AMENDED CERTIFICATE OF DESIGNATIONS OF
SERIES C 6% CONVERTIBLE PREFERRED STOCK OF
USA BIOMASS CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The undersigned, Fred H. Behrens and Hilly G. Jones, hereby certify that:
I. They are the duly elected and acting Chairman and Secretary,
respectively, of USA Biomass Corporation, a Delaware corporation (the
"Corporation").
II. The Certificate of Incorporation of the Corporation authorizes the
Corporation to issue preferred stock, and the Corporation has authorized the
issuance of three thousand (3,000) shares of Series C 6% Convertible Preferred
Stock, $0.01 par value per share.
III. The following is a true and correct copy of resolutions duly adopted
by the Board of Directors of the Corporation (the "Board of Directors") on July
5, 2000 pursuant to the Articles of Incorporation of the Corporation and in
accordance with the provisions of the General Corporation Law of the State of
Delaware.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for the issuance
of the shares of preferred stock, and by filing a certificate pursuant to the
applicable law of the State of Delaware to establish and issue preferred stock
with such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and with such qualifications, limitations or restrictions thereon as the
Board of Directors may determine.
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
A. Designation, Amount and Par Value. The series of preferred stock shall
be designated as the Series C 6% Convertible Preferred Stock (the "Series C
Preferred Stock"), and the number of shares so designated shall be three
thousand (3,000) (which shall not be subject to increase or decrease). Each
share of Series C Preferred Stock shall have a par value of $0.01 per share and
a stated value (the "Stated Value") of the Liquidation Preference (as
hereinafter defined in Section C(1)).
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B. Dividends.
(1) Holders of the Series C Preferred Stock shall be entitled to receive,
out of funds legally available therefor, dividends at a rate equal to 6% (the
"Dividend Rate") of the Liquidation Preference per share per annum (subject to
appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), and no
more, payable in accordance with the provisions of this Amended Certificate of
Designations.
(2) At the election of the Corporation, each dividend on Series C Preferred
Stock shall be paid either in shares of Common Stock of the Corporation, $0.002
par value per share ("Common Stock") or in cash on the Delivery Date (as defined
in Subsection G(2)(a) of this Amended Certificate of Designations) with respect
to any shares of Series C Preferred Stock which are the subject of a Notice of
Conversion (as defined in Subsection G(2) of this Amended Certificate of
Designations). Dividends paid in shares of Common Stock shall be paid (based on
an assumed value of $1,000 per share) in full shares only, with a cash payment
equal to the value of any fractional shares. Each dividend paid in cash shall be
mailed to the holders of record of the Series C Preferred Stock as their names
and addresses appear on the share register of the Corporation or at the office
of the transfer agent on the corresponding dividend payment date. Holders of
Series C Preferred Stock will receive written notification from the Corporation
or the transfer agent if a dividend is paid in kind, which notification will
specify the number of shares of Common Stock paid as a dividend and the
recipient's aggregate holdings of Common Stock as of that dividend payment date
and after giving effect to the dividend. All holders of shares of Common Stock
issued as dividends shall be entitled to all of the rights and benefits relating
to shares of Common Stock as set forth in the Corporation's Articles of
Incorporation, as amended, and By-laws.
(3) Holders of the Series C Preferred Stock shall be entitled to payment of
any dividends in preference and priority to any payment of any cash dividend on
Common Stock or any other class or series of capital stock of the Corporation,
other than holders of shares of the issued and outstanding Series A Preferred
Stock of the Company, as of the date hereof, who shall be entitled to receive
such dividends on a pari passu basis with the holders of the Series C Preferred
Stock. Dividends on the Series C Preferred Stock shall accrue with respect to
each share of the Series C Preferred Stock from the date on which such share is
issued and outstanding and thereafter shall be deemed to accrue from day to day
whether or not earned or declared and whether or not there exists profits,
surplus or other funds legally available for the payment of dividends, and shall
be cumulative so that if such dividends on the Series C Preferred Stock shall
not have been paid, or declared and set apart for payment, the deficiency shall
be fully paid or declared and set apart for payment before any dividend shall be
paid or declared or set apart for any Common Stock or other class or series of
capital stock ranking junior to the Series C Preferred Stock (such stock being
collectively referred to herein as the "Junior Stock") and before any purchase
or acquisition of any Junior Stock is made by the Corporation. At the earlier
of: (1) the redemption or conversion of the Series C Preferred Stock or (2) the
liquidation of the Corporation, any accrued but undeclared dividends shall be
paid to the holders of record of outstanding shares of
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the Series C Preferred Stock in accordance with the provisions of this Amended
Certificate of Designations. No accumulation of dividends on the Series C
Preferred Stock shall bear interest.
C. Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of shares of the Series C Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be made to the
holders of Junior Stock by reason of their ownership thereof, an amount equal to
one thousand dollars ($1,000) per share of Series C Preferred Stock (the
"Liquidation Preference") plus any accrued but unpaid dividends (whether or not
declared). If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of the
Series C Preferred Stock the full amount to which they shall be entitled, the
holders of shares of the Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
D. Voting. Except for the limited voting rights specified in Section J of
this Amended Certificate of Designations, each holder of outstanding shares of
Series C Preferred Stock shall not be entitled to vote at any meeting of
stockholders of the Corporation (and with respect to written consents of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration, until
and unless the shares of Series C Preferred Stock held by such holder have been
converted into shares of Common Stock, at which time each holder shall have the
voting rights appurtenant to each whole share of Common Stock so converted.
E. Other Securities. Subject to any limitations contained in this Amended
Certificate of Designations, the Corporation's Articles of Incorporation and/or
the Primary Documents (as defined in the Securities Purchase Agreement, dated as
of March 14, 2000, hereinafter the "Securities Purchase Agreement"), the Board
of Directors of the Corporation reserves the right to establish additional
classes and/or series of capital stock of the Corporation and to designate the
preferences, limitations and relative rights of any such classes and/or series;
provided, however, that no such class and/or series may have preferences,
limitations and relative rights which are superior to or senior to the
preferences, limitations and relative rights granted to the holders of the
Series C Preferred Stock.
F. Capital Reorganization. If the Corporation shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock, declare a dividend
payable in Common Stock, or in case of any capital reorganization or
reclassification of the shares of Common Stock of the Corporation, the number of
shares of the Series C Preferred Stock and the Stated Value of the Series C
Preferred Stock shall be adjusted appropriately to allow the holders of the
Series C Preferred Stock, as nearly as reasonably possible, to maintain (i) the
aggregate Stated Value of the Series C Preferred Stock and (ii) their pro rata
interest in the Corporation and in the
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Common Stock upon conversion of the Series C Preferred Stock, that each holder
had prior to any such subdivision, combination, stock dividend, reorganization
or reclassification.
G. Conversion.
(1) The holders of the Series C Preferred Stock shall have conversion
rights as follows (the "Series C Preferred Stock Conversion Rights"):
(a) Each share of Series C Preferred Stock shall be convertible, at
the option of the holder thereof, at any time and from time to time, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $1,000, plus the amount of any accrued and unpaid
dividends the Corporation elects to pay in Common Stock, by the Conversion
Price (as defined below) in effect at the time of conversion. The
Conversion Price at which shares of Common Stock shall be deliverable upon
conversion of Series C Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall be the
lower of (i) four and 65/100 dollars ($4.65) or (ii) 85% of the average of
the three lowest Closing Bid Prices of the shares of Common Stock for the
fifteen (15) trading days immediately preceding the Series C Preferred
Stock Conversion Date (as hereinafter defined). For purposes of these
Articles of Amendment, the term "Closing Bid Price" means, for any security
as of any date, the closing bid price on the principal securities exchange
or trading market where the Common Stock is listed or traded as reported by
Bloomberg, L.P. ("Bloomberg") or, if applicable, the closing bid price of
the Common Stock in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid
price is reported for the Common Stock by Bloomberg, then the average of
the bid prices of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price of the Common Stock can not be calculated on such date on any of the
foregoing bases, the Closing Bid Price of the Common Stock on such date
shall be the fair market value as determined by the holders of a majority
of the outstanding shares of Series C Preferred Stock being converted for
which the calculation of the Closing Bid Price is required in order to
determine the Conversion Price of such shares. "Trading day" shall mean any
day on which the Corporation's Common Stock is traded for any period on the
principal securities exchange or other securities market on which the
Common Stock is then being traded. If, during any period following March
14, 2000 (the "Original Issue Date"), as a result of the occurrence of any
of the events set forth in Section 3(f) or 3(g) of the Registration Rights
Agreement, dated as of March 14, 2000, by and between the Corporation and
the Purchaser set forth therein (the "Registration Rights Agreement"), the
Purchasers set forth therein are not able to sell shares of Common Stock
issuable upon conversion of, or in lieu of dividends on, shares of Series C
Preferred Stock pursuant to a registration statement filed pursuant to such
agreement, the holders of shares of Series C Preferred Stock shall have the
right, for any purpose during such period and thereafter, to designate as
the Conversion Price any Conversion Price that would have been applicable
during such period had such Series C Preferred Stock shareholder delivered
a Notice of Conversion with respect to any such Series C Preferred Stock.
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(b) In no event shall the number of shares of Common Stock issued (A)
upon conversion of the Series C Preferred Stock and (B) in lieu of dividend
payments on the Series C Preferred Stock, equal 20% or more of the
Corporation's outstanding Common Stock. At such time as the Board of
Directors of the Corporation determines that it is necessary or appropriate
to do so to ensure that the number of shares issued to the Series C
Preferred Stockholder resulting from conversion and dividend payments does
not equal or exceed 20% of the Corporation's outstanding Common Stock (a
"Common Stock Redemption Event"), the Corporation shall (x) redeem, at a
price per share equal to (A) the quotient of (i) the Liquidation Preference
per share of Series C Preferred Stock plus all accrued but unpaid dividends
on such shares of Series C Preferred Stock and (ii) the Conversion Price as
if the Series C Preferred Stock had been converted on the Series C
Preferred Stock Redemption Date multiplied by (B) the average Closing Bid
Price of shares of Common Stock for the five (5) trading days immediately
preceding the Series C Preferred Stock Redemption Date, all of the
outstanding Series C Preferred Stock or (y) call a special meeting of its
stockholders for the purpose of approving the transactions contemplated by
the Securities Purchase Agreement, including the issuance of the Series C
Preferred Stock on the terms set forth therein, together with any other
approvals that shall be required so as to cause the transactions
contemplated by the Securities Purchase Agreement to remain in compliance
with the Rules and Regulations of The Nasdaq Stock Market (including Rules
4300 and 4310 of Nasdaq's Non-Qualitative Designation Criteria in
connection with conversions of Series C Preferred Stock; such approvals are
referred to herein as the "Required Approvals"); provided, however, that
the Corporation shall not redeem the outstanding Series C Preferred Stock
pursuant to clause (x) above, until such time as the Corporation has issued
that number of shares of the Corporation's Common Stock equal to at least
16% of the Corporation's outstanding Common Stock to the Series C Preferred
Stockholders . The Corporation shall determine within five (5) business
days following the receipt of a Notice of Conversion which of such actions
it shall take, and shall promptly furnish notice to each of the holders of
Series C Preferred Stock as to such determination, including, if
applicable, a notice of redemption. In no event shall the Corporation issue
shares of Common Stock upon conversion of, or in lieu of dividend payments
on, the Series C Preferred Stock, after the occurrence of a Common Stock
Redemption Event until the Required Approvals, if any, are obtained.
(c) If the Corporation elects to call a special meeting of its
stockholders pursuant to Subsection G(1)(b) of this Amended Certificate of
Designations to obtain the Required Approvals, the Corporation shall use
its best efforts to obtain such Required Approvals within thirty (30) days
of the Closing Date (as defined in the Securities Purchase Agreement) (such
thirty (30) day period is referred to herein as an "Approval Period"). If
the Corporation does not obtain the Required Approvals within the Approval
Period and the Corporation receives a Notice of Conversion after the
termination of the Approval Period, the Corporation must redeem, in
accordance with this Subsection G of this Amended Certificate of
Designations, that number of shares of Series C Preferred Stock necessary
to ensure that the number of shares issued to the Series C Preferred
Stockholder resulting
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from conversion and dividend payments does not equal or exceed 20% of the
Corporation's outstanding Common Stock.
(d) If the Corporation elects, pursuant to this Subsection G, to
redeem the Series C Preferred Stock on the occurrence of a Common Stock
Redemption Event, it shall redeem such Series C Preferred Stock at the
price determined in accordance with Subsection G(1)(b) of this Amended
Certificate of Designations. If the Corporation shall have elected,
pursuant to this Subsection G(1), to obtain the Required Approvals but
shall not have done so by the later of the occurrence of the Common Stock
Redemption Event or the expiration of the Approval Period, it shall furnish
a redemption notice to the Purchaser within three (3) business days after
the expiration of the Approval Period.
(2) The Series C Preferred Stock Conversion Rights shall be exercised as
follows:
(e) The Corporation will permit each holder of Series C Preferred
Stock to exercise its right to convert the Series C Preferred Stock by
faxing an executed and completed notice of conversion (the "Notice of
Conversion") to the Corporation, and delivering within three (3) business
days thereafter, the original Notice of Conversion (and the certificates
representing the related shares of Series C Preferred Stock) to the
Corporation by hand delivery or by express courier, duly endorsed. Each
date on which a Notice of Conversion is faxed in accordance with the
provisions hereof shall be deemed a "Series C Preferred Stock Conversion
Date." The Corporation will transmit the certificates representing the
Common Stock issuable upon conversion of the Series C Preferred Stock
(together with certificates representing the related shares of Series C
Preferred Stock not so converted and, if applicable, a check representing
any fraction of a share not converted) to such holder via express courier
as soon as practicable, but in all events no later than (the "Delivery
Date") three (3) business days after the Series C Preferred Stock
Conversion Date. For purposes of this Amended Certificate of Designations,
such conversion of the Series C Preferred Stock shall be deemed to have
been made immediately prior to the close of business on the Series C
Preferred Stock Conversion Date.
(f) In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the Series C Preferred Stock,
provided that the Corporation's transfer agent is participating in the
Depository Trust Corporation ("DTC") Fast Automated Securities Transfer
program, on the written request of a holder of Series C Preferred Stock who
shall have previously instructed such holder's prime broker to confirm such
request to the Corporation's transfer agent, the Corporation shall use its
best efforts to cause its transfer agent to electronically transmit such
Common Stock to such holder by crediting the account of the holder's prime
broker with DTC through its Deposit Withdrawal Agent Commission system no
later than the applicable Delivery Date.
(g) The Corporation will at all times have authorized and reserved for
the purpose of issuance a sufficient number of shares of Common Stock to
provide for the conversion of the Series C Preferred Stock. The Corporation
will use its best efforts at all times to maintain a number of shares of
Common Stock so reserved for issuance that is no
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less than the sum of (i) one and one-half (1.5) times the number that would
then actually be issuable upon the conversion of three thousand (3,000)
shares of Series C Preferred Stock and (ii) the exercise of the Warrants
(as defined in the Securities Purchase Agreement). Before taking any action
which would cause an adjustment reducing the Conversion Price below the
established par value of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock, the Corporation shall take any
corporate action which may, in the opinion of its counsel or in the opinion
of counsel to holders of the Series C Preferred Stock, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
(3) In the event of a liquidation of the Corporation, the Series C
Preferred Stock Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of the Series C Preferred Stock.
(4) If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the person(s) entitled
to receive the Common Stock issuable upon such conversion of the Series C
Preferred Stock shall not be deemed to have converted such Series C Preferred
Stock until immediately prior to the closing of the sale of securities.
(5) At no time shall any holder of the Series C Preferred Stock convert
such amount of Series C Preferred Stock as shall result in such Purchaser's
ownership, after such conversion, exceeding 4.99% of the Corporation's
outstanding Common Stock.
(6) No fractional shares of Common Stock shall be issued upon conversion of
the Preferred Stock. In lieu of fractional shares, the Corporation shall pay
cash equal to such fraction multiplied by the then effective and applicable
Conversion Price.
(7) The Corporation will not, by amendment of its Articles of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed under this Amended Certificate of Designations by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of this Amended Certificate of Designations and in the taking of all
such action as may be necessary or appropriate in order to protect the Series C
Preferred Stock Conversion Rights of the holders of the Series C Preferred Stock
against impairment.
(8) In the event (a) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation, (b) that the Corporation subdivides or combines its outstanding
shares of Common Stock, (c) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution
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thereon), (d) of any consolidation or merger of the Corporation into or with
another corporation, (e) of the sale of all or substantially all of the assets
of the Corporation, or (f) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation, then the Corporation shall cause
to be filed at its principal office or at the office of the transfer agent of
the Series C Preferred Stock, and shall cause to be mailed to each holder of the
Series C Preferred Stock at their last address as shown on the records of the
Corporation or such transfer agent, at least ten (10) days prior to the record
date specified in (i) below or twenty (20) days before the date specified in
(ii) below, a notice stating
(i) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(ii) the date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
H. Sinking Fund. There shall be no sinking fund for the payment of
dividends, or liquidation preferences on the Series C Preferred Stock or the
redemption of any shares thereof.
I. Redemption Events. In case one or more of the following events, each a
redemption event, shall have occurred:
(a) failure to deliver the shares of Common Stock required to be
delivered upon conversion of the shares of Series C Preferred Stock in the
manner and at the time required by Section 5 of the Securities Purchase
Agreement; or
(c) failure of the Corporation to have authorized the number of shares
of Common Stock issuable upon conversion of the shares of Series C
Preferred Stock or exercise of the Stock Purchase Warrants (as defined in
the Securities Purchase Agreement); or
(d) failure on the part of the Corporation to duly observe or perform
any of the provisions of this Amended Certificate of Designations or any of
its other covenants or agreements contained in the Securities Purchase
Agreement, or to cure any material breach in a material representation or
covenant contained in the Securities Purchase Agreement or the Registration
Rights Agreement for a period of ten (10) days after the date on which
written notice of such failure or breach requiring the same to be remedied
has been given by a registered holder of shares of Series C Preferred Stock
to the Corporation;
then, and in each and every such case, so long as such redemption
event has not been remedied, the holders of not less than fifty-one percent
(51%) of the shares of Series C Preferred Stock then outstanding, by notice
in writing to the Corporation (the date
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of such notice the "Redemption Notice Date"), may demand that the
Corporation redeem, and the Corporation shall redeem, each share of Series
C Preferred Stock then outstanding at a price per share equal to one
hundred twenty-five percent (125%) of the sum of (x) the Stated Value and
(y) the aggregate accrued and unpaid dividends on such Redemption Notice
Date
For purposes of this Section I "Material Subsidiary" means any subsidiary
with respect to which the Corporation has directly or indirectly invested,
loaned, advanced or guaranteed the obligations of, an aggregate amount exceeding
fifteen percent (15%) of the Corporation's gross assets, or the Corporation's
proportionate share of the assets or net income of which (based on the
subsidiary's most recent financial statements) exceed fifteen percent (15%) of
the Corporation's gross assets or net income, respectively, or the gross
revenues of which exceed fifteen percent (15%) of the gross revenues of the
Corporation based upon the most recent financial statements of such subsidiary
and the Corporation.
J. Amendment. This Amended Certificate of Designations constitutes an
agreement between the Corporation and the holders of the Series C Preferred
Stock. The Corporation shall not amend this Amended Certificate of Designations
or alter or repeal the preferences, rights, powers or other terms of the Series
C Preferred Stock so as to affect adversely the Series C Preferred Stock,
without the written consent or affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the then outstanding shares of
Series C Preferred Stock, given in writing or
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by vote at a meeting, consenting or voting (as the case may be) separately as a
class.
IN WITNESS WHEREOF, USA Biomass Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Fred H. Behrens, its
Chairman, and attested by Hilly G. Jones, its Secretary, this 5th day of July,
2000.
USA BIOMASS CORPORATION
By: /s/
------------------------
Name: Fred H. Behrens
Title: Chairman
Attest:
By:
Name: Hilly G. Jones Title: Secretary
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