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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 22,1997
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DENTAL SERVICES OF AMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-11935 59-2754843
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
12000 Biscayne Boulevard, Suite 200, North Miami, FL Md. 33181
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Registrant's telephone number, including area code (305) 895-0716
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Item 2. Acquisition or Disposition of Assets.
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On June 22, 1997 the Registrant executed an agreement to acquire a 10,000
square building located at 2260 S. W. 8th Street, Miami, Fl. from Luis Cruz,
M.D. The building will be delivered empty and it is anticipated that the
Registrant will utilize it for corporate offices. See Item 5 for further
information.
Item 5. Other Events.
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On June 22, 1997 the Registrant executed an agreement with Luis Cruz, M.D.
Pursuant to the agreement Dr. Cruz will sell to the Registrant the real estate
described in Item 2 for 250,000 shares of Registrant's Class C Convertible
Preferred Stock. In addition, Dr. Cruz agreed to purchase 100,000 shares of
Registrant's Series A Convertible Preferred Stock for a cash payment of
$495,000. The agreement with Dr. Cruz is filed as an exhibit herewith.
Concurrent with the closing, Dr. Cruz is acquiring a warrant to acquire 500,000
shares of the Registrant's common stock for $1.00 per share from a holder of
such warrant.
Registrant's Board of directors adopted resolutions designating the rights
and preferences of the Company's Series A Convertible Preferred Stock, Series C
Convertible Preferred Stock and Class 10 Convertible Preferred Stock.
Dr. Cruz was elected as a director of the Company and Chairman and Chief
Executive Officer of the Company and Maria Suarez was elected as a director of
the Company.
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On June 30, 1997 Paulo Dominguez resigned as President and director of the
Registrant. Luis Cruz, M.D. was named to the additional post of President.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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Exhibit 1 herewith is the preferred stock acquisition agreement between
Registrant Luis Cruz, M.D.
Exhibit 2 herewith is Certificate of Designation of Preferred Stock.
SIGNATURES
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Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
DENTAL SERVICES OF AMERICA, INC.
By: /s/ LUIS CRUZ
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Luis Cruz, President
June 30, 1997
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EXHIBIT 1
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT is made and entered into as of the 22nd
day of June, 1997, by and between DENTAL SERVICES OF AMERICA, INC., a Delaware
corporation maintaining its principal offices at 12000 Biscayne Boulevard,
Miami, FL 33181 (the "Company"), and LUIS CRUZ, M.D., an individual with an
address at (the "Purchaser").
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WHEREAS, Purchaser desires to purchase and hold certain equity securities of the
Company and the Company desires to sell such securities to Purchaser, all in
accordance with, and subject to, the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. AUTHORIZATION AND SALE OF THE SHARES.
1.1 Authorization. The Company has authorized the issuance pursuant to the
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terms and conditions hereof: (i) 250,000 shares (the "Series C Shares") of its
Series C Convertible Preferred Stock, par value $0.01 per share; and (ii)
100,000 shares (the "Series A Shares") of its Series A Convertible Preferred
Stock, par value $0.01 per share. Such Series C Shares and Series A Shares of
Preferred Stock shall have the preferences, preferred rights and powers as set
forth in the Schedule annexed hereto and made a part hereof.
1.2 Purchase and Sale. (a) Subject to the terms and conditions hereof, the
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Company will issue and sell to Purchaser, and Purchaser will purchase from the
Company, the Series C Shares in exchange for real estate owned by the Purchaser
located at 2260 S.W. 8th Street, Miami, FL. (the "Property"), which contains a
3-story building of approximately 10,000 rentable square feet. Such real estate
shall be transferred to the Company free and clear of all liens, claims and
encumbrances and with good, marketable and insurable title. The parties have
agreed to allocate a purchase price of approximately $1,250,000 (the "Purchase
Price") to such transaction. Purchaser represents and warrants to the Company
that the fair market value of such property is at least $1,000,000, that such
property is in full compliance with all applicable zoning and building code
requirements, that the building on such property is in good condition and not in
need of any repairs and that there is no environmental problems associated with
the property.
(b) Subject to the terms and conditions hereof, the Company will issue and sell
to Purchaser, and Purchaser will purchase from the Company, the Series A Shares
at an aggregate purchase price of $495,000 (the "Purchase Price").
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2. CLOSING AND DELIVERY.
2.1 Closing. The closing of the purchase and sale of the Securities (the
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"Closing") shall be held at the offices of Company 1:00 p.m. on June 24, 1997
(the "Closing Date") or at such other time and place as the Company and
Purchaser may agree in writing. Either party shall have the right to terminate
this Agreement without penalty by delivering notice of such termination to the
other party at the address set forth above by noon on June 24.
2.2 Delivery. At the Closing, subject to the terms and conditions of this
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Agreement, the Company will deliver to Purchaser the Shares against payment by
Purchaser of the Purchase Price and delivery of a warranty deed to the Property,
provided however that the delivery of the warranty deed may be delayed for up to
ten (10) days in order to research title and legal description. Purchaser shall
also transfer to the Company all personal property of the Purchaser on the
Property, all insurance policies covering the Property and all security deposits
on the Property. Within ten (10) days after the Closing the parties will
prorate the taxes, rents, utilities and insurance premiums associated with the
Property through the Closing date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in Exhibit A attached hereto, the Company hereby represents
and warrants to Purchaser as follows (unless the context otherwise requires or
admits, references herein to the Company include any Subsidiaries of the
Company):
3.1 Organization and Standing, Articles and Bylaws. The Company is a
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corporation duly organized and existing under the laws of the State of Delaware
and its status under such laws is active. The Company has the requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted.
3.2 Corporate Power. The Company has now, or will have at the Closing Date, all
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requisite legal authority and corporate power to enter into this Agreement, to
sell the Securities hereunder and to perform its obligations under this
Agreement.
3.3 SEC Filings; Financial Statements. (a) The Company has filed and made
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available to Purchaser all forms, reports and documents required to be filed by
the Company with the SEC (collectively, the "SEC Reports"). The SEC Reports (i)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in the SEC Reports or necessary in order to make the
statements in the SEC Reports, in the light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case, any
related notes)
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contained in the SEC Reports, including any SEC Reports filed after the date of
this Agreement until the Closing, complied or will comply as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was or will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted for
presentation in Quarterly Reports on Form 10-Q), and fairly presented or will
fairly present the consolidated financial position of the Company and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount. The
Company's unaudited balance sheet as of March 31, 1997 is referred to herein as
the "Balance Sheet".
3.4 Capitalization. The authorized capital stock of the Company consists of
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25,000,000 shares of Common Stock, $.01 par value, and 10,000,000 shares of
Preferred Stock, $.01 par value. The issued and outstanding shares of Common
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. The shares of Preferred Stock to be issued to Purchaser pursuant
to this agreement shall be validly issued, fully paid and nonassessable.
3.5 Taxes. The amount of the provision for liability for taxes on the Balance
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Sheet is sufficient for the payment of all unpaid federal, state and local
income, franchise and property taxes of the Company accrued for or applicable to
the period ended on the date of said Balance Sheet and all years and periods
prior thereto. The Company has collected or paid all applicable local tax
returns, intangible tax returns and other tax returns which are required to be
filed by it, and such returns and reports are true and correct. The Company has
prepared and filed all Federal, State and County and local income, excise and
other tax returns required to be filed by it and all such returns are true and
correct. The Company has paid all taxes which have become due pursuant to such
returns or pursuant to any assessment received by it. The Federal income tax
returns of the Company have not been examined by the Internal Revenue Service.
The Company has not incurred any tax liabilities other than in the ordinary
course of business; there are no tax liens upon any of the properties or assets,
real, personal or mixed, tangible or intangible, of the Company, (except for
liens of taxes not yet due); and, except as reflected in the Balance Sheet,
there are no pending questions relating to, or claims asserted for, taxes or
assessments against the Company, and there is no basis for any such question or
claim.
3.6 Insurance. The Company has in force and effect and is covered under
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policies of insurance covering such risks and in amounts adequate for the size
and scope of its business.
3.7 Assets. The Company has good and marketable title to all of its
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properties, free and clear of all liens and encumbrances except as noted in the
Balance Sheet. The properties and assets of the Company are in good repair and
condition and are adequate for the conduct of the business of the Company as now
being conducted.
3.8 Labor Agreements and Policies. The Company is not a party to or bound by
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any collective
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bargaining agreement and the Company is not aware of any attempt to organize any
of the employees of the Company. There are no strikes or other labor disputes
pending, or to the knowledge of the Company or any of the Sellers, threatened
against the Company. The Company has complied in all material respects with the
Fair Labor Standards Act, Occupational Safety and Health Act, Equal Employment
Opportunity, wage and hour laws and all other applicable Federal and State laws
regarding employment and in respect to hours worked by and payments made to the
employees of the Company.
3.9 Performance of Obligations. The Company has performed all of the material
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obligations required to be performed by it and is not in material default under
any of the agreements, leases, contracts, or other documents to which it is a
party. No party with whom the Company has an agreement or commitment is in
material default thereof.
3.10 Conflict. Neither the execution of this Agreement nor the consummation of
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the transactions contemplated hereby will conflict with or result in a breach
of, or give rise to, or termination of, or accelerate the maturity of or the
performance required by any terms of the Articles of Incorporation or By-laws or
any indenture, loan agreement, lease or other agreement or arrangement of the
Company or any Seller, or constitute a default thereunder, or result in the
creation of any lien, charge or encumbrance upon any of the assets or properties
of the Company.
3.11 Litigation, etc. There is no investigation by any governmental agency or
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any legal proceedings pending, or to the best knowledge of the Company,
threatened against the Company, or the property, assets or good will thereof,
and there is no out-standing order, writ, injunction or decree of any court or
governmental agency against or affecting the Company, or against or affecting
its business, property, assets, good will or common stock.
3.12 Compliance with Laws. The Company has complied in all material respects
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with all laws, regulations and orders applicable to the conduct of its
business, and the Company possesses all permits, licenses and other approvals
and authorizations of all governmental agencies which are necessary to the
conduct of its business and all said permits, licenses and other approvals and
authorizations are in full force and effect. The Company has not received any
notice of, and is not aware of any material violation of, any law, rule,
regulation or ordinance concerning zoning, environmental regulation, hazardous
substances or of any law, order, regulation or requirement relating to the
operation of its business which remains uncured or which has not been dismissed.
4. SECURITIES ACT.
Each certificate representing shares of Company Preferred Stock issued to
Purchaser hereunder shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGIS TERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or Blue Sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if Purchaser shall have delivered to the Company a copy of a letter from the
staff of the Securities and Exchange Commission, or an opinion of counsel, in
form and substance reasonably satisfactory to the Company, to the effect that
such legend is not required for purposes of the Securities Act or such laws;
(ii) the reference to the provisions of this Agreement in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
5. ADDITIONAL AGREEMENTS OF THE PARTIES.
5.01 At the Closing, the Purchaser shall assume the office of Chairman and
Chief Executive Officer of the Company to hold such office pursuant to the
Bylaws. For the first three (3) years following the Closing the Purchaser shall
not be paid any compensation in excess of $1.00 per year for such services and a
five (5) year incentive stock option to purchase 100,000 shares of the Company's
Common Stock for $.50 pursuant to the Company's 1996 Employee Stock Option Plan.
The purchaser shall devote such time and attention to the business of the
Company as is usual for the Chief Executive Officer of a public corporation.
The Purchaser represents to the Company that he is under no restrictions which
would restrict him from serving as Chairman, Chief Executive Officer and
Director of the Company, other than possible restriction with CAC Ramsay HMO
which the Company acknowledges.
5.02 Upon the Closing, the Purchaser and Maria Suarez shall be elected as
directors of the Company to hold office pursuant to the Bylaws.
5.03 At the Closing IAMG shall assign to the Purchaser a Warrant to purchase
500,000 shares of the Company's Common Stock and the exercise price of such
Warrant shall be reduced to $1.00 per share. The purchaser shall pay IAMG $5,000
for such Warrant.
6. MISCELLANEOUS.
6.01 Notices. All notices, requests, demands, or other communications
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hereunder shall be in writing and shall be deemed to have been duly given when
delivered to the parties at their addresses as set forth above or such other
address as the parties shall designate by notice given as provided herein.
6.02 Public Announcements. The parties acknowledge that the Company is a
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public corporation and will issue a public announcement of the transactions
provided for herein and such time or times as it deems necessary or appropriate.
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6.03 Expenses. Except as otherwise expressly provided herein, each of the
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parties hereto shall pay its own fees and expenses incident to the negotiation,
preparation, execution and consummation of this Agreement, including all fees
and expenses of their respective counsel and accountants incurred in connection
with this Agreement and all other agreements, documents, certificates,
applications and other instruments prepared in connection herewith.
6.04 Successors. This Agreement shall inure to the benefit of and be binding
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upon the Company and its successors and assigns, and Purchaser and its
successors and assigns.
6.05 Law to Apply. This Agreement shall be construed and enforced in
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accordance with the laws of the State of Florida.
6.06 Assignment. This Agreement shall not be assignable by any party hereto
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without the prior written consent of the other parties hereto.
6.07 Entire Agreement. This Agreement contains the entire agreement among the
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parties hereto with respect to the subject matter hereof and supersedes any and
all prior arrangements, proposals or understandings, written or oral, by or
among any of the parties hereto with respect to such purchase and sale or other
transactions, which arrangements, proposals and understandings shall be of no
further force and effect. No waiver, amendment or modification of this
Agreement shall be effective for any purpose unless the same shall be in writing
signed by all of the parties hereto or their successors in interest.
6.08 Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
6.09 Section Headings. The section headings herein are for convenience only
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and shall not affect the construction hereof.
6.10 Resolution of Disputes. In the event of any dispute arising under this
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Agreement or the transactions herein, the parties agree to mediation. In the
event that such mediation is not successful in resolving such dispute, it shall
be resolved by binding arbitration in accordance with the commercial rules of
the American Arbitration Association then in effect, and judgment upon the award
rendered by the arbitration may be entered in any court of competent
jurisdiction. Except as otherwise provided herein, the expenses of the
arbitration shall be borne equally by the
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parties to the arbitration, provided that each party shall pay for and bear the
cost of its own experts, evidence, legal counsel and travel expense.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
DENTAL SERVICES OF AMERICA, INC.
By:
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Paulo Dominguez, President
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LUIS CRUZ, M.D.
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SERIES C CONVERTIBLE PREFERRED STOCK
250,000 shares of the Preferred Stock shall be designated "Series C
Convertible Preferred Stock" and shall have the powers, preferred rights,
qualifications, limitations and restrictions as follows:
(i) Dividends. The Series C Convertible Preferred Stock shall not be
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entitled to receive any dividends.
(ii) Redemption.
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(a) Optional Redemption. The Series C Convertible Preferred Stock
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shall be redeemable, in whole or in part, at the option of the Corporation, at
any time or from time to time, at a redemption price equal to $5.00 per share.
(b) Selection of Shares to be Redeemed. In the case of a
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redemption of only a part of the outstanding shares of a class of Preferred
Stock, all shares of the class of Preferred Stock to be redeemed shall be
selected pro rata and there shall be so redeemed from each registered holder in
whole shares, as nearly as practicable to the nearest share, that proportion of
all of the shares to be redeemed which the number of shares held of record by
such holder b bears to the total number of shares of such class of Preferred
Stock at the time outstanding.
(iii) Liquidation. Upon dissolution, liquidation or winding up of the
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Corporation, the holders of the Series C Convertible Preferred Stock shall be
entitled to receive, before any distribution is made to the holders of shares of
Common Stock of the Corporation, the sum of $5.00 per share.
(iv) Voting. Each share of Series C Convertible Preferred Stock shall
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entitle the holder thereof to five (5) votes on all matters as to which
shareholders of the Corporation have a right to vote as provided in the
Certificate of Incorporation and/or under applicable law. On all matters
presented to a vote of shareholders of the Corporation, the holders of the
Series C Convertible Preferred Stock and Common Stock shall vote together as a
single class.
(v) Conversion.
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(a) Subject to the provisions for adjustment hereinafter set forth,
shares of Series C Convertible Preferred Stock shall be convertible at any time
at the option of the holder thereof, upon surrender to the transfer agent for
the Series C Convertible Preferred Stock of the certificate or certificates
evidencing the shares so to be converted, into fully paid and nonassessable
shares of Common Stock of the Corporation at the rate of five (5) shares of
Common Stock for each share of Series C Convertible Preferred Stock so
surrendered for conversion. The right to convert shares of the Series C
Convertible Preferred Stock called for redemption shall terminate thirty (30)
days after the notice of redemption has been mailed to the registered holders of
the Series C Convertible Preferred Stock by certified mail to the address of
record of the holders of such shares.
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(b) The number of shares of Common Stock into which such shares of
Series C Convertible Preferred Stock may be converted shall be subject to
adjustment as follows:
(1) In the event of a stock split, reverse stock split, stock
dividend, reorganization or recapitalization affecting the number of shares of
outstanding Common Stock, then in each such case, the number of shares of Common
Stock into which shares of Series C Convertible Preferred Stock may be converted
shall be equitably adjusted so as not to impair the conversion rights of the
Series B Convertible Preferred Stock.
(2) In the event the Corporation determines to offer rights to
the holders of the outstanding Common Stock entitling them to subscribe for
additional shares of Common Stock or securities convertible into Common Stock,
the Corporation shall also extend such rights to the holders of Series C
Convertible Preferred Stock. There shall be no adjustment in the conversion rate
by virtue of such rights offering or by virtue of any sale of any class of
securities of the Corporation.
(3) No fractional share of Common Stock shall be issued upon any
conversion or redemption but, in lieu thereof, there shall be paid to the holder
of the shares of Series C Convertible Preferred Stock surrendered for conversion
as soon as practicable after the date such shares are surrendered for
conversion, an amount in cash equal to the same fraction of the current market
price per share of Common Stock, unless the Board of Directors shall determine
to adjust fractional shares in some other manner.
(4) No adjustment in the number of shares of Common Stock into
which each share of Series C Convertible Preferred Stock is convertible or
redeemable shall be required unless such adjustment would require an increase or
decrease of at least 1/25th of a share in the number of shares of Common Stock
into which such share is then convertible; provided, however, that any
adjustments which by reason of this subparagraph are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(5) Whenever any adjustment is required in the shares into which
each share of Series C Convertible Preferred Stock is convertible or redeemable,
the Corporation shall forthwith (i) file with the transfer agent, if any, for
the Series C Convertible Preferred Stock a statement describing in reasonable
detail the adjustment and the method of calculation used and (ii) cause a copy
of such notice to be mailed to the holders of record of the shares of Series C
Convertible Preferred Stock.
(c) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares the full number of shares into which all
shares of Series C Convertible Preferred Stock from time to time outstanding are
convertible or redeemable.
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(d) The Corporation will pay any and all issue and other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion or redemption of shares of Series C Convertible Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of Common Stock in
a name other than that in which the shares of Series C Convertible Preferred
Stock is converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
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SERIES A CONVERTIBLE PREFERRED STOCK
100,000 shares of the Preferred Stock shall be designated "Series A
Convertible Preferred Stock" and shall have the powers, preferred rights,
qualifications, limitations and restrictions as follows:
(i) Dividends. The Series A Convertible Preferred Stock shall not be
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entitled to receive any dividends.
(ii) Redemption.
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(a) Optional Redemption. The Series A Convertible Preferred
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Stock shall be redeemable, in whole or in part, at the option of the
Corporation, at any time after five years from the date of issue or from time to
time thereafter, at a redemption price equal to $5.00 per share.
(b) Selection of Shares to be Redeemed. In the case of a
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redemption of only a part of the outstanding shares of a class of Preferred
Stock, all shares of the class of Preferred Stock to be redeemed shall be
selected pro rata and there shall be so redeemed from each registered holder in
whole shares, as nearly as practicable to the nearest share, that proportion of
all of the shares to be redeemed which the number of shares held of record by
such holder b bears to the total number of shares of such class of Preferred
Stock at the time outstanding.
(iii) Liquidation. Upon dissolution, liquidation or winding up of the
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Corporation, the holders of the Series A Convertible Preferred Stock shall be
entitled to receive, before any distribution is made to the holders of shares of
Common Stock of the Corporation, the sum of $5.00 per share.
(iv) Voting. Each share of Series A Convertible Preferred Stock shall
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entitle the holder thereof to twenty (20) votes on all matters as to which
shareholders of the Corporation have a right to vote as provided in the
Certificate of Incorporation and/or under applicable law. On all matters
presented to a vote of shareholders of the Corporation, the holders of the
Series A Convertible Preferred Stock and Common Stock shall vote together as a
single class.
(v) Conversion.
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(a) Subject to the provisions for adjustment hereinafter set forth,
shares of Series A Convertible Preferred Stock shall be convertible at any time
at the option of the holder thereof, upon surrender to the transfer agent for
the Series A Convertible Preferred Stock of the certificate or certificates
evidencing the shares so to be converted, into fully paid and nonassessable
shares of Common Stock of the Corporation, as follows:
(1) The initial conversion rate shall be ten (10) shares of Common
Stock for each share of Series A Convertible Preferred Stock so surrendered for
conversion.
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(2) In the event that the Corporation has consolidated net income,
before income taxes and any extraordinary income or loss, of $1 million in any
of the five (5) fiscal years beginning after the fiscal year ending September
30, 1997 the conversion rate shall be twenty (20) shares of Common Stock for
each share of Series A Convertible Preferred Stock so surrendered for
conversion.
(3) In the event that the Corporation doe not meet the earnings
requirement of the foregoing subsection but has cumulative consolidated net
income before income taxes and extraordinary income or loss of $1 million in the
five (5) fiscal years ending September 30, 2002, then the conversion rate shall
be fifteen (15) shares of Common Stock for each share of Series A Convertible
Preferred Stock so surrendered for conversion.
(4) In the event that the conversion rate does not meet the earnings
requirements of the foregoing two subsections, then, in that event, five (5)
years after the date of issue the conversion rate shall be ten (10) shares of
Common Stock for each share of Series A Convertible Preferred Stock so
surrendered for conversion.
The right to convert shares of the Series A Convertible Preferred
Stock called for redemption shall terminate thirty (30) days after the notice of
redemption has been mailed to the registered holders of the Series A Convertible
Preferred Stock by certified mail to the address of record of the holders of
such shares.
(b) The number of shares of Common Stock into which such shares of
Series A Convertible Preferred Stock may be converted shall be subject to
adjustment as follows:
(1) In the event of a stock split, reverse stock split, stock
dividend, reorganization or recapitalization affecting the number of shares of
outstanding Common Stock, then in each such case, the number of shares of Common
Stock into which shares of Series A Convertible Preferred Stock may be converted
shall be equitably adjusted so as not to impair the conversion rights of the
Series B Convertible Preferred Stock.
(2) In the event the Corporation determines to offer rights to the
holders of the outstanding Common Stock entitling them to subscribe for
additional shares of Common Stock or securities convertible into Common Stock,
the Corporation shall also extend such rights to the holders of Series A
Convertible Preferred Stock. There shall be no adjustment in the conversion rate
by virtue of such rights offering or by virtue of any sale of any class of
securities of the Corporation.
(3) No fractional share of Common Stock shall be issued upon any
conversion or redemption but, in lieu thereof, there shall be paid to the holder
of the shares of Series A
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Convertible Preferred Stock surrendered for conversion as soon as practicable
after the date such shares are surrendered for conversion, an amount in cash
equal to the same fraction of the current market price per share of Common
Stock, unless the Board of Directors shall determine to adjust fractional shares
in some other manner.
(4) No adjustment in the number of shares of Common Stock into which
each share of Series A Convertible Preferred Stock is convertible or redeemable
shall be required unless such adjustment would require an increase or decrease
of at least 1/25th of a share in the number of shares of Common Stock into which
such share is then convertible; provided, however, that any adjustments which by
reason of this subparagraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
(5) Whenever any adjustment is required in the shares into which
each share of Series A Convertible Preferred Stock is convertible or redeemable,
the Corporation shall forthwith (i) file with the transfer agent, if any, for
the Series A Convertible Preferred Stock a statement describing in reasonable
detail the adjustment and the method of calculation used and (ii) cause a copy
of such notice to be mailed to the holders of record of the shares of Series A
Convertible Preferred Stock.
(c) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares the full number of shares into which all
shares of Series A Convertible Preferred Stock from time to time outstanding are
convertible or redeemable.
(d) The Corporation will pay any and all issue and other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion or redemption of shares of Series A Convertible Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of Common Stock in
a name other than that in which the shares of Series A Convertible Preferred
Stock is converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
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SERIES 10, 12% REDEEMABLE CONVERTIBLE PREFERRED STOCK
300,000 shares of the Preferred Stock shall be designated "Series 10, 12%
Redeemable Convertible Preferred Stock" and shall have the powers, preferred
rights, qualifications, limitations and restrictions as follows:
1. Dividends. The Series 10, 12% Redeemable Convertible Preferred Stock
---------
shall be entitled to receive a dividend of $.30 per share on October 15, January
15, and July 15 of each year beginning October 15, 1997 to holders of record on
July 31, 1997 and such dividend shall accumulate without interest in any quarter
it is not paid.
2. Redemption. The Series 10, 12% Redeemable Convertible Preferred Stock
----------
shall be redeemable in whole or in part at a redemption price equal to $10.00
per share plus accrued but unpaid dividends solely at the option of the
Corporation on thirty (30) days written notice sent to the registered holders of
such stock by first class mail. In the event the Corporation gives such notice
of redemption, the holders shall be entitled to convert the shares as provided
below during such thirty (30) day period.
3. Liquidation. Upon dissolution, liquidation or winding up of the
-----------
Corporation, the holders of the Series 10, 12% Redeemable Convertible Preferred
Stock shall be entitled to receive, before and distribution is made to the
holders of shares of common stock of the Corporation, the sum of $10.00 per
share plus accrued but unpaid dividends and no more.
4. Voting. Each share of Series 10, 12% Redeemable Convertible Preferred
------
Stock shall entitle to holder thereof to one vote on all matters as to which
shareholders of the Corporation have a right to vote as provided in the Articles
of Incorporation and/or under applicable law. On all matters presented to a vote
of shareholders of the Corporation, the holders of the Series 10, 12% Redeemable
Convertible Preferred Stock and Common Stock shall vote together as a single
class.
5. Conversion. The Series 10, 12% Redeemable Convertible Preferred Stock
----------
at the option of the respective holders thereof, shall be convertible into fully
paid and nonassessable shares of Common Stock as follows:
(a) The holders of Series 10, 12% Redeemable Convertible Preferred
Stock may upon surrender of the certificates therefor, convert each share of
such Preferred Stock into ten (10) shares of Common Stock of the Corporation.
(b) The number of shares of Common Stock into which such shares of
Series 10, 12% Redeemable Convertible Preferred Stock may be converted shall be
subject to adjustment as follows:
(1) In the event of a stock split, reverse stock split, stock
dividend, reorganization or recapitalization affecting the number of shares of
outstanding Common Stock, then in each such case, the number of shares of Common
Stock into which shares of Series 10, 12% Redeemable Convertible Preferred Stock
may be
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converted shall be equitably adjusted so as not to impair the conversion rights
of the Series 10, 12% Redeemable Convertible Preferred Stock.
(2) In the event the Corporation determines to offer rights to
the holders of Common Stock entitling them to subscribe for additional shares of
Common Stock or securities convertible into Common Stock, the Corporation shall
also extend such rights to the holders of Series 10, 12% Redeemable Convertible
Preferred Stock. There shall be no adjustment in the conversion rate by virtue
of such rights offering or by virtue of any sale or any class of securities of
the Corporation.
8
