
Payment Due Date, commencing June 30, 2000, to the Holders of record of
shares of the Series B Preferred Stock, as they appear on the stock records
of the Corporation at the close of business on such record date, not more
than 60 days or less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors. Accrued and unpaid dividends
for any past Dividend Period may be declared and paid at any time, without
reference to any Dividend Payment Due Date, to Holders of record, not more
than 15 days preceding the payment date thereof, as may be fixed by the Board of
Directors. At the option of the Corporation, the dividend shall be paid either
(x) in cash or (y) through the issuance of duly and validly authorized and
issued, fully paid and nonassessable shares of the Common Stock valued at
100% of the then applicable Conversion Price calculated in accordance
with the provisions of Section 6.1, assuming for this purpose, that the
applicable Dividend Payment Due Date is the applicable Conversion Date, and
registered for resale in open market transactions on the Registration
Statement (as defined in the Registration Rights Agreement), which Registration
Statement shall then be effective under the Securities Act; provided, however,
that if no funds are legally available for the payment of cash dividends on the
Series B Preferred Stock, dividends shall be paid as provided in clause (y)
above. Except as provided in Section 4(d) hereof, the Holder shall not be
entitled to any dividends in excess of the cumulative dividends, as herein
provided, on the Series B Preferred Stock.
Except as otherwise provided in Section 4(e) hereof, so long as any shares of
the Series B Preferred Stock are outstanding, no dividends shall be declared or
paid or set apart for payment or other distribution declared or made upon any
Junior Securities, nor shall any Junior Securities be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or benefit
plan (including a stock option plan) of the Corporation or any Subsidiary) for
any consideration by the Corporation, directly or indirectly, nor shall any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of any Junior Securities, unless in each case (i) the full
cumulative dividends required to be paid in cash on all outstanding shares
of the Series B Preferred Stock shall have been paid or set apart for
payment for all past Dividend Periods with respect to the Series B Preferred
Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the dividend for the current Dividend Period with respect to the
Series B Preferred Stock. Except as otherwise provided in Section 4(e) hereof,
if the Corporation shall at any time or from time to time after the Issue Date
declare, order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend or spin-off) on shares of its Common Stock,
then, and in each such case, in addition to the dividend obligation of the
Corporation specified in Section 4(a) hereof, the Corporation shall declare,
order, pay and make the same dividend or distribution to
each Holder of Series B Preferred Stock as would have been made with respect to
the number of Common Shares the Holder would have received had it converted all
of its Series B Preferred Shares immediately prior to such dividend or
distribution. If the Corporation shall at any time or from time to time after
the Issue Date declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of the Corporation or
any of its Subsidiaries by way of dividend or spin-off) on shares of its Common
Stock in connection with a spin-off of assets or businesses of the
Corporation or any of its Subsidiaries to the Corporation's stockholders,
then, and in each such case, in addition to the dividend obligation of the
Corporation specified in Section 4(a) hereof, the Corporation shall declare,
order, pay and make the same dividend or distribution to each Holder of
Series B Preferred Stock as would have been made with respect to the number of
Common Shares the Holder would have received had it converted all of its Series
B Preferred Shares immediately prior to such dividend or distribution; provided,
however, that notwithstanding the foregoing, 50% of any such dividend or
distribution due to the Holder with respect to each share of Series B Preferred
Stock shall be paid to the Holder at the time such dividend or distribution is
made to the other shareholders of the Corporation and the remaining 50% of such
dividend or distribution shall be deposited with an escrow agent reasonably
acceptable to the Holder and the Corporation pursuant to an escrow agreement
reasonably acceptable to the Holder and the Corporation, which escrow
agreement will provide that the remaining 50% of such dividend or
distribution deposited with such escrow agent with respect to each share of
Series B Preferred will be delivered to the Holder upon the earlier to occur
of (i) the applicable Conversion Date for such Series B Preferred and (ii)
the Redemption Date, if applicable for such Series B Preferred.
Liquidation Preference; Mergers, Consolidations, etc.
If the Corporation shall commence a voluntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law, or consent to the entry of an order for relief in an involuntary case under
any law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of the Corporation or of
any substantial part of its property, or make an assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction
in the premises in an involuntary case under the Federal bankruptcy laws
or any other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up, no distribution shall be made to the holders of
any shares of capital stock of the Corporation upon liquidation,
dissolution or winding-up unless prior thereto, the Holders of shares of
Series B Preferred Stock, subject to this Article 5, shall have
received the Liquidation Preference with respect to each share.
In case the Corporation shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another Person (where the Corporation
is not the survivor or where there is a change in or distribution with respect
to the Common Stock of the Corporation), sell, convey, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
Person, or effectuate a transaction or series of related transactions in which
more than 50% of the voting power of the Corporation is disposed of (each, a
"Fundamental Corporate Change") and, pursuant to the terms of such Fundamental
Corporate Change, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any
nature whatsoever (including warrants or other subscription or purchase rights)
in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Corporation, then each Holder of Series B
Preferred Stock shall have the right thereafter, at its sole option, either
(x) to require the Corporation to deem such Fundamental
Corporate Change to be a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall be required to distribute,
upon consummation of and as a condition to, such Fundamental Corporate Change
an amount equal to 100% of the Liquidation Preference with respect to each
outstanding share of Series B Preferred Stock, (y) to receive the number of
shares of common stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and Other Property as
is receivable upon or as a result of such Fundamental Corporate Change by a
holder of the number of shares of Common Stock into which such Series B
Preferred Stock may be converted at the Conversion Price applicable immediately
prior to such Fundamental Corporate Change or (z) require the Corporation, or
such successor, resulting or purchasing corporation, as the case may be, to,
without benefit of any additional consideration
therefor, to execute and deliver to the Holder shares of its Preferred Stock
with substantial identical rights, preferences, privileges, powers, restrictions
and other terms as the Series B Preferred Stock equal to the number of shares of
Series B Preferred Stock held by such Holder immediately prior to such
Fundamental Corporate Change; provided, that all Holders of Series B Preferred
Stock shall be deemed to elect the option set forth in clause (x) above if at
least a majority in interest of such Holders elect such option. For purposes of
this Section 5(b), "common stock of the successor or acquiring corporation"
shall include stock of such corporation of any class which is not preferred as
to dividends or assets over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock.
The foregoing provisions of this Section 5(b) shall similarly apply to
successive Fundamental Corporate Changes.
Conversion of Preferred Stock
Conversion; Conversion Price
At the option of the Holder, the shares of Series B Preferred
Stock may be converted, either in whole or in part, into Common Shares
(calculated as to each such conversion to the nearest whole share) at any
time and from time to time on and following the Closing Date, at a
Conversion Price per share of Common Stock equal to the lesser of: (i)
110% of the lowest of the closing bid prices for the Common Stock on the
OTCBB for the five Trading Days immediately preceding the Closing
Date (subject to adjustment for any stock-split or stock combination to
occur after the date hereof), or (ii) 75% of the Market Price (in this Section
6.1, the "Conversion Percentage"); provided that, if the Registration
Statement (as defined in the Registration Rights Agreement) has not been
declared effective on or before the Effectiveness Date (as defined in the
Registration Rights Agreement) (the "Due Date"), then the Conversion
Percentage shall decrease by two percent (2%) for each month (that is,
each thirty (30) day period beginning on the 30th day after the Due Date) or
partial month in which the said registration statement has not been
declared, or does not remain, effective; if such registration statement has
not been declared and does not remain effective on and after the date
which is one (1) year after the Closing Date and until the Series B
Preferred Stock has been converted in full, then the Conversion Percentage
shall be fifty percent (50%). At the Corporation's option, the amount of
accrued and unpaid dividends as of the Conversion Date (whether or not
earned or declared, whether or not there were funds legally available for
the payment of dividends and whether or not a Dividend Payment Due
Date has occurred since the last dividend payment) shall not be subject to
conversion but instead may be paid in cash as of the Conversion Date; if
the Corporation elects to convert the amount of such accrued and unpaid
dividends at the Conversion Date into Common Stock, the Common Stock
issued to the Holder shall be valued at the applicable Conversion Price.
The number of shares of Common Stock due upon
conversion of Series B Preferred Stock shall be (i) the number of shares of
Series B Preferred Stock to be converted, multiplied by (ii) the Stated
Value plus accrued and unpaid dividends (whether or not earned or
declared, whether or not there were funds legally available for the payment
of dividends and whether or not a Dividend Payment Due Date has
occurred since the last dividend payment), to the extent the Corporation
does not at its election pay such accrued and unpaid dividends in cash, and
divided by (iii) the applicable Conversion Price.
Within two Business Days of the occurrence of a Valuation
Event, the Corporation shall send notice thereof to each Holder.
Notwithstanding anything to the contrary contained herein, if a Valuation
Event occurs during any Valuation Period, the Holder may convert some
or all of its Series B Preferred Stock, at its sole option, at a Conversion
Price equal to the Current Market Price on any Trading Day during the
Valuation Period.
For purposes of this Section 6.1, a "Valuation Event" shall
mean an event in which the Corporation takes any of the following
actions:
subdivides or combines its Capital Shares;
makes any distribution on its Capital Shares;
issues (other than as listed on Schedule 3(c) to the Securities Purchase
Agreement) any additional Capital Shares (the "Additional Capital Shares"),
otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b) above,
at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuances, or
without consideration, except for issuances under employee benefit plans
consistent with those presently in effect and issuances under presently
outstanding warrants, options or convertible securities; issues any
warrants, options or other rights to subscribe for or purchase any
Additional Capital Shares if the price per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to such warrants, options
or other rights shall be less than the Current Market Price in effect
immediately prior to such issuance;
issues any securities convertible into or exchangeable or exercisable for
Additional Capital Shares if the consideration per share for which Additional
Capital Shares may at any time thereafter be issuable pursuant to the terms of
such convertible, exchangeable or exercisable securities shall be less than the
Current Market Price in effect immediately prior to such issuance;
announces or effects a Fundamental Corporate Change;
makes any distribution of its assets or evidences of indebtedness to the holders
of its Capital Shares as a dividend in liquidation or by way of return of
capital or other than as a dividend payable out of earnings or surplus legally
available for the payment of dividends under applicable law or any distribution
to such holders made in respect of the sale of all or substantially all of the
Corporation's assets (other than under the circumstances provided for in the
foregoing Sections 6.1(a) through 6.1(e)); or takes any action affecting the
number of Outstanding Capital Shares, other than an action described in
any of the foregoing Sections 6.1(a) through 6.1(g) hereof, inclusive, which
in the opinion of the Holder, determined in good faith, would have a material
adverse effect upon the rights of the Holder at the time of a conversion of
the Preferred Stock or is reasonably likely to result in a decrease in the
Market Price.
Exercise of Conversion Privilege; Option to Purchase Additional
Common Stock
Conversion of the Series B Preferred Stock may be exercised, in whole or in
part, by the Holder by telecopying an executed and completed Conversion Notice
to the Corporation, along with the Holder's written calculation of the
Conversion Price. Each date on which a Conversion Notice is telecopied to the
Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Series B
Preferred Stock and issue the Common Stock Issued at Conversion, and all
voting and other rights associated with the beneficial ownership of the Common
Stock Issued at Conversion shall vest with the Holder, effective
as of the Conversion Date at the time specified in the Conversion Notice.
The Conversion Notice also shall state the name or names (with addresses)
of the Persons who are to become the holders of the Common Stock Issued at
Conversion in connection with such conversion. The Holder shall
deliver the shares of Series B Preferred Stock to the Corporation by express
courier within two (2) business days following the Conversion Date. Upon
surrender for conversion, the Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. Except as
otherwise stated in the Securities Purchase Agreement, as promptly as
practicable after the receipt of the Conversion Notice as aforesaid, but in
any event not more than five (5) Business Days after the
Corporation's receipt of such Conversion Notice (by
facsimile or otherwise), the Corporation shall (i) issue the Common Stock issued
at Conversion in accordance with the provisions of this Article 6, and (ii)
cause to be mailed for delivery by overnight courier to the Holder (x) a
certificate or certificate(s) representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion, and (y) if the Corporation
chooses to pay accrued and unpaid dividends in cash, cash in the amount of
accrued and unpaid dividends as of the Conversion Date. Such conversion shall
be deemed to have been effected at the time at which the Conversion Notice
indicates so long as the Series B Preferred Stock shall have been surrendered as
aforesaid at such time, and at such time the rights of the Holder of the Series
B Preferred Stock, as such, shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable
shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights
associated with the beneficial ownership of such Common Shares shall at such
time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.3), to surrender the Series B Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$2.00 shall be required to be given unless specifically requested by the Holder.
If, at any time (i) the Corporation challenges, disputes or denies the right of
the Holder hereof to effect the conversion of the Series B Preferred Stock into
Common Shares or otherwise dishonors or rejects any Conversion Notice delivered
in accordance with this Section 6.2 or (ii) any third party commences any
lawsuit or proceeding or otherwise asserts any claim before any court or public
or governmental authority which seeks to challenge, deny, enjoin, limit, modify,
delay or dispute the right of the Holder hereof to effect the conversion of the
Series B Preferred Stock into Common Shares, then the Holder shall have the
right, by written notice to the Corporation, to require the Corporation promptly
to redeem the Series B Preferred Stock for cash at a redemption
price equal to 135% of the Stated Value thereof together with all
accrued and unpaid dividends (whether or not earned or declared, whether
or not there were funds legally available for the payment of dividends
and whether or not a Dividend Payment Due Date has occurred since the last
dividend payment) thereon (the "Mandatory Purchase Amount"). Under any
of the circumstances set forth above, the Corporation shall be responsible
for the payment of all costs and expenses of the Holder, including
reasonable legal fees and expenses, as and when incurred in disputing any such
action or pursuing its rights hereunder (in addition to any other rights of the
Holder), unless such action is finally adjudicated against the Holder.
Notwithstanding the above, if the Company objects to a calculation contained in
a Notice of Conversion, the Company shall make such objection to the Holder in
writing within twenty four (24) hours after the Company's first receipt (whether
via facsimile or otherwise) of such Notice of Conversion. If the Holder agrees
with such objection, then the calculation shall be properly adjusted. If the
Holder disagrees with the Company's objection, the Company shall submit the
Notice of Conversion or Warrant exercise form (as applicable) with the relevant
facts to its accounting firm of record, which shall, at Company expense and
within twenty-four (24) hours after receipt thereof, make a determination of the
correct calculation to be utilized for such conversion or exercise, and notify
the Company and the Holder. Absent manifest error, the determination of such
accounting firm shall be final. The Holder shall be entitled to exercise its
conversion privilege notwithstanding the
commencement of any case under 11 U.S.C. par. 101 et seq. (the "Bankruptcy
Code"). In the event the Corporation is a debtor under the Bankruptcy Code, the
Corporation hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. Par. 362 in respect of the Holder's conversion
privilege. The Corporation hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Par. 362 in respect of the
conversion of the Series B Preferred Stock. The Corporation agrees,
without cost or expense to the Holder, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. Par. 362.
(d) On any Conversion Date relating to a conversion of Series B
Preferred Stock by a Holder, the converting Holder shall have the option (the
"Option") to purchase one (1) additional share of Common Stock for each
share of Common Stock issuable as a result of such conversion at an exercise
price per share equal to the applicable Conversion Price (such additional
shares of Common Stock referred to herein as "Option Shares"). The Holder
shall (i) indicate on the Notice of Conversion in respect of such Conversion
Date that it is exercising its Option with respect to such conversion and shall
specify the number of shares of Common Stock with respect to which the
Option is being so exercised, and (ii) shall pay to the Company in immediately
available funds within two (2) business days after such Conversion Date, the
aggregate purchase price for the Option Shares then being purchased.
Without limitation, the provisions of this Section 5 above shall apply to any
exercise by the Holder of its Option.
Fractional Shares
No fractional Common Shares or scrip representing
fractional Common Shares shall be issued upon conversion of the Series B
Preferred Stock. Instead of any fractional Common Shares which
otherwise would be issuable upon conversion of the Series B Preferred
Stock, the number of Common Shares shall be rounded up to the nearest
whole share.
Adjustments to Conversion Price
For so long as any shares of the Series B Preferred Stock are
outstanding, if the Corporation issues and sells
pursuant to an exemption from registration under
the Securities Act (other than as listed on Schedule
3(c) to the Securities Purchase Agreement) (A)
Common Shares at a purchase price that is lower
than the Conversion Price on the date of issuance
of such Common Shares, (B) warrants or options
with an exercise price on the date of issuance
thereof that is lower than the Conversion Price for
the Holder on such date, except for warrants or
options issued pursuant to employee stock option
agreements or stock incentive agreements of the
Corporation, or (C) convertible, exchangeable or
exercisable securities with a right to exchange at
lower than the Current Market Price on the date
of issuance or conversion, as applicable, of such
convertible, exchangeable or exercisable
securities, except for stock option agreements or
stock incentive agreements, then the Conversion
Price shall be reduced to equal the lowest of any
such purchase price, exercise price or exchange
price, and the number of shares of Common Stock
into which the Series B Preferred Stock is
convertible pursuant to the second paragraph of
Section 6.1 shall be correspondingly adjusted.
After such reduction, the Conversion Price shall
never exceed the Conversion Price as so reduced,
in spite of any subsequent increase in the Market
Price. Optional Redemption
At any time after the date 60 days after the Closing Date
until the Mandatory Conversion Date (as defined below), the Corporation,
upon notice delivered to the Holder as provided in Section 6.6, may
redeem, in cash, the Series B Preferred Stock (but only with respect to
such shares as to which the Holder has not theretofore furnished a
Conversion Notice in compliance with Section 6.2), at 125% of the Stated
Value thereof (the "Optional Redemption Price"), together with all
accrued and unpaid dividends (whether or not earned or declared, whether
or not there were funds legally available for the payment of dividends and
whether or not a Dividend Payment Due Date has occurred since the last
dividend payment) thereon to the date of redemption (the "Redemption
Date"); provided, however, that the Corporation may only redeem the
Series B Preferred Stock under this Section 6.5 if the Current Market Price
is less than 200% of the Current Market Price on the Issue Date. Except as
set forth in this Section 6.5, the Corporation shall not have the right to
redeem the Series B Preferred Stock.
Notice of Redemption
Notice of redemption pursuant to Section 6.5 shall be
provided by the Corporation to the Holder in writing (by registered mail or
overnight courier at the Holder's last address appearing in the
Corporation's security registry) not less than 60 nor more than 75 days
prior to the Redemption Date, which notice shall specify the Redemption
Date and refer to Section 6.5 (including a statement of the Current Market
Price per Common Share) and this Section 6.6.
Surrender of Preferred Stock
Upon any redemption of the Series B Preferred Stock
pursuant to Sections 6.5 and 6.6, the Holder shall either deliver the Series
B Preferred Stock by hand to the Corporation at its principal executive
offices or surrender the same to the Corporation at such address by express
courier within two (2) Business Days after the date that the Buyer receives
payment therefore. Payment of the Optional Redemption Price shall be
made by the Corporation to the Holder by wire transfer of immediately
available funds to such account(s) as the Holder shall specify to the
Corporation. If payment of such Optional Redemption Price is not made
in full by the Redemption Date, the Holder shall again have the right to
convert the Series B Preferred Stock as provided in Article 6 hereof.
Mandatory Conversion
On the third anniversary of the date of this Certificate of
Designation (the "Mandatory Conversion Date"), the Corporation shall
convert all Series B Preferred Stock outstanding, at the Conversion Price
utilizing the Stated Value (plus accrued and unpaid dividends (whether or
not earned or declared, whether or not there were funds legally available
for the payment of dividends and whether or not a Dividend Payment Due
Date has occurred since the last dividend payment)) as the value of each
share of Series B Preferred Stock, into shares of Common Stock registered
for resale in open market transactions on the Registration Statement (as
defined in the Registration Rights Agreement), which Registration
Statement shall then be effective under the Securities Act.
Certain Conversion Limitations
(a) Notwithstanding anything herein to the contrary, the
Holder shall not have the right, and the Corporation shall not have the
obligation, to convert all or any portion of the Series B Preferred Stock
(and the Corporation shall not have the right to pay dividends on the Series
B Preferred Stock in shares of Common Stock) or exercise the Option if
and to the extent that the issuance to the Holder of shares of Common
Stock upon such conversion (or payment of dividends) or exercise of the
Option would result in the Holder being deemed the "beneficial owner" of
more than 5% of the then Outstanding shares of Common Stock within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder. If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than
5% of the then Outstanding shares of Common Stock, then the
Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series B Preferred Stock as are necessary to
cause such Holder to be deemed the beneficial owner of not more than 5%
of the then Outstanding shares of Common Stock. Upon such
determination by a court of competent jurisdiction, the Redemption Shares
shall immediately and without further action be deemed returned to the
status of authorized but unissued shares of Series B Preferred Stock, and
the Holder shall have no interest in or rights under such Redemption
Shares. Any and all dividends paid on or prior to the date of such
determination shall be deemed dividends paid on the remaining shares of
Series B Preferred Stock held by the Holder. Such redemption shall be for
cash at a redemption price equal to the sum of (i) 125% of the Stated
Value of the Redemption Shares and (ii) any accrued and unpaid dividends
(whether or not earned or declared, whether or not there were funds legally
available for the payment of dividends and whether or not a Dividend
Payment Due Date has occurred since the last dividend payment) to the
date of such redemption.
(b) Notwithstanding anything herein to the contrary, if
and to the extent that, on any date (the "Section 16 Determination
Date"), the holding by the Holder of shares of the Series B Preferred Stock
would result in the Holder becoming subject to the provisions of
Section 16(b) of the Exchange Act in virtue of being deemed the
"beneficial owner" of more than 10% of the then Outstanding shares of
Common Stock, then the Holder shall not have the right, and the
Corporation shall not have the obligation, to convert so many of such
Holder's shares of Series B Preferred Stock or permit an exercise of the
Option (the "Section 16 Redemption Shares") as shall cause such Holder
to be deemed the beneficial owner of more than 10% of the then
Outstanding shares of Common Stock during the period ending 60 days
after the Section 16 Determination Date. If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than
10% of the then Outstanding shares of Common Stock for the purposes of
such Section 16(b), then the Corporation shall redeem the Section 16
Redemption Shares. Upon such determination by a court of competent
jurisdiction, the Section 16 Redemption Shares shall immediately and
without further action be deemed returned to the status of authorized but
unissued shares of Series B Preferred Stock, and the Holder shall have no
interest in or rights under such Section 16 Redemption Shares. Any and
all dividends paid on or prior to the date of such determination shall be
deemed dividends paid on the remaining shares of Series B Preferred
Stock held by the Holder. Such redemption shall be for cash at a
redemption price equal to the sum of (i) 125% of the Stated Value of the
Section 16 Redemption Shares and (ii) any declared and unpaid dividends
to the date of such redemption.
(c) Unless the Corporation shall have obtained the
approval of its voting stockholders to such issuance in accordance with the
rules of OTCBB or any other stock market rules with which the
Corporation shall be required to comply, but only to the extent required
thereby, the Corporation shall not issue shares of Common Stock (i) upon
conversion of any shares of Series B Preferred Stock or (ii) as a dividend
on the Series B Preferred Stock, if such issuance of Common Stock, when
added to the number of shares of Common Stock previously issued by the
Corporation (x) upon conversion of shares of the Series B Preferred Stock,
(y) upon exercise of the Warrants issued pursuant to the terms of the
Securities Purchase Agreement and (z) in payment of dividends on the
Series B Preferred Stock, would equal or exceed 20% of the number of
shares of the Corporation's Common Stock which were issued and
Outstanding on the Issue Date (the "Maximum Issuance Amount"). In
the event that a properly executed Conversion Notice is received by the
Corporation which would require the Corporation to issue shares of
Common Stock equal to or in excess of the Maximum Issuance Amount,
the Corporation shall honor such conversion request by (a) converting the
number of shares of Series B Preferred Stock stated in the Conversion
Notice which is not in excess of the Maximum Issuance Amount and (b)
redeeming the remaining number of shares of Series B Preferred Stock
stated in the Conversion Notice in cash at a price equal to 125% of the
Stated Value thereof, together with all accrued and unpaid dividends
(whether or not earned or declared, whether or not there were funds legally
available for the payment of dividends and whether or not a Dividend
Payment Due Date has occurred since the last dividend payment) on the
total number of shares stated in the Conversion Notice. In the event that
the Corporation shall elect to pay a dividend in shares of Common Stock
which would require the Corporation to issue shares of Common Stock
equal to or in excess of the Maximum Issuance Amount, the Corporation
shall pay (1) a dividend in a number of shares of Common Stock equal to
one less than the Maximum Issuance Amount and (2) the balance of the
dividend in cash.
Voting Rights
The Holders of the Series B Preferred Stock have no voting
power, except as otherwise provided by the General Corporation Law of
the State of Delaware (the "DGCL"), in this Article 7, and in Article 8
below.
Notwithstanding the above, the Corporation shall provide
each Holder of Series B Preferred Stock with prior notification of any
meeting of the shareholders (and copies of all proxy materials and other
information sent to shareholders). In the event of any taking by the
Corporation of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share
of any class or any other securities or property, or to receive any other
right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed liquidation, dissolution or winding
up of the Corporation, the Corporation shall mail a notice thereof to each
Holder at least 30 days prior to the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event,
together with a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such
time.
To the extent that under the DGCL the vote of the Holders
of the Series B Preferred Stock, voting separately or as a class, as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the Holders of at least a majority of the
outstanding shares of Series B Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of a majority
of the outstanding shares of Series B Preferred Stock (except as otherwise
may be required under the DGCL) shall constitute the approval of such
action by the class. To the extent that under the DGCL Holders of the
Series B Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series B
Preferred Stock shall be entitled to a number of votes equal to the number
of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of
which the Conversion Price is calculated. Holders of the Series B
Preferred Stock shall be entitled to notice of all shareholder meetings or
written consents (and copies of all proxy materials and other information
sent to shareholders) with respect to which they would be entitled to vote,
which notice would be provided pursuant to the Corporation's bylaws and
the DGCL.
Protective Provisions
So long as shares of Series B Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided in the DGCL) of the Holders of at
least a majority of the then outstanding shares of Series B Preferred Stock:
alter or change the rights, preferences or privileges of the Series B Preferred
Stock; create any new class or series of capital stock having a preference over
the Series B Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series B Preferred Stock;
increase the authorized number of shares of Series B Preferred Stock; or
do any act or thing not authorized or contemplated by this Certificate of
Designation which would result in taxation of the Holders of shares of the
Series B Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code of 1986, as
hereafter from time to time amended).
In the event Holders of least a majority of the then
outstanding shares of Series B Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or privileges of the
shares of Series Preferred Stock, pursuant to subsection (a) above, so as to
affect the Series B Preferred Stock, then the Corporation will deliver
notice of such approved change to the Holders of the Series B Preferred
Stock that did not agree to such alteration or change (the "Dissenting
Holders") and Dissenting Holders shall have the right for a period of 30
days to convert pursuant to the terms of this Certificate of Designation as
in effect prior to such alteration or change or to continue to hold their
shares of Series B Preferred Stock.
Miscellaneous
Loss, Theft, Destruction of Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of
the loss, theft, destruction or mutilation of shares of Series B Preferred
Stock and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Corporation, or, in the
case of any such mutilation, upon surrender and cancellation of the Series
B Preferred Stock, the Corporation shall make, issue and deliver, in lieu of
such lost, stolen, destroyed or mutilated shares of Series B Preferred
Stock, new shares of Series B Preferred Stock of like tenor. The Series B
Preferred Stock shall be held and owned upon the express condition that
the provisions of this Section 9.1 are exclusive with respect to the
replacement of mutilated, destroyed, lost or stolen shares of Series B
Preferred Stock and shall preclude any and all other rights and remedies
notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement of negotiable instruments or other
securities without the surrender thereof.
Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the
Series B Preferred Stock shall be registered upon the registry books of the
Corporation to be, and may treat it as, the absolute owner of the Series B
Preferred Stock for the purpose of receiving payment of dividends on the
Series B Preferred Stock, for the conversion of the Series B Preferred
Stock and for all other purposes, and the Corporation shall not be affected
by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series B Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
Fundamental Corporate Change
In the case of the occurrence of any Fundamental Corporate
Change described in Section 5(b), the Corporation shall cause to be mailed
to the Holder of the Series B Preferred Stock at its last address as it
appears in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date specified in connection
therewith (or, if such 20 days notice is not possible, at the earliest possible
date prior to any such record, effective or expiration date), a notice stating
(x) the date on which a record is to be taken for the purpose of such
corporate action, or if a record is not to be taken, the date as of which the
Holders of record of Series B Preferred Stock to be entitled to any
dividend, distribution, issuance or granting of rights, options or warrants
are to be determined or the date on which such Fundamental Corporate
Change is expected to become effective, and (y) the date as of which it is
expected that Holders of record of Series B Preferred Stock will be entitled
to exchange their shares for securities, cash or other property deliverable
upon such Fundamental Corporate Change.
Register
The Corporation shall keep at its principal office a register
in which the Corporation shall provide for the registration of the Series B
Preferred Stock. Upon any transfer of the Series B Preferred Stock in
accordance with the provisions hereof, the Corporation shall register such
transfer on the register of Series B Preferred Stock.
Withholding
To the extent required by applicable law, the Corporation
may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the
Series B Preferred Stock.
Headings
The headings of the Articles and Sections of this Certificate
of Designation are inserted for convenience only and do not constitute a
part of this Certificate of Designation.
Severability
If any provision of this Certificate of Designation, or the
application thereof to any person or entity or any circumstance, is invalid
or unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (ii) the
remainder of this Certificate of Designation and the application of such
provision to other persons, entities or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation to be signed by its duly authorized officers on
May __, 2000.
DATAWORLD SOLUTIONS,
INC.
By:
Name:
Title:
By:
Name:
Title:
ANNEX I
FORM OF CONVERSION NOTICE
TO: DataWorld Solutions, Inc.
920 Conklin Street
Farmingdale, NY 11735
The undersigned owner of this Series B 8% Convertible Preferred Stock (the
"Series B Preferred Stock") issued by DataWorld Solutions, Inc. (the
"Corporation") hereby irrevocably exercises its option to convert __________
shares of the Series B Preferred Stock into shares of the common stock, $.001
par value per share ("Common Stock"), of the Corporation in accordance with the
terms of the Certificate of Designation. The undersigned hereby irrevocably
elects to purchase ____ Option Shares, at an exercise
price per share equal to the Conversion Price, or $_______ per share. The
undersigned shall pay the purchase price for such Option Shares to the Company
within two (2) business days after the date of delivery of this Notice of
Conversion. The calculations for such conversion and exercise, if applicable,
are shown on the sheet attached hereto as Exhibit A.
The undersigned hereby instructs the Corporation to convert the number of
shares of the Series B Preferred Stock specified above, and to exercise the
Option as specified above, into Shares of Common Stock Issued at Conversion in
accordance with the provisions of Article 6 of the Certificate of Designation.
The undersigned directs that the Common Stock issuable and certificates
therefor deliverable upon conversion and the recertificated
Series B Preferred Stock, if any, not being surrendered for conversion hereby,
together with any check in payment for fractional Common Stock, be issued
in the name of and delivered to the undersigned unless a different name has
been indicated below. All capitalized terms used and not defined herein
have the respective meanings assigned to them in the Certificate of
Designation. So long as the Series B Preferred Stock shall have
been properly surrendered for conversion, the conversion (and exercise, if
applicable) pursuant hereto shall be deemed to have been effected at the date
and time specified below, and at such time the rights of the undersigned as a
Holder of the Series B Preferred Stock shall cease and the Person or Persons in
whose name or names the Common Stock Issued at Conversion shall be issuable
shall be deemed to have become the holder or holders of record of the Common
Shares represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons.
Date and time:
Signature
Fill in for registration of Series B Preferred Stock:
Please print name and address (including zip code number)
